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Analysis

5 Things to Watch Next Week: The Fed, Crypto-Chaos, All-Time Highs in Stocks, FX-Volatility, Gold at $1300

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1.            What’s Next for the Fed?

All eyes will be on Wednesday’s FOMC meeting, as the central bank is expected to provide the details of its tapering plans. While the bond market predicts no rate hike from the Fed next week, the future of the bank’s balance sheet is at least that important for risk assets and the Dollar.

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The Bank of Canada raised its benchmark rate two weeks ago while the Bank of England also took a surprisingly hawkish turn last week, so the global environment definitely favors tightening. Also, the major US stock indices are at or near all-time highs so, despite the mixed economic numbers, the Fed might be comfortable with even a bolder quantitative tightening schedule that would surely cause some turmoil in the main asset classes.

TLT (Long-Term US Bond ETF), Daily Chart Analysis

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2.           Bitcoin After a Bubble or Still on the Way Up?

The crypto segment has been shaken by this week’s crash, as the Chinese crackdown on ICOs and crypto-exchanges spread uncertainty in the sector. The previously soaring market was ripe for a correction, but the speed and extent of the move caught a lot of investors off guard, amid the growing chatter on a bubble in the coins. While the stellar gains in the segment do in fact resemble a speculative bubble, and Bitcoin already experienced several boom-bust cycles, whether or not we are after a multi-year top is yet to be seen. For now, the long-term trends in most of the majors are intact and the continuation of the boom is more likely. The next few weeks will be crucial in deciding where we are in the current cycle, as bulls and bears will battle for control amid the accelerated blockchain adoption.

Bitcoin, Daily Chart Analysis

3.           Equities Continue to Defy Valuations

The North Korean escalation, tightening central banks, another miss in US Retail Sales, and so on… A weak stock market would have definitely tumbled in recent weeks, but conversely US equities have been edging higher towards their all-time highs. The Dow closed on a new ATH on Friday and the S&P 500 finished right at the 2500 level, with only the Nasdaq lagging slightly after the mixed reception of Apple’s new IPhones. The Fed might be able to stir things up next week, but despite the extremely high level of the most valuable valuation measures (CAPE, P/S…) and the weak market internals, the price action makes a break-out to new highs very likely here. Calling an exact top in equities is almost impossible but we still think that for anything more than short-term trades, investors are too late to the stock-party now.

4.           Strong Trends in the Major Currencies

FX volatility, which incredibly enough took over stock volatility lately, exploded in some of the major pairs thanks mainly to diverging monetary expectations. The Pound surged by several percents against its most important peers, while the Canadian Dollar continues to be among the strongest majors. That said, the focus is still on the Dollar that lost significant ground compared to the Euro lately, but it showed some strength in recent weeks. With the looming Fed meeting, we expect a two-faced week, as the run-up towards the rate decision is usually choppy while the aftermath tends to be violent. The Bank of Japan’s monetary meeting could also add volatility to the mix, as the Yen also experienced strong moves in both directions in recent weeks.

5.           How low will the Gold-Correction Reach?

As the tensions regarding North Korea eased somewhat (although the crisis is far from being over mind you), despite another missile launch by the country, the primary safe-haven asset entered a slightly overdue correction. The recent key break-out in the precious metal carried it to overbought territory, and although the long-term is clearly bullish now, a move to test the $1300 level is likely, especially if the Fed joins the hawkish central bank trend. But as stocks are near all-time highs, and stock volatility is near record lows, the creeping strength in gold is something to note and increasing one’s holding still seems the way to go.

Gold Futures, Daily Chart Analysis

Key Economic Releases This Week

Day Country Release Expected Previous
Monday EUROZONE Final CPI 1.5% 1.5%
Tuesday AUSTRALIA Monetary Meeting Minutes
Tuesday GERMANY ZEW Economic Sentiment 12.3 10.0
Tuesday CANADA Manufacturing Sales -1.4% -1.8%
Tuesday US Retail Sales 0.2% 0.3%
Tuesday US Existing Home Sales 5.46 mill 5.44 mill
Wednesday UK Crude Oil Inventories 5.9 mill
Wednesday US FOMC Rate 1.25% 1.25%
Wednesday US FOMC Statement
Wednesday US FOMC Press Conference
Thursday JAPAN BOJ Rate Decision -0.10% -0.10%
Thursday JAPAN Monetary Statement
Thursday CANADA Wholesale Sales -0.9% -0.5%
Thursday US Unemployment Claims 300,000 284,000
Thursday AUSTRALIA Trade Balance 0.95 bill 0.86 bill
Thursday UK Halifax HPI 0.2% 0.4%
Thursday EUROZONE ECB Rate Decision 0.00% 0.00%
Thursday CANADA Building Permits 2.2% 2.5%
Thursday EUROZONE ECB Press Conference
Thursday US Unemployment Claims 300,000 284,000
Thursday US Philly Fed Index 17.2 18.9
Friday GERMANY Manufacturing PMI 59.0 59.3
Friday GERMANY Services PMI 53.8 53.5
Friday EUROZONE Manufacturing PMI 57.2 57.4
Friday EUROZONE Services PMI 54.8 54.7
Friday CANADA CPI Index 0.2% 0.0%
Friday CANADA Retail Sales 0.4% 0.7%

Featured image from Shutterstock

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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Analysis

Music: One Overlooked Use Case

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So far in this year, Ethereum has been the crypto star appreciating over 80% to a recent record of $1402. All this suggests that more and more applications are being created. We know this by the demand for Ether, the gas that drives the Ethereum network.

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The reason behind the explosion of Ether demand was confirmed by Ethereum co founder Steven Nerayoff in a CNBC interview where he claimed the number of Ethereum projects today is more than 10 times year ago levels.

One of those areas is the music business and there are several names appearing on the ICO list to add to your research agenda.

Why The Music Business Needs Help

Music may live forever but the business side has been in trouble for a long while. Over the last decade there have been only three years when the global value of music sales increased. The combination of digital music and outright pirating through peer-to-peer sharing has much to do with the long-term trend.

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Throughout the world there are 69 copyright and royalty societies given the responsibility of documenting, collecting and distributing music royalties. That means collecting a few pennies whenever a song is played on the radio, Internet or anywhere else. Four of the largest of these is in the US, followed by Japan, Germany and Britain. Their operations are truly byzantine.

Experts in the music-publishing field confirm the time between music usage and royalty payment can run close to 24 months. Even then not all royalties are distributed. According to my sources, there are often millions of dollars collected by royalty authorities everywhere that never make it to the entitled recipients. That sort of practice borders on criminal behavior but copyright and royalty societies operate in a sub-rosa manner making it difficult to understand their policies.

In the past just 4 major record labels controlled over 80% of the industry. These giants could afford a full time legal department to pursue royalty issues dominated the music industry. Today, however, independent labels represent almost one-third of the market. This means less democracy in the business with the young independent artist at a particular disadvantage.

Of course, musicians aren’t the only group of artists loosing out on their pay. There are writers, poets and painters that go largely unprotected.

The music business is just easier to track because it has more data. Yet in spite of all the information, the music industry is widely recognized for its lack of transparency. Blockchain technology has the ability to disrupt long-standing industry practices.

ICOs To The Rescue

The number of Ethereum based white knights is starting to appear on the horizon promising to rattle the industry and hopefully restore some democracy on behalf of the independent artist.

One simple business model comes from a startup SingularDTV who is attempting to build their ecosystem on top of Ethereum. Here is the basic value added proposal.

SingularDTV tokenizes the artist work. In doing so the artist is turning their music into a financial asset. Anyone who buys into an artist’s token owns a share of the creation and its income stream. The more people consume an artist creation, the higher goes the token price.

Only time will show if SingularDTV succeeds with this model. The consequence of this model is how it eliminates many of the middlemen and nefarious influences in the industry. Instead of singing on a street corner for bread, an artist could raise money upfront without relying on an advance from a record label.

According to SingularDTV, distributing content via blockchain would allow artists to skirt streaming platforms like Spotify to earn royalties on their own terms. Now that is true democracy.

SingularDTV may stand out a bit in the news due its recent ICO success in raising $8 million but they aren’t the only player in the music game. Names like Voise recently raised $1 million as well as Soundchain, Blokur and Opus to name a few.

I am no longer a registered investment advisor, which means I don’t go around making investment recommendations. So I will only suggest this group to put on your list of late night reading. Next time, I will take a closer look at more of these names.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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Analysis

Technical Analysis: Cryptocurrencies Start Week on a Quiet Note as NEO Shines

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The broad Bitcoin-led correction continued to dominate trading in the crypto-segment throughout the weekend, as the most valuable coin drifted sideways above the key technical level at $13,000, with dwindling trading volumes.

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BTC remains in a declining short-term pattern, although the digital currency still holds well above the mini-crash lows from December, spending almost a month now in the daily range of the year-end plunge. We still expect the largest coin to complete the current cycle with a move below the crash lows and the $10,000 level after the stellar rally of the previous months. Key support is still found near $13,000, with further levels at $11,300, $10,000, $9000, and stronger levels at $8200 and $7700

BTC/USD, 4-Hour Chart Analysis

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Altcoins also settled down across the boards with only a few coins registering strong activity. Ethereum and NEO have been among the coins making headlines, as the second largest coin continued to grind, higher still trading near its recent all-time high today. The price of the ETH token is moving in a short-term uptrend, in the face of the stretched momentum indicators, but we expect a meaningful correction soon, and long-term investors should wait for a more favorable technical setup before entering new positions, with key support levels at $1000, $850, $740, $625, and near $575.

ETH/USD, 4-Hour Chart Analysis

Ripple remained under heavy selling pressure in the meanwhile, as the oversold bounce of the weekend faded away and the coin got close last week’s lows again. As the short-term downtrend is intact, traders should stay away from entering new positions, while investors should wait for short-term sell-offs towards the main support levels at $1.50, $1.25, and $0.85 to add to their holdings.

XRP/USDT, 4-Hour Chart Analysis

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Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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Analysis

Technical Analysis: Coins Rebound as Key Support Level Holds Bitcoin

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The $13,000 level in the price of Bitcoin continued to be the center attention of traders today, as the most valuable coin successfully tested the crucial support zone overnight, despite another brief dip below it. The other majors followed the subsequent bounce higher, with Ethereum pushing past $1250 once again, while Ripple reclaiming the $2 level.

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Despite the bounce, the short-term trend in Bitcoin is clearly bearish and the correction is still likely to continue, although the extreme long-term overbought readings are now cleared. We still expect a move towards the previous correction low near $11,300, with a likely dip below $10,000 before the end of the current cycle, with further important support levels are found at $9000, $8200, and $7700.

BTC/USD, 4-Hour Chart Analysis

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Ripple recovered slightly after nearing the $1.50 level and reaching short-term oversold readings, and the coin tested the primary resistance level at $2.1 yesterday in late trading. The currency remains in a strong short-term downtrend despite the bounce and the continuation of the correction is likely, although long-term investors could already accumulate new positions near the main support levels at  $1.50, $1.25, and $0.85.

XRP/USDT, 4-Hour Chart Analysis

Ethereum bounced of the dominant short-term trendline, but the coin remains overbought on all time-frames and we expect a trendline break in the coming days. That said, traders could hold smaller positions here with tight stops as a push towards the prior all-time high is still possible. Key support levels are found at $1000, $850, $740, $625, and near $575.

ETH/USD, 4-Hour Chart Analysis

(more…)

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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