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Asian Market Update – Friday: Bitcoin falls back after insane rally; Asian stocks rally on better Japanese GDP data

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Bitcoin euphoria

Bitcoin market in a state of euphoria

Bitcoin prices climbed up in another rally in Asian trading Friday morning, bellowing away $16,000 and $17,000 to reach a high of $17,627 before falling back.

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The price action today came after an insane rally in the price of bitcoin overnight, Hong Kong time, with the price nearing $20,000 on Coinbase.

The extremely active trading even brought down Coinbase-owned GDAX exchange, though normal operations were restored after about half an hour, as reported by CCN.

As of midday in Asian trading on Friday, bitcoin was down 5.12 percent to $16,501.

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With the historic run in bitcoin, the debate about its future is also heating up. On one side are the people who are drawn into the cryptocurrency because they believe bitcoin is better store of value than precious metals; On the other side, people are arguing that nothing can justify its current price increase.

Ethereum continued down slightly on Friday morning, though it later shrugged off some of the losses from early morning. At midday, ethereum was down 1.19 percent to $428. The coin had lost about $16 in a downfall from 5 AM to reach $423 at 8 AM before surging back.

The story is similar for litecoin, which was trading down 1.08 percent to $97 at midday. Litecoin has been struggling to gain momentum since it topped out on December 3.

Main Market Movers – Mid-day Asian Trading Session

Indexes Value at Midday Daily Change
Japan- Nikkei 225 22,772 1.22%
China-Shanghai Composite Index 3,269 -0.09%
Hong Kong –Hang Seng 28,465 0.54%
South Korea-KOSPI 2,468 0.28%
Australia-ASX 200 5,995 0.29%
S&P 500 E-Mini Futures 2,641 -0.03%

Major Asian equities markets rallied on Friday morning session, extending gains seen on Thursday, though the market on the Chinese mainland was still down slightly.

In Tokyo, the Nikkei 225 Index edged up 1.22 percent to 22,772 before midday on Friday, after trading up by 1.45 percent yesterday as well. A better-than-expected economic growth rate out on Friday might have boosted investors’ confidence, adding to BOJ’s voices that ultra-easy monetary policies and stimulus packs would be intact in the near future. Japan’s GDP grew 2.5 percent in the third quarter from the year before.

In Hong Kong, the Hang Seng Index edged up 0.54 percent to 28,465 at midday, turning a recent downward trend.

Down under, the ASX 200 tacked on 0.29 percent to 5,995 at midday.

In South Korea, the Kospi also gained 0.28 percent to 2,468 at midday.

On the Chinese mainland, the Shanghai Composite Index was off 0.09 percent to 3,269.

The S&P 500 E-Mini Futures was down 0.03 percent to 2,641.

Investors are currently waiting for November trade data for China, which is expected later today. In October, China’s export growth pace slowed to 6.9 percent, but imports accelerated to 17.2 percent. China posted a trade surplus of $38.17 billion in the month. Investors will be paying attention to the demand for commodities from the world’s second largest economy in November.

In the US, in a last-minute effort, US Democratic and Republican lawmakers saved the US government from a shutdown this weekend by passing a short-term spending bill. But, the bill only covers the time before December 23, when a yearly spending bill needs to be finished.

Currencies

The Japanese yen lost 0.22 percent against the US dollar at midday Friday, changing hands at 113.32 per dollar.

The Chinese yuan lost 0.03 percent against the US dollar at 6.6190 per dollar.

The Australian dollar lost 0.01 percent on the dollar, changing hands at 1.3208 per dollar at midday.

Commodities

WTI Oil was up 0.02 percent to $56.61 per barrel.

Brent Crude gained 0.18 percent to $61.15 per barrel.

Gold was up 0.17 percent to $1,249 an ounce.

News across Asia

In Japan, the world’s third-largest economy saw solid growth in the third quarter of the year, fresh data out on Friday showed. The Japanese economy grew 2.5 percent, beating a Reuters poll that estimated 1.5 percent growth. The better-than-expected growth was largely buoyed by a 1.1 percent rise of capital expenditure in the GDP.

Take away: The economy grew fast, and the BOJ appears to be inclined to keep current ultra-easy monetary policies and massive financial stimulus, despite missing their inflation rate goals. The long-term effects of this on the Japanese economy are undoubtedly questionable.

In China, officials voiced strong dissatisfaction over the EU’s new anti-dumping legal framework that only requires companies and industry groups to prove “significant market distortion” when filing anti-dumping cases.

Take away: China is worried because it makes it easier for European companies to keep Chinese goods out of their market by pointing to “market distortion.” There is a widespread consensus that distortion occurs in China at least in some industries. Immediate escalation of trade tensions between the EU and China is unlikely, but this is a core issue for China and the Chinese commerce ministry said it would firmly defend against any potential “abuse” of WTO rules.

Featured image from Pixabay.

Disclaimer: The author owns bitcoin, ethereum and litecoin. He holds investment positions in the coins, but does not engage in short-term trading.

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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4.2 stars on average, based on 21 rated postsFredrik Vold is an entrepreneur, financial writer, and technical analysis enthusiast. He has been working and traveling in Asia for several years, and is currently based out of Beijing, China. He mainly follows the stock and forex markets, and is always looking for the next great alternative investment opportunity.




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Analysis

Daily Analysis: Oil Extends Rally as Nasdaq Leads Stocks Higher

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Friday Market Recap

Asset Current Value Daily Change
S&P 500 2749 1.38%
DAX 12,483 0.18%
WTI Crude Oil 63.58 1.29%
GOLD 1330.00 -0.16%
Bitcoin 10,14 -0.09%
EUR/USD 1.2295 -0.28%

US equities built up some bullish momentum towards the end of the week, ignoring the technical damage that the volatility-crash caused, and the major US indices rallied into the close today, squeezing the shorts. The Nasdaq, which led the rally as we expected, took out the key 6850 level in late trading and added another percent to, incredibly enough, finish only a hundred point of the all-time high.

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NASDAQ 100 Futures, 4-Hour Chart Analysis

Should the tech benchmark retest the high next week, it will be amid very strong negative divergences, but hey, those divergences have been building for months now. The rally in equities was boosted by the dip in Treasury yields, especially at the long end of the curve, while Amazon continued ot lead the charge, closing right at the historic $1500 per share level.

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Russell 2000 (Small Cap) Index, 4-Hour Chart Analysis

The advance in the Dow and the S&P 500 is much less convincing and with small caps also lagging the tech-behemoth juggernaut, we remain skeptical regarding the sustainability of the move. That said, if the broader indices stay above the key levels, we will be trading the long side in equities, even as from an investment standpoint, valuations are still way above acceptable.

Forex Markets and Commodities

The lackluster performance of European and Asian stocks adds to the negative divergences, especially as the Euro stopped appreciating against the Greenback, and that should be helping stocks of the old continent. Of course, the DAX and the EuroStoxx 50 could play catch-up next week, barring another surge in the common currency.

EUR/USD, 4-Hour Chart Analysis

The most-traded forex pair remains in a short-term downtrend, as it failed to recapture the previously broken rising trendline, and the commodity related risk-on currencies also remained under pressure. The Canadian Dollar did bounce back off yesterday’s 8-week lows, boosted by the much hihger than expected inflation release and the jump in the price of crude oil.

USD/CAD, 4-Hour Chart Analysis

Oil benefited from the positive shift in sentiment, while the Syrian situation, which took a backseat in the headlines, still supports the rally. The Japanese Yen and gold were stable amid the risk-rally and that adds to our suspicions regarding the upside potential form these levels.

Cryptocurrencies

The segment started out the day with a strong bounce that carried the major coins higher by around 10%, but given the recent steep short-term pullback, even that wasn’t enough to turn the tide, and the day ended with an (almost usual) sell-off after the US close. Despite the recent volatility, the overall picture is still encouraging, with most of the majors being safely above the crash lows, likely in a new bullish cycle that has the potential to last for several more weeks or even months.

While new all-time highs are it guaranteed following the 60-70% declines among the largest coins, but even without those, plenty of upside potential is left for investors. With that in mind, investors should hold on to their coins and even add to their holdings on the short-term dips like the current one.

ETH/USD, 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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Bitcoin is Clear

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It’s not often that drama from reality television influences the stock markets but I suppose it’s one of the hallmarks of the new world we live in.

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For those of you who haven’t heard yet. Kylie Jenner sent out this tweet…

…and SNAP stocks did this…

The follow-up apology didn’t seem to help much though.


Love or no love, it’s pretty clear that investors are following these personalities fairly closely and taking notes.

@MatiGreenspan
eToro, Senior Market Analyst

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Today’s Highlights

  • More Market Funk
  • Bitcoin is Clear
  • CME Bitcoin Expiration

Please note: All data, figures & graphs are valid as of February 23rd. All trading carries risk. Only risk capital you can afford to lose.

Traditional Markets

The market funk continues. All the indicators are totally sensational and correlations are way-out.

The Dow Jones went up and the Nasdaq was down. This morning the Asians did great but Europe is starting out weird.

Things are just kind of all over the place. There weren’t really any progressions in Volatility or the 10 Year Yield. Both kind of just coasted through Thursday.

But hey, today is Friday. So we could get some action going into the weekend. Especially with some heavy fed activity planned for this evening.

Of course, the only FOMC member traders really want to hear from at the moment is the newly appointed Jerome Powell, who will be giving his first interest rate announcement on March 21st.

Bitcoin in the Clear

The community celebrated yesterday as the bitcoin mempool was cleared for the first time in months.

Here we can see that during the peak of the FOMO from December 8th util January 21st, the bitcoin network was backlogged with more than 100,000 unconfirmed transactions at any time.

This comes as the adoption of both Segwit and the Bitcoin Lightening Network have been dramatically increased.

In short, the scaling issue that we’ve spoken about often in the last few months may finally have a solution. Of course, we’ll only know for sure once we give it a real test.

For now, transactions rates are at the lowest point since at least May of 2016, with an average of only 2.14 transactions per second (TPS) over the last 7 days.

It should be noted however that adoption of the Lightning Network will actually reduce the TPS rates since Lightening transactions happen off of Bitcoin’s main chain.

Rather than adding each transaction to the main blockchain, trusted parties are able to transact freely with each other. They then send an aggregate summary of their transactions onto the main blockchain so that the rest of the network can update the final results.

Either way, it’s clear for now that there’s simply less activity on Bitcoin since the pullback. This can be confirmed by Google Trends which shows that interest in the world’s largest digital currency is now as low as it was in early November, which at the time was an all-time high.

Futures

Another thing to bear in mind is that the CME February Bitcoin futures contracts will expire today. Any positions that are not rolled over to the March contracts will need to be settled in cash on the Gemini exchange.

It should be noted that Wall Street is still taking it very slowly with bitcoin, and so far only 5,840 BTC have been traded on the February CME contracts.

Some people have pointed out that the price of bitcoin tends to dip around the time of the contract expirations, but I still haven’t seen enough evidence to support this theory.

For now, my tinfoil hat is still in the closet. Will let you know once I take it out. 😉

Have an amazing weekend!!

This content is provided for information and educational purposes only and should not be considered to be investment advice or recommendation. The outlook presented is a personal opinion of the analyst and does not represent an official position of eToro. Past performance is not an indication of future results. All trading involves risk; only risk capital you are prepared to lose. Cryptocurrencies can widely fluctuate in prices and are not appropriate for all investors. Trading cryptocurrencies is not supervised by any EU regulatory framework.

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: Stocks Refuse to Fall Even as China Takes Over Key Insurer

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Although it should have been a very quiet week in China, thanks to the New Year celebrations, the recent surge in volatility and the plunge in equities didn’t pass without consequences in the key market. Just shortly after effectively shutting down the Chinese version of the Volatility Index (VIX) (presumably to calm the markets…), one of the main actors of the monstrous financial web, Anbang, of the country had to be taken over to avoid a systemic event and stop the “creative” financial engineering that involved criminal activity (the shadow of 2008).

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China will likely need many more duck-tapes like this one if it wants to stop the largest credit bubble in human history to collapse, but for now, the solution could work. Equity futures edged higher since yesterday’s volatile close, and as the major US indices are holding up well, not far off last Friday’s highs, our bearish short-term view might have to be revised.

Nasdaq 100 Futures, 4-Hour Chart Analysis

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As we discussed before, the long-term uptrend is intact, and we expect at least a re-test of the highs even if we are in a large-scale top formation, but we thought that the technical damage caused by the crash three weeks ago would require more healing.

We are not turning bullish just yet, but today’s session could finally decide if we the BTFD-crowd is strong enough to turn the tide after the choppy drift lower this week. We are still focusing on the Nasdaq, as the broader market seems to be following the lead of the tech benchmark, and a move 6850 (in the Nasdaq 100 futures, and still the 2735 level in the S&P) would be a very positive sign for bulls.

DAX Index, 4-Hour Chart Analysis

The German DAX index is also showing some tentative short-term relative strength although it remains almost 10% below its all-time high, and it remains a strong negative divergence to be monitored.

Forex Markets Quiet

EUR/USD, 4-Hour Chart Analysis

The main pairs are trading in a choppy narrow range today after the strong move in the Yen and the drop in the USD yesterday. US Treasury Yields are edging lower today, helping the calm in equities and currencies, but on a bearish note, commodity currencies failed to rebound so far, and they were providing good signals since the crash. Day-traders should note that the Canadian Dollar will likely be very active again, with the Canadian CPI report coming out pre-market.

To sum the outlook up, we are still leaning on the risk-off side here regarding the short-term outlook, but we wouldn’t bet the farm on that, as there are mixed signals before the weekend.

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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