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Analysis

A Bitcoin Buy Signal That’s Getting Attention

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In previous articles we have talked about the aura surrounding the term blockchain and the limitless applications for smart contracts, not to mention the cost benefits of this amazing technology.  

I am a huge believer that fundamental forces that drive demand win out in the long term. Some of the most successful enterprises in the world also enjoyed a further bonus, cash flow: the more, the better.  A good example of this is Warren Buffett’s company Berkshire Hathaway. Today, they have more than $100 million of spare bucks sitting in the bank.

Right now, and for the last couple of months, none of this has mattered.  After the price of major cryptocurrencies have been cut in half, we have been in a directionless crypto market. After the spectacular 2017 performance, not knowing whether to buy or sell is pure mental torture.  Well this could be changing, so follow along with me for just a moment longer.

Investors in cryptocurrencies and the stock market aren’t so different.  So when trying to understand the why the crypto markets of late have been going nowhere, some of the same tools used on the stock market can be applied to bitcoin, Ethereum and the others.

Mental Measures Favor Bitcoin

Call it mob psychology but there are ways to use the mindset of the mob to make money.  In other words, if your investment habit is to follow the crowd, you can expect to reap only average returns.  If you are willing to take risk when all others are avoiding risk, your investment performance will be far different: much better or much worse but not just average.

Here is a real life situation comparing the US stock market and bitcoin. There are numerous ways to measure the mindset of stock market investors.  There are two that I have relied on: the VIX and the IAI.

Bitcoin Offers Better Value Than Stocks

The Chicago Board of Exchange’s volatility index, the VIX measures the volatility of options on the S&P 500.  The IAI measures Investopedia readers search for topics associated with investor anxiety.

Both of these indices have been great predictors having reached historic highs in the stock market crash of 2008.  At that time the Dow Jones Industrial Average dropped to under 7000. Using the VIX, investors more than tripled their assets over the following decade.

Today both the VIX as well as the IAI are in dead neutral territory.  Under these conditions, it is silly to go against the crowd. The benefits of being right are the same as the cost of being wrong.  So unless you simply like to take on an impossible challenge, why bother putting more money in stocks.

Tom Lee Offers The Bitcoin Misery Index

Investor and crypto junkie Tom Lee is a guy for which I have a good deal of respect.  His position on cryptocurrency pricing is typically analytically created, not just a gigantic  number smothered in hyperbole. Right or wrong, his positions are well thought out. That is all you can ask of anyone.

Well Tom has come up with a contrarian mental measure for bitcoin.  Appropriately it is called the Bitcoin Misery Index. In one of his frequent CNBC appearances, Lee explained how the index is calculated on a scale of 0-100.  

The lower the index number the better time to be owning bitcoin.  Any reading less than 27 is a buy signal, anything above 67 is time to get out.  Well the Index is currently at 18.8 the lowest level in more than five years. That is almost the entire history of bitcoin.

I am not the only fan of Tom Lee and his Bitcoin Misery Index.  Since his appearance on CNBC, seems like everyone is talking of writing about the exceptionally strong bitcoin buy signal.  Just Google the topic and you will find it has been a top story for the past three days.

So for all the mental torture that we have been forced to go through in recent times, at least one important signal is working in our favor.  And, what is good for bitcoin has good omens for other cryptos like Ethereum, Litecoin, Ripple and others. Thank you Tom Lee for adding some perspective to our misery.  When everyone is miserable, it is time to be optimistic, and that time is now.

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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4.4 stars on average, based on 115 rated postsJames Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.




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Analysis

Forex Update: Trump Pressures Fed Ahead of Rate Decision

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Forex Market Snapshot

Asset Current Value Daily Change
EUR/USD 1.1355 0.46%
GBP/USD 1.2629 0.36%
USD/JPY 112.72 -0.57%
AUD/USD 0.7177 0.03%
GOLD 1,250 0.64%
WTI Crude Oil 49.99 -2.38%
BTC/USD 3,543 10.91%

The US Dollar has been at the center of attention again, as the last full trading week of the year started off in a bearish fashion for risk assets. Although we saw a bounce following Theresa May’s statement on the Brexit process regarding a possible vote on the draft plan in January, risk-on currencies and other risk-on assets are clearly under pressure, with the US stock markets challenging their correction lows again, completing the bearish global shift.

The Dollar’s slight dip, which was triggered by another attack by Donald Trump on the Fed’s tightening schedule provided the most action in the otherwise quiet forex segment, with a lot of traders taking a step back before the Fed’s rate decision on Wednesday. The consensus estimate is still a rate hike on the central bank’s meeting, which would be the fourth tightening step this year, but now, the bond market signals no rate hikes next year and in the current cycle.

Technical Analysis

EUR/USD, 4-Hour Chart Analysis

The EUR/USD pair bounced higher in its broader trading range after last week’s bearish close, but it remains well below the key 1.1440 level, and the bearish long-term technical setup is unchanged, eve as the pair held up above the support zone between 1.1275-1.13.

The breakdown from the consolidation pattern has been aborted, and we will likely have to wait until Wednesday for the next meaningful move, but with the period of positive seasonality soon ending for the Euro, odds still favor new lows in January, barring a sharp dovish shift by the Federal Reserve.

USD/JPY, 4-Hour Chart Analysis

The Dollar also lost ground compared to the Japanese Yen, and the safe-haven currency was among the strongest majors especially in the second half of the day, as risk assets decisively turned lower. The USD/JPY pair continues to trade in a broad consolidation pattern, but today’s drop off the 113.50 level could be the start of a broader trend change, with all eyes on the October low near 111.50. Gold’s strength confirms the strong safe-haven flows, which could propel the Yen higher against all of the majors, even the Dollar.

AUD/USD, 4-Hour Chart Analysis

The AUD/USD pair continues to be in an interesting technical setup with a likely move towards the October lows being likely underway. Today, the Aussie has been showing relative weakness due to the risk-off flows, and it’s virtually unchanged against the Greenback, despite the broad dip in the reserve currency.

Wednesday’s Fed decision and Thursday’s Australian Employment Report will likely cause volatile moves in the pair before the holidays, but bears are still clearly in control of the market both short- and long-term, especially given the weakness in Chinese assets.

Gold Futures, 4-Hour Chart Analysis

We have been following the key break-out attempt in gold, and today, the precious metal likely formed a crucial swing low that could propel it to a new swing high, which would signal a likely rally towards the resistance zone near the $1300 level. While a failed break-out attempt is still in the cards, given the bullish fundamentals, and the recent relative strength of gold, odds favor a confirmed trend change and the start of a bullish cycle here.

Key Economic Events Tomorrow

ChartBook

Forex

GBP/USD, 4-Hour Chart Analysis

EUR/GBP, 4-Hour Chart Analysis

EUR/JPY, 4-Hour Chart Analysis

AUD/JPY, 4-Hour Chart Analysis

GBP/JPY, 4-Hour Chart Analysis

USD/CHF, 4-Hour Chart Analysis

USD/CNH, 4-Hour Chart Analysis

Commodities

WTI Crude Oil, 4-Hour Chart Analysis

Copper Futures, 4-Hour Chart Analysis

Major Stock Indices

S&P 500 Futures, 4-Hour Chart Analysis

DAX 30 Index CFD, 4-Hour Chart Analysis

Nikkei 225 Futures, 4-Hour Chart Analysis

Shanghai Composite Index CFD, 4-Hour Chart Analysis

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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4.7 stars on average, based on 419 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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Analysis

Crypto Update: 5 Altcoins to Watch This Week

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Except for YOYOW (YOYO/BTC), all of the altcoins included on our December 10 list had an interesting week. Waves (WAVES/BTC) continued to pump while EOS (EOS/BTC) sustained its bounce. On top of that, Bitcoin Cash (BCH/BTC) is moving closer to our bottom picking target and Republic Protocol (REN/BTC) rallied from our exact bottom picking area.

This week, we’ll continue with the same theme as we look for altcoins that will likely move to interesting price points. Here are the 5 altcoins to watch this week.

SingularityNET (AGI/BTC)

AGI/BTC is having a strong December so far. It broke out of an inverse head and shoulders pattern on the daily chart. On top of that, it is poised to generate another bullish higher low setup.

Daily chart of AGI/BTC

The breakout from the inverse head and shoulders pattern has a target of 0.0000151. If you’re planning to enter the market, the key levels to watch are 0.0000105 and 0.0000086. So far, it looks like the 50-day moving average offers a strong support. If the market goes below that level, AGI/BTC can rely on the 100-day moving average to keep its uptrend alive.

Counterparty (XCP/BTC)

It appears that Counterparty is following the footsteps of SingularityNET. The market is currently working hard to take out its range midpoint of 0.0007653 and break out from an inverse head and shoulders pattern on the daily chart.

Daily chart of XCPBTC

The daily chart tells us that bulls have to put their A-game if they wish to reverse the market’s trend soon. On top of the range midpoint, they also have to deal with the 200-day moving average, which is acting as a resistance. Failure to take out the range midpoint will likely drive the market down to range support of 0.000415.

On the other hand, a breach of the midpoint with heavy volume can ignite a rally to the top end of the range at 0.001135.

Polymath (POLY/BTC)

Polymath has been trading in a wide range between 0.00002776 and 0.00004420 with a midpoint at 0.00003590 since November 24, 2018. That may not be the case for long as the market is beginning to show bullish signals.  

4H chart of POLY/BTC

The market may have recently respected range resistance of 0.00004420. However, a look at the 4-hour chart shows that POLY/BTC had several golden crosses between December 12 and December 14. The 50 MA crossed above both the 100 MA and 200 MA. On top of that, the 100 MA crawled above the 200 MA. What we have right now is a very bullish setup with the short-term, medium-term, and long-term moving averages acting as support levels.

With this setup, we can expect bulls to hold the range midpoint of 0.00003590. If they do, Polymath will very likely take out the range resistance.

NAV Coin (NAV/BTC)

NAV/BTC is one of two bottom picking candidates this week. The market pumped over the weekend but it was met by heavy selling. As a result, NAV Coin is now trading below the range midpoint of 0.000047.

4H chart of NAV/BTC

With the range midpoint now acting as a resistance, NAV/BTC is likely headed to the bottom end of the range at 0.0000327. You can bottom pick the market at that price area. If the support continues to hold, the range midpoint is an easy target.

AION (AION/BTC)

Our second bottom picking candidate for this week is AION. The market is close to the bottom as of this writing. To make matters worse for the bulls, the 50 MA and 100 MA are acting as short-term resistances.

4H chart of AION/BTC

We expect AION to drop to the range low of 0.0000318 in the next few days. With the current setup, it is possible for the market to generate a fresh yearly low only to wick back up to the support. If this happens, you can buy at the retest of the range low.

Bottom Line

On this week’s list, we included altcoins that have bullish tendencies as well as bottom picking potential. SingularityNET, Counterparty, and Polymath appear to have rosy outlooks. On the other hand, NAV Coin and AION seem set to revisit range lows. We’ve considered these altcoins so we can cater to both breakout and position traders.

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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3.8 stars on average, based on 288 rated postsKiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and ETFs, as he does his own crypto research and is the subject matter expert at ETFdb.com. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.




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Analysis

Pound Sterling Stems Decline

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By Dmitriy Gurkovskiy, Chief Analyst at RoboMarkets

On Monday morning, the British Pound stopped its significant decline against the USD, but it’s still pretty far from reaching stability. The British currency will remain under serious pressure until the country’s Parliament votes on the Brexit agreement with the European Union. We remind you that the voting was canceled last week because the Prime Minister Theresa May thought the situation wasn’t in favor of a positive outcome.

Meanwhile, consumers and businesses are reconsidering their position on the potential consequences of Brexit. According to the Rightmove agency, the country is overwhelmed by the plunge of real estate prices, which have already reached six-year lows. By December, they had been plummeting for two consecutive months. On YoY, the indicator added only 0.9%, the slowest growth over a very long period of time.

In the comments, the agency stated that the real estate market wasn’t moving anywhere due to high economic and political uncertainty. In addition to that, it was said that the current decline would be followed by an off-peak season. As a result, no one is expecting any rebounds on the British real estate market.

This recession is not a good signal for the British currency. As a rule, real estate in the country has always been too expensive, although the population could afford to pay extra money for a square meter of living space. The situation is obviously changing right now and if the Brexit proceeds according to the “tough” scenario, the British economy may find itself in a serious drawdown.

As we can see in the H4 chart, GBPUSD seems to continue its stable descending movement. However, it’s just a first impression. It’s not deceptive, but shouldn’t distract us from other scenarios. The pair has completed the previous descending impulse and right now is trying to start a new rising structure. To confirm a possible mid-term ascending movement, the price has to reach the resistance line and then test to break 1.2712 and fall towards 1.2637. The key upside target will be the resistance line of the projected channel at 1.2835. In case of a further decline, the key downside target will be at 1.2285.

Disclaimer

Any predictions contained herein are based on the authors’ particular opinion. This analysis shall not be treated as trading advice. RoboMarkets shall not be held liable for the results of the trades arising from relying upon trading recommendations and reviews contained herein.

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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4.6 stars on average, based on 21 rated postsHaving majored in both Social Psychology and Economics, I went on to continue my education in post graduate. Later I worked as a team lead of a tech and fundamental analysis lab in the Applied System Analysis Research Institute. This helped me to acquire all necessary skills and experience to become a successful trader and analyst, as well as a portfolio manager in an investment company. I'm a pro in the financial field and the author of articles for various international media. I also hold the position of Chief Analyst at RoboMarkets.




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