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Market Overview

Better Early Than Never: OPEC, Cryptos, & BoJ

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Japan, US stocks

The US Government failed to reach any sort of deal to approve a budget last Friday. If there’s no budget there’s no money to pay government employees or to keep things open.

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Welcome to Day 1 of the US Government Shutdown.

(Technically, the shutdown started on Friday night but short of a last minute arrangement, today will be the first day that it actually matters.)

@MatiGreenspan
eToro, Senior Market Analyst

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Today’s Highlights

  • OPEC Yesterday
  • Cryptos Today
  • BoJ Tonight

Please note: All data, figures & graphs are valid as of January 22nd. All trading carries risk. Only risk capital you’re prepared to lose.

Traditional Markets

Asian markets seem little affected by the government shutdown in the United States. I guess this isn’t much of a shock to most people. Even President Trump himself tweeted several times that this was a possibility that didn’t particularly concern him.

The biggest question is how long it will last. Shutdowns in previous Presidencies were mostly resolved quite quickly. However, with the Democratic leaders feeling like they’re “negotiating with jello” something tells me there’s a good chance this time might be different.

As I’m writing, we’re getting word that there will be a vote on the floor at 01:00 in Washington DC, but if that fails Trump’s trip to Davos may be in question. šŸ™

Currency markets opening up for the week are showing the US Dollar with a small gap down (blue circle). Of course, a good deal here could see the Buck much higher as it already is at multi-year lows (dotted yellow line).


OPEC’s Framework

The OPEC cartel has done a great job in the past of controlling the price of crude oil by limiting the amount that OPEC partner countries produce. However, Saudi Arabia’s Energy Minister Khalid Al-Falih pointed out yesterday that OPEC nations have dwindled in market share over the past few years.

At the moment, OPEC only produces about a third of the world’s oil. Yet, most oil that is produced globally is actually consumed locally. So OPEC oil still accounts for about 60% of global trade.

Their main competition is US Shale producers. The US has invested big on fracking technology and they’re getting pretty good at it. With the collapse of oil prices in 2014 however, the fracking math just didn’t seem to add up and there are currently plenty of pumps in the United States that are not being used to their full capacity.

With Oil now holding above $60 since New Years, the shale guys might just have a prime incentive to start priming the pumps.

Khalid Al-Falih’s statement involved a fair bit of forward thinking but was rather vague, saying that by the end of 2018 OPEC and her partners would need to come up with some sort of a “framework” rather than continue to limit production. I mean, what does that even mean?

It would seem, the role is now reversed. Saudi Arabia and her partners now have a clear incentive to keep prices low in order to continue to corner this market.

Crypto’s In Red

Looks like the Crypto markets may have been more affected by Trump’s government shutdown than the stocks.

As we mentioned in previous updates, a dip is usually a good time to get in but it is possible that we go down even further from here as technical support is still a way away.

The good thing is that volumes are holding in Japan and South Korea. Though real FOMO won’t start to kick in unless we get an indication that the dip is over.

It’s been a wild year so far so it’s good to see things calming down a bit as far as the volatility. Let’s hope the gyrations remain subdued for the next few weeks to give the market some more time to even out.

Meet the Bank of Japan

The BoJ has just gone into a two day meeting at the end of which they will make a public statement that could prove symbolic for global monetary policy and have a sizable impact on financial markets.

As we know, most of the central banks in the world have been practicing an extremely loose monetary policy since 2009. Yet, out of everyone, the Japanse have been the most aggressive by far. According to some, their bond-buying program has gotten way out of hand and the BoJ now owns more than 75% of the ETFs in the country and a good portion of all the financial assets in the world.

They may have been trying to give us a hint last week when they reduced their monthly bond purchases ever so slightly. Some traders reacted quite quickly taking this as a sign that they might be about to pull out and tighten up.

If this is the case, we may witness the last of the titans of loose money fall tomorrow morning. For those of you who are hardcore FX traders, this could be an amazing opportunity but might require staying up all night depending on where you are in the world.

Watch the USDJPY closely, and if they are indeed about to shake things up, we could see the pair drop pretty quickly as investors pile into the newer stronger Yen.

Let’s have an awesome week!

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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4.6 stars on average, based on 85 rated postsSenior Market Analyst at Etoro.com.




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Market Overview

Stocks in a Sea of Green, Buoyed by China

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Stocks started the week on a strong footing, with all three major US indices — the Dow, Nasdaq and S&P 500 — all trading in the green. China is largely to thank amid a deal that was reached over the weekend with the United States to suspend a trade war that was threatening to unfold. The Dow advance more than 300 points, with the index revisiting March highs and trading comfortably above the $25,000 threshold, while the Nasdaq and S&P 500 were each up nearly 1%.

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US Treasury Secretary Steven Mnuchin set the stage for gains over the weekend, when he disclosed that the trade war was “on hold” and that the United States would refrain from assigning tariffs to Beijing and vice versa amid productive discussions. The world’s two largest economies were at stake, with the United States and China poised to attach tariffs of $150 billion and $50 billion on China and US imports, respectively.

There was early confusion when a US trade representative seemingly countered the progress, but by Monday morning Secretary Mnuchin suggested that while President Trump could change his mind, a trade war is off the table — at least for now. The somewhat mealy-mouthed response may suggest that the market rally could have more steam left once any and all signs of an impending trade war are put to rest.

Further concerns were resolved in a tweet –

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‘All Is Fair in Love and War’

Putting the kibosh on a brewing trade war sent many sectors higher, from high-tech to agriculture including farm equipment maker Caterpillar, which advanced 4% on the development that President Trump tweeted about above.

American farmers were at risk of taking the brunt of a US/China trade war, given that ChinaĀ had threatened toĀ place tariffs onĀ ag products like soybeans, hogs andĀ pork. In addition to Caterpillar, Deere & Co, which is behind the famous green John Deere tractors, climbed 3% higher.

But the trade reversal took the wind out of the sails of steel stocks, which would have benefitted greatly from the double-digit percentage tariffs that President Trump was prepared to attach on China’s steel imports. US Steel was hit especially hard, shedding nearly 5% early in Monday’s trading session. Nucor Corp, another steel play, fell about 1%.Ā The price of steel the commodity had rallied 5% since President Trump’s previous tariff announcement in March.

The agreement between the U.S. and China remains tentative. As US Commerce Secretary Wilbur Ross put it, it was a “40,000 feet” deal whose details are still being ironed out. Larry Kudlow, President Trump’s economic advisor, also did what he could to dampen the mood, telling CNBC that the tariffs remain a tool in the arsenal of trade talks. Clearly, traders chose to focus on Mnuchin’s optimism.

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 6 rated postsGerelyn has been covering ICOs and the cryptocurrency market since mid-2017. She's also reported on fintech more broadly in addition to asset management, having previously specialized in institutional investing. Full disclosure, she's invested in bitcoin.




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Market Overview

Efficiency in Risk

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Crypto critics and skeptics often like to point out the high use of energy that is consumed by the Bitcoin network. Most proponents, including myself, regularly refute these claims as simply being the cost of doing business.

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The video I’m about to show you isn’t new but it’s something that I saw for the first time today and it blew my mind.

Andreas Antonopoulos is arguably one of Bitcoin’s most recognized names. In this clip, Andreas responds to the question of energy consumption in a rather unique way.

Please watch the video here now. (5:50)

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Not only does he make a comparison between the energy consumption of traditional means of payment but he also explains that the energy arbitrage that is being committed by the Bitcoin network is arguably the most efficient use of surplus energy that might otherwise go to waste.

No doubt, if more and more cryptocurrencies tried to adopt the Proof of Work, mining protocol it could be wasteful, but Andreas believes that at least one is, in fact, necessary in order to maintain the exceptional security of all cryptocurrencies.

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

  • Trade War On Hold
  • Efficiency in Oil
  • Ready for Risk

Please note: All data, figures & graphs are valid as of May 21st. All trading carries risk. Only risk capital you can afford to lose.

Traditional Markets

The US Secretary of the Treasury Steven Mnuchin has announced over the weekend that the trade war between the United States and China is officially on hold.

Speaking on Fox News Sunday, Mnuchin outlined the framework under which the de-escalation is taking place as well as explaining what happened with ZTE and why. Arguably, not a very forthcoming explanation, but that’s probably as good as we’re going to get.

Markets, on the other hand, do not seem to be on hold. Nor are they showing any real signs of relaxation following Mnuchin’s announcement. The most notable move, of course, is the US Dollar, which is flying this morning.

The purple circle here is the weekend gap…

Crude Oil’s Reaction

Strangely enough, crude oil is burning ever higher on the announcement. I can’t personally come up with any fundamental reasons why the Secretary’s announcement should have a positive effect on the price of oil, and that’s after reading several articles that try to make that very claim.

 

If anything, the stronger USD should serve to send the sticky stuff lower. Looking at the price, it becomes a bit more clear. The high of $72 per barrel was actually triggered last Thursday (yellow circle). The gap from the weekend (purple circle) was so weak that we could consider the Trade War news to have had a neutral effect.

Keep in mind that today is Whit Monday in the EU and Victoria Day in Canada, so volumes could be light throughout the day.

Cryptos in Green

The weekend has gone well in crypto-land with all of the 10 tokens listed on eToro rising.

Looking at the landscape, we can easily see that cryptotraders are piling on the risk again. This is apparent by the fact that the most experimental of the bunch, EOS and NEO are outperforming the rest by a wide margin. Whereas two of the most established coins, Litecoin and Dash, have underperformed.

This type of irrational behavior is unfortunately rather typical of financial markets. Both EOS and NEO are far from operating at full capacity and investors see this as an opportunity to get in before “the revolution” takes place. When in fact, it would make more sense to be looking at networks that have already stood the test of time and are in fact growing in their adoption and use.

No matter. the risk/reward slider doesn’t lie. Those who take on greater risks might end up being rewarded for them but if the respective projects don’t end up materializing, prices could come crashing as well. Whereas, the more established networks are less susceptible to those type of wild gyrations.

Risk Efficiency

Interestingly enough, it seems that a similar dynamic is playing out in the traditional markets as well. Here we can see three different ETFs that cover different parts of the market.

White = Russel 2000 – Smallcap Stocks
Blue = S&P Midcap Stocks
Green = S&P Largecap Stocks

Notice how investors are seeking out the extra risk as they speculate that the smaller companies will grow faster than the larger ones.

Wise investors will no doubt keep a diversified portfolio. One that holds a very small amount of ultra-high-risk assets, and includes plenty of different types of markets from crypto to stocks to ETFs and everything else.

Let’s have an amazing week ahead!

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.

Best regards,
Mati Greenspan
Senior Market Analyst

eToro: @MatiGreenspan | Twitter: @MatiGreenspan | LinkedIn: MatiGreenspan | Facebook:MatiGreenspan

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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Market Overview

Weekly Forecast: Economic Data, Post-Consensus Wrap-Up and Zcash’s Gemini Listing

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It’s shaping up to be another active week in the financial markets, as currency and stock traders shift their attention to economic data and geopolitics. Cryptocurrency traders will be looking for clues about the direction of the market following a highly successful Consensus blockchain summit.

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To get a better sense of whatā€™s ahead, we encourage readers to go over latestĀ Week in Review.

Consensus 2018: The Aftermath

The year’s biggest blockchain event was greeted positively by policymakers, academics and industry proponents. However, unlike the previous three years, Consensus failed to spark a sustained rally in cryptocurrency prices.

Though Consensus usually generates double-digit gains for bitcoin during the event, the bulk of the rally occurs long after the summit has taken place. Since 2015, post-Consensus gains have ranged between 78% and 138%. With this precedent in mind, traders will be closely monitoring market activity over the next few weeks to see if price action follows a similar trajectory.

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In addition to Consensus, the blockchain industry is riding a wave of momentum tied to institutional adoption, innovation and sanguine comments from regulatory agencies. These stories have counterbalanced negative headlines concerning fraudulent ICOs and the massive carbon footprint of bitocin mining.

Zcash Lists on Gemini

The privacy-focused Zcash cryptocurrency has been cleared by U.S. regulators to be listed on the Gemini exchange. The exchange, which is led by Cameron and Tyler Winklevoss, began accepting ZEC deposits on Saturday with full trading expected to begin on Tuesday.Ā ZEC values surged to two-and-a-half month highs following the news.

By listing on Gemini, Zcash could enjoy higher liquidity and become a front-runner in the launch of cryptocurrency derivatives products. That’s because Gemini provides pricing data to CBOE, which was the first regulated exchange to launch bitcoin futures. According to some analysts, the addition of Zcash could hasten the production of ZEC derivatives products.

Economic Calendar

Traders with exposure to stocks, currencies and commodities can expect a steady stream of market-moving events throughout the week.

Monday

Three members of the Federal Open Market Committee (FOMC) are scheduled to deliver speeches on Monday, including Raphael Bostic, Patrick Harker and Neel Kashkari. The Fed’s policy-setting board is widely expected to raise interest rates at its next meeting in June.

Fed fund futures prices imply two more rate hikes for 2018, with a third upward adjustment a strong possibility.

In terms of economic data, the Chicago Fed will release the national activity index at the start of New York trade.

Tuesday

The United Kingdom’s House of Commons will hold inflation report hearings on Tuesday. In North America, the U.S. Richmond Fed will release its monthly manufacturing survey for May.

Wednesday

Wednesday is the most active session of the week from a data perspective, with IHS Markit scheduled to release a deluge of PMI reports for Japan, Eurozone and United States.

The U.K. Office for National Statistics will release headline inflation figures, including the consumer price index and producer price index for the month of April.

In the United States, the Federal Reserve will release the FOMC meeting minutes for May.

Commodity traders will be keeping close tabs on weekly crude inventory data courtesy of the U.S. Energy Information Administration (EIA). Crude inventories are forecast to fall by nearly 1.8 million barrels in the week ended May 18.

Thursday

A meeting of the Eurogroup will be in the headlines in the second half of the week, although it is not expected to generate any strong signals about monetary policy. In terms of data, GfK will report on German consumer confidence and the U.K. government will issue its monthly report on retail sales.

The European Central Bank (ECB) will release the monetary policy meeting accounts of its most recent gathering, where officials voted to keep interest rates on hold.

The Fed’s William Dudley and Patrick Harker of the FOMC are also scheduled to deliver speeches.

Friday

Japanese inflation data and the latest GDP figures for the U.K. will headline the economic calendar on Friday. In the United States, a report on monthly durable goods orders will also make headlines.

Federal Reserve Chairman Jerome Powell will participate in a panel discussion on financial stability and central bank transparency in Stockholm, Sweden.

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 406 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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