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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

Crypto Update: Post-Crash Oversold Bounce Ensues in Crypto-Land

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As Bitcoin plunged below $10,000 yesterday, nearing the crucial $9000 level, all of the majors followed the most valuable coin in the panic sell-off. Our trend model turned short-term neutral in most of the cases, while the long-term prospects also improved thanks to the deep and violent correction.

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Bitcoin itself already traded at slightly attractive levels, as it breached our first possible target for the correction, but we expect a lengthy bottoming process with a possible dip to the $8200 or $7650 supports.

As for the short-term, the oversold rally initiated from the lower boundary of the declining trend channel, and a choppy, hard-to-trade consolidation period is likely ahead that could last throughout the weekend. Strong overhead resistance is found at $13,000, likely capping the advance for now, while the $11,300 support/resistance level could also be in the focus in the coming sessions.

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BTC/USD, 4-Hour Chart Analysis

Altcoins

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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

The Crypto Correction: What You Need To Know

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In the short span of about 24 hours prices of cryptocurrencies have fallen like a stone. Investors have either given back or taken losses of sizable amounts. Measuring the one-day drop: bitcoin -21%, Ether -29%, Litecoin -29%.

From its December all time high near $20,000, bitcoin has given back more than $200 billion in value. This amounts to more than 80% of the companies on the New York Stock Exchange or Nasdaq. Even for those who have experience-trading crypto, the events of the last few days can challenge nerves.

What is the right plan of action? Possibly no plan at all, by that I mean sitting tight and doing nothing, could be the best plan. What ever you choose, the first thing to do is to shut down your computer and turn off CNBC. These are all entirely emotion driven groups and right now they are making loud negative headlines reminding us of quotes from JP Morgan CEO Jamie Dimon and Warren Buffett.

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The same sources are painting a dark case today. These are the very same folks that were gaga over crypto last year while prices were rising. Now these sources are quoting Warren Buffett who predicted with a high degree of confidence that cryptocurrencies will have a bad ending.

If you listen to Christopher Harvey, Head of Equity Strategy at Wells Fargo, you get an even more dire prediction. He recently appeared on CNBC stating that the cryptocurrency price correction could spill over into the overall stock market.

There is a rule of thumb on Wall Street. If you are right 51% of the time, you are considered an investment genius. This means most opinions are wrong at least half of the time. This could be the case with today’s crypto naysayers.

Prices And Business Fundamentals Don’t Always Match

The number of true experts in cryptocurrencies is small relative to the number of investors. That means there is more emotion than usual driving prices in both directions. It is this volatility that keeps certain investors on the sidelines.

But if you have done your research and have a view of the world in 2028 short-term volatility is not your enemy. Warren Buffett, the biggest crypto naysayer is a master of long term investing. During the 2008 financial crisis, when the world was close to the brink of financial disaster, Buffett was standing by with billions to loan Goldman Sachs charging an outrageous 10% rate of interest. There is a lesson for us here.

Don’t Get Distracted By Short Term Issues

Korea is a big market for crypto demand and, along with China has produced headlines threatening to close down cryptocurrency exchanges. I have not dealt directly with any of these so the analysis of others is necessary.

These folks point out the excessive price premiums as evidence of the behavior of bad actors in the game. So any action by governments to clean up the exchanges could produce a better experience for investors. And let us not forget cryptocurrencies are global. There are plenty of exchanges in the world that make markets.

Korea does not have a monopoly on bad actors. The exchange and lending platform Bitconnect, in recent days, announced that it is closing. The company was recently served with a cease and desist order. Ethereum founders had criticized the exchange for their practices that many believe were bordering on a Bernie Madoff style Ponzi scheme.

The Tipping Point Has Been Reached

The jury is no longer debating the verdict. Cryptocurrencies have become embedded in the global economy. According to Google’s Annual Report on Search Facts, bitcoin and cryptocurrencies were the second most important topic in the world during 2017.

Bitcoin is all about fast, anonymous, low cost movement of money anywhere on the planet. Those lofty goals have not yet been achieved but with tens of thousands of businesses now accepting bitcoin including some hefty Fortune 500 companies and with the Bitcoin Lightning Network coming on, bitcoin’s shortcomings are being addressed.

Bitcoin Futures: Acceptance Is Spreading

When I learned that bitcoin futures would be traded in the US by the CME and CBOE, the only question was how long it would be before other countries recognized the legitimacy of bitcoin futures. Well, it didn’t take long. The Hong Kong securities regulators, SFC issued a report on December 11th giving investors a green light.

Within less than a year futures contracts will be available on Ethereum and possibly others.

Ethereum: The Future Is Here

Ethereum has always had a more obtuse purpose. It was never intended as a medium of exchange like bitcoin. For what it is worth, Ethereum is less likely to be singled out by governments and central banks that fear loss of economic control.

Descriptions like decentralized blockchain platform offering smart contracts and driven by Ether require some time to appreciate. Ethereum is open sourced and applications oriented. You don’t need to understand the technology you only need to envision what it can be applied to.

Ethereum co-founder Steven Nerayoff tells us the number of Ethereum projects today is already ten times the number of last year. Here are just two examples.

Unilever

Unilever, the $52+billion food and packaged goods giant, is working on a blockchain based project to better manage its massive global supply chain. So far it is only being tested but consider the size: 10,000 Malawian tea farmers. And this is just the start of their massive corporate wide supply chain. Imagine what this will look like if Unilever starts to take things seriously: stay tuned.

On The Vanguard

Now the $5 trillion Vanguard group is getting the blockchain bug.  They are the investment industry’s low cost provider. Now they are embarking on test to apply blockchain technology for data sharing.

Caveat Emptor

The reality is the cryptocurrencies are embedded in the global economy and likely to grow dynamically for a long while. This doesn’t protect us from short-term events. That is why huge price corrections are so interesting. The Warren Buffett habit of always having deep cash reserves to pounce on opportunity when frightened investors run is a strategy that has worked well over multiple decades.

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: Bitcoin Hits First Correction Target as Volatility Reigns Supreme

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The violent correction that created a full-on panic in the cryptocurrency segment continues to unfold in a rather orderly way from a technical standpoint, reflecting the extreme nature of the preceding rally. That said, the percentage losses in some of the coins are huge, and the collapse of Bitconnect accelerated the process, spreading uncertainty among investors, and sentiment quickly got bleak.

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Bitcoin remains in the center of attention, and the most valuable coin finally breached the $10,000 level today, causing another strong wave of liquidation in the majors, that could be the base of a more durable bottom, and a consolidation in the coming days after the crazy last couple of days.

The coin is now oversold from a short-term perspective, and although further losses are likely before the end of the cycle, given the still only neutral long-term momentum readings, a counter-trend move is possible in the coming days. Below, $9000, strong support levels are still found at $8200 and near $7650.

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BTC/USD, 4-Hour Chart Analysis

Altcoins got slaughtered in the two-day crash with Ripple leading the way lower, while Ethereum also lost its relative strength amid the broad sell-off and its recent trendline break. ETH got close to the next major support level at $740 during today’s move, and as the short-term momentum is now oversold, a bounce to the zone around $1000 could be ahead. We still expect the correction to continue in the token, as the long-term momentum remains overbought, with key support at $625 and near $575.

ETH/USD, 4-Hour Chart Analysis

Ripple fell as low as the $0.85 support level during the crash, and although the coin rebounded above $1 afterward, it remains 70% off its recent all-time highs. Long-term investors could already accumulate small positions on the short-term sell-offs, although the correction will likely continue, and a prolonged consolidation phase might also be ahead. Key support levels are now found at $0.85 and $0.68, while resistance is ahead at $1.25.

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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