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5 Things to Watch Next Week: NASDAQ, Cryptocurrencies, China, Euro & Trump

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Asset Current Value Weekly Change
S&P 500 2398 0.88%
DAX 12675 1.76%
WTI Crude Oil 46.47 -5.75%
GOLD 1228.00 -3.21%
Bitcoin 1570 16.11%
EUR/USD 1.0998 0.91%

 

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  1. Will the NASDAQ carry stocks higher again?

The schizophrenic state of the US market continued to dominate trading this week, with the tech sector clearly emerging as a leader on Wall Street, while the S&P 500 and small caps kept on dragging the broader indices lower. While Apple, Amazon, and a few other names in Europe names are still pushing higher, a lot of stocks are much weaker, and usually, these situations resolve in the direction of the majority. That said, with no major economic releases coming out, the low volatility period could definitely last longer, but the market seems vulnerable to negative triggers.

  1. Will the cryptocurrency correction continue?

Bitcoin and Litecoin are under pressure this weekend and the other majors are also struggling, with the exception of the relatively strong Ripple and NEM. Asian demand has been driving prices higher lately, while the growing attention from the broader investment public also helped the broad rally in the coins. We have seen several such euphoric periods in Bitcoin, but the recent rally in coins is unprecedented. It’s very hard to guess if the current correction will be a sustained one, but next week could prove crucial.

  1. Have we seen the top in the Euro?

The common currency got a huge boost from the French election, as Macron is good news for those fearing the worst after the Brexit vote. That said, the structural problems that the Eurozone faces are here to stay, and the “natural” trend of the Euro is bearish compared to the USD. The speculative positions against the EUR have been significantly reduced in recent weeks, and that might mean that the market will soon run out of buyers. The unknown factor in the equation is the ECB, which routinely lags the Fed with its interest rate policies, so a late hawkish turn in the central bank’s approach could push the currency even higher.

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  1. What’s next for the Chinese market?

Shanghai Composite Index, 4-Hour Chart Analysis

Chinese stocks dropped further in the beginning of the week after the scary period in April, but as the interbank market settled down a bit, the local stock market recovered most of its losses and finished virtually unchanged. Does that mean that the country’s problems are fixed? Of course not, but the short-term trend might have turned. Credit crises usually are slow processes, as the market realizes the extent of the problem, so several sentiment waves are likely to form before a full-fledged crunch. This week might decide if we only saw a brief stop in the sell-off or a longer “relief-period” has started.

  1. Will Trump drop another bomb?

The new POTUS fired FBI director Comey this week, and the surprising move caused a small dip in risk assets, but it didn’t change the underlying trends. It seems that these kind of unusual decisions are the new normal, with investors still not putting a huge weight on the political scandals. Having said that, there are several areas which could still have a large impact on investor portfolios globally. That is especially true or the North Korean situation that can escalate any time, despite the recent quiet period.

In Focus: Cryptocurrencies

Monthly performance comparison of the major cryptocurrencies, Hourly Chart

The cryptocurrency market didn’t even blink as it crossed the $55 billion mark this week, and the total capitalization now grew 10% more to $55 billion. Bitcoin, even after its epic rally, accounts for a mere $30 billion out of that, showing how quickly the other players have been expanding lately. Ripple has definitely been the winner of the recent period, as it overtook Ethereum regarding capitalization, as it recovered quickly after the early-week correction. Litecoin was the second most active coin thanks to the huge price swings throughout the period, while trading volumes increased across the board, as the market exploded higher. Ethereum, Dash, Monero, and Ethereum Classic were lagging both in volume and performance, while NEM got close to Litecoin regarding market value.

Currency Weekly Volume Monthly Volume Market Cap
Bitcoin 5,104 15,791 29,540
Ripple 964 2,361 8.428
Ethereum 968 4,425 8,294
Litecoin 1,137 3,500 1,519
NEM 80 151 1,129
Dash 116 505 654
Ethereum Classic 159 1000 580
Monero 70 313 415

Key Economic Releases of the Week

Day Country Release Expected Previous
Monday CHINA Industrial Production (yearly) 7.0% 7.6%
Monday SWITZERLAND PPI Index 0.00% 0.10%
Monday US ES Manufacturing Index 7.6 5.2
Tuesday AUSTRALIA Montery Meeting Minutes
Tuesday UK CPI Index 2.6% 2.3%
Tuesday EUROZONE Flash GDP 0.50% 0.50%
Tuesday GERMANY ZEW Economic Sentiment 22.3 19.5
Tuesday US Building Permits 1.27 mill 1.27 mill
Tuesday US Housing Starts 1.26 mill 1.22 mill
Tuesday US Industrial Production 0.4% 0.5%
Wednesday UK Average Earnings 2.4% 2.3%
Wednesday UK Unemployment Rate 4.7% 4.7%
Wednesday EUROZONE Final CPI 1.90% 1.90%
Wednesday CANADA Manufacturing Sales 0.40% -0.20%
Wednesday US Crude Oil Inventories 55.0
Thursday JAPAN Prelim GDP 0.4% 0.3%
Thursday AUSTRALIA Employment Change
Thursday AUSTRALIA Unemployment Rate 5.9% 5.9%
Thursday UK Retail Sales 1.2% -1.8%
Thursday US Initial Jobless Claims 240,000 236,000
Thursday US Philly Fed Manufacturing 18.9 22.0
Friday CANADA CPI Index 0.5% 0.2%
Friday CANADA Core Retail Sales 0.20% -0.10%

 

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

Bitcoin Bears Running Out of Gas, According to Price Manipulation Theory

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A group of researchers at The Crypto Fam have linked price manipulation to bitcoin’s bear market, suggesting that the arrival of institutional trading allowed investors to dump oversized holdings of digital currency.

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Bitcoin Price Manipulation?

According to a new theory, it is no coincidence that bitcoin’s long unwind began on Dec. 17, the same day that bitcoin futures were launched. Over the next several months, the bitcoin-dollar exchange rate would fall from a high near $20,000 to a low of $5,980.

The rapid decline was aided by futures trading, which allows traders to short assets much more easily. As we’ve written before, shorting bitcoin was practically impossible prior to the launch of futures.

The theory posits that institutional money was stocking up on bitcoin well before Dec. 17, likely in anticipation of the CBOE/CME futures contracts. The bear market that ensued consisted of three major down moves, with the third leg beginning earlier this month.

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Each down move follows a similar pattern: (1) a fake-out dump, (2) a failed rally and (3) a major dump. Each leg down is driven by lower selling volume with each drop less severe than the previous.

The compelling study was presented this week in a series of tweets by The Crypto Fam, which describes itself as “a community of crypto enthusiasts bridging the gaps.” The group’s stated goal, according to its website, is to “make crypto not so cryptic.”

In describing the pattern, the researchers concluded that “the bear market is running out of gas” because their supply of bitcoin has declined since the pump culminated on Dec. 17.

“This is a very simplified explanation of how markets work. A great deal of the total BTC supply is not traded. Some is lost forever in idle or forgotten wallets. Other Bitcoin is hodled by strong hands who never sell. This gives [market makers] greater power with their share of BTC.”

End of the Downtrend?

With the bears and market makers running low on supplies, the researchers concluded that the end of the downtrend is near. Bounces are more shallow than before while bottoms aren’t nearly as low.

Bitcoin prices fell below $7,300 earlier this week but have since recovered to the $7,500 range. Since bottoming below $6,000, prices have failed to test new lows. On the opposite side of the ledger, rallies have also been limited to $12,000 and $10,000, respectively.

Institutional adoption is widely viewed as a positive development in the evolution of cryptocurrency trading, though the latest study sheds light on the downside risks of derivatives trading. A similar conclusion was drawn earlier this month by the San Francisco Fed, which compared the launch of bitcoin futures to innovations in securitization in the mortgage market. However, this model has been criticized heavily for mistaking correlation with causation.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

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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4.5 stars on average, based on 417 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Analysis

Long-Term Cryptocurrency Analysis: Correction Deepens but Leaders Remain Stable

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As the major cryptocurrencies got hit hard this week, losing around 20% on average, the long-term picture in the segment got close to an entry point for investors. The overbought readings that developed during the late-April rally are now cleared and although the short-term trends are still clearly negative, we still expect the coins to resume the recovery. With that in mind, long-term investors could start accumulating the relatively stronger coins.

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On a negative note, even the leaders violated key support levels during this week’s selloff, but the secular long-term trends are not yet in danger. The prior leaders Ethereum, EOS, and IOTA are still in the center of attention, as we expect them to form a bottom soon. Bitcoin and the other relatively weak coins, like Litecoin, Monero, Dash, and NEO are still lagging the form a technical perspective, but they are also well above the support levels that would indicate an end of the secular bull market.

BTC/USD, Daily Chart Analysis

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Bitcoin is below the key $7650-$7800 support level and it remains the biggest drag on the market, despite a brief period of relative strength this week. The upper boundary of the base pattern that we identified in April is found near $6150, with a weaker zone around $6500, and with the short-term trend clearly being negative, the latter might be tested before a bottom forms. Further resistance is ahead at $8400, $8700, and between $9000 and $9200, and traders and investors still shouldn’t enter positions here.

ETH/USD, Daily Chart Analysis

Ethereum is testing the $555-$575 support zone after violating the $625-$645 range, with the declining short-term pattern being intact. A bottom near the $500 would still keep the recovery intact, but the correction low might already be in, and investors could already add to their holdings here. Further resistance zones are ahead between $735 and $780 and near $845, while support is found near $450.

(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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Analysis

Pre-Market: Oil Plunges Below $70 as Markets Mixed Before Long Weekend

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Financial markets are relatively calm today, despite the hectic week that was highlighted by the Turkish currency crisis, wild swings in bonds, and a step back in US-North Korean relations. Stock markets turned lower globally, with US equities outperforming the rest of the world, essentially drifting sideways all week long, thanks to the slight correction in the Dollar’s rally, and the dip in Treasury yields that was triggered by the dovish Fed meeting minutes.

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S&P 500 Futures, 4-Hour Chart Analysis

Today, the durable goods report came out before the opening bell and although the headline number was a tad worse than expected the more important core figure beat the consensus estimate, helping the slightly dampening economic outlook, even as yields continue to fall, especially with regards to long-dated Treasuries.

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EUR/USD, 4-Hour Chart Analysis

Although emerging market currencies are way less volatile today than recently, despite the rebound in the Dollar, equities shed their early gains and are now slightly in the red. The all-important EUR/USD pair hitting yet another 6-month low near 1.1650, and the test of the key long-term 1.1450-1.15 zone looks more and more likely in the coming weeks, even as the pair is a bit oversold.

Energy Markets in Turmoil as OPEC Signals Production Increase Again

WTI Crude Oil, 4-Hour Chart Analysis

It seems that the crude oil market is in for a strategic switch yet again, as the OPEC, together with Russia made it clear today that the price of the Black Gold finally reached a desirable level. The cartel will be targeting a higher level of output later on this year in order to keep the US shale players under pressure by capping the advance in the key commodity’s market.

The WTI contract reached a 4-year high at $72 per barrel recently and the Brent contract which is more exposed to Middle East woes rose as high as $80 per barrel after trading below the $30 level just two years ago. The last phase of the advance extended above the level where a large portion of the shale plays turn profitable, and as global growth worries also surfaced, the commodity entered a selloff this week.

Gold Futures, 4-Hour Chart Analysis

Safe haven assets continue to be bid despite the relatively calm environment, and gold hit a two-week high today despite the bounce in the Greenback as buyers are back after the wash-out plunge below $1300. With the long-term setup and fundamentals still being favorable for the precious metal, the short-term downtrend line is in danger here.

As US markets will be closed on Monday, which usually favors an active session, volatility might remain high throughout the day.

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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