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Daily Analysis: Markets Settle Down ahead of the FED as Crypto-Coins Rebound

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Tuesday Market Recap

Asset Current Value Daily Change
S&P 500 2434 0.35%
DAX 12783 0.73
WTI Crude Oil 45.89 -0.42%
GOLD 1264.00 -0.45%
Bitcoin 2744 -1.51%
EUR/USD 1.1210 0.05%

The tech giants experienced a relief rally after the flash-crash on Friday, as the major global indices rebounded together with the NASDAQ. Traders took a step back before tomorrow’s key Federal Reserve meeting, causing a decline in trading volumes and volatility. Despite the snapback rally, the NASDAQ still seems wounded from a technical viewpoint and another leg lower in the correction is expected, at least testing the Monday lows. The better than expected US PPI index gave another boost to rate hike expectations and helped a slight rebound in the Dollar that has been in a gruelling downtrend in recent months thanks to the strength of the Euro and the Yen.

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Dollar Index, 4-Hour Chart Analysis

The Great British Pound rallied on a positive inflation surprise today, as the post-election sell-off ran out of steam. The other major fiat currencies are virtually unchanged in thin trading, although the Canadian Dollar continues to rally despite the weakness in oil. The production of the OPEC countries hit a new 6-month high according to the cartel’s report, painting a gloomy picture of the fate of the extended supply-cut agreement especially considering the diplomatic crisis between some of the major members. Gold is under pressure before the Fed, as the precious metals correction continues following the rally to $1300.

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Cryptocurrencies

The coins settled down after yesterday’s crazy session that brought the two giants of the segment even closer in market value. The Bancor ICO was a huge success, the biggest public offering so far, but that probably drained some liquidity away from small cap coins, leading to weakness in their prices. That said, Stratis, Steem, Siacoin, Lisk, Golem, and Zcash are all rallying today. Bitshares is consolidating its lofty gains, while Ripple and NEM are still weak. Ethereum is holding strongly below its highs from yesterday, despite the scary correction in late trading, while Bitcoin also rebounded, together with Dash and ETC.

 

Bitcoin, 4-Hour Chart Analysis

Technical Picture

The S&P 500 held up well amid the strong correction in the big tech names, as it respected the crucial support level near 2415. The short- and –long-term trends are both positive, with the all-time still being less than 0.5% above the current levels. We expect low volatility until tomorrow evening, when the Fed announces its interest rate decision, with a probable test of the all-time highs. In a bearish scenario, the 2400 level is expected to act as support, with the long-term uptrend line currently found just above 2600.

  S&P 500, 4-Hour Chart Analysis

Key Economic Releases on Tuesday

Time, CET Country Release Actual Expected Previous
3:30 AUSTRALIA NAB Business Confidence 7 13
10:30 UK CPI Index 2.9% 2.7% 2.7%
11:00 GERMANY Zew Economic Sentimetn 18.6 21.8 20.6
14:30 US PPI Index 0.0% 0.1% 0.5%

Key Economic Releases on Wednesday

Time, CET Country Release Expected Previous
4:00 CHINA Industrial Production -0.20% -0.10%
10:30 UK Average Earnings 2.4% 2.4%
10:30 UK Unemployment Rate 6.4% 6.5%
14:30 US CPI Index 0.3% 0.2%
14:30 US Core Retail Sales 0.2% 0.3%
16:30 US Crude Oil Inventories 3.3 mill
14:30 US Fed Interest Rate Decision 1.25% 1%
20:00 US Fed Monetary Statement
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Analysis

Technical Analysis: Litecoin Continues Surge as Bitcoin Tests Highs

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With the crypto world being focused on the historical futures launch, the major coins all enjoyed buying following a hectic weekend, and a volatile week as a whole. BTC itself got another boost from the widespread publicity and the volatile correction of the recent days ended, with the most valuable coin bouncing back towards its all-time high.

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While the long-term picture remains severely overbought, the short-term picture is not stretched and further gains are possible even amid the elevated correction risk. That said, investors should wait for a more favorable entry point to ad dot their holdings, while traders should control position sizes in the light of the long-term setup. Major support levels are now near $13,000, $11,300, and $10,000, with stronger levels still at $8200 and $7700.

BTC/USD, 4-Hour Chart Analysis

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The major altcoins are all up today, but only Monero and Litecoin are still within short-term uptrends, and the segment as a whole is still dangerously overextended, and a deeper correction is very likely in the coming weeks. LTC continued its recent break-out, getting close to the $200 level, and joining the extremely overbought group regarding the long-term momentum, and triggering a long-term sell signal in our trend model. Key support levels are found $100 at $75 and $64, with a weaker primary level at $125.

LTC/USD, 4-Hour Chart Analysis

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Analysis

Long-Term Analysis of the Silver Market

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Silver

The silver market has once again caught investors’ interest as the price is nearing areas not seen since late 2008.

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2017 started at a low point for silver, and it seems it will end the year that way as well, meaning investors who bought at the beginning of the year haven’t suffered nor gained much.

This doesn’t mean, however, that the price hasn’t moved during the year. After the low start of the year, silver quickly tacked on about 18% to a top of $17.50 per ounce.

In terms of fundamentals in the silver market, things look a bit complicated for 2018. There are multiple forces pulling in different directions for the price of silver going forward:

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Positives

  • A sharp stock market correction can be expected to occur some time in 2018. Most likely, this will happen sooner rather than later. Stock market crashes always trigger a flight to safety, meaning gold, silver, and quite possibly bitcoin, can benefit.
  • We are seeing signs that inflation may be starting to rise again, although this is not confirmed yet. Rising inflation is always good for precious metals.
  • If the US federal budget deficit widens as a result of the new tax reform, the US dollar may suffer as a consequence. Goldman Sachs put out a note to investors in November 2017 saying that the US debt is “on track” to reach an “unsustainable” level in coming years. Fed Chair Janet Yellen has also said about the US debt that it is “the type of thing that should keep people awake at night.” Rising debt levels creates uncertainty about the economy, which is generally good for gold and silver.

Negatives

  • Central banks around the world seem committed to raise interest rates in 2018. Rising interest rates are bad for precious metals because it would make it more attractive to put money in the bank.
  • The cryptocurrency bull market is on track to continue, diverting attention and capital away from precious metals as a traditional store of value. However, this one is uncertain, as it may also be considered a positive in the way that the rise of cryptocurrencies brings the inflationary and unsustainable nature of fiat currencies into focus.
  • The US dollar may have hit a bottom in 2017 and trade higher compared to other major fiat currencies going into 2018. A stronger dollar is always bad for precious metals, which are priced in dollars.

Silver chart

When looking at the chart, we can see that silver is back down to were it started the year, which coincides with a major support area where it has turned several times in the past few years.

From a technical perspective, silver has been trading in a triangle pattern on the longer-term weekly chart, with the price now trading very near the lower end of the triangle, adding confluence to our bias that silver will trade up from here.

Silver failed to live up to our prediction from early 2017, and is now even trading well below the level from that time.

A low price by any measure combined with two major technical support levels adds confidence to our trade and makes silver a low risk and potentially high reward trade for 2018.

Depending on your own strategy and investment style, you may want to wait for the price to break out from the current triangle pattern it has been trading in for the past year and a half. You would then give up some of the potential return for an even safer trade. After that, major resistance is found around $17.50 and $18, with lots of upside potential if we can finally break through those levels.

Featured image from Pixabay.

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Analysis

Long-Term Cryptocurrency Analysis: Look Out Below?

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After last week’s observation that a major top is in or near in the segment, the Bitcoin surge continued for almost a week, with Thursday’s wild session taking the coin as high as $19,000 (the article uses Bitstamp prices) on some exchanges. While the currency already pulled back by more than 20% the long-term picture is still extremely overbought and a much deeper correction is likely in the coming weeks.

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BTC spiked below $13,000 today, violating the primary weak support at $13,300, with further levels now at $11,300, $10,000 and $9000, but stronger support only found at $8200 and $7700. Next week’s futures launch could cause another jump in trading activity, and volatility is expected to remain very high amid the likely correction.

BTC/USD, Daily Chart Analysis

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While not all altcoins participated in the, supposedly, last part of the rally, IOTA, Monero, and towards the end of the week Litecoin, also stretched above all conventional targets with IOTA also turning exponential after a deal with Microsoft. The coin exploded by more than 350% before entering an initial sharp correction, breaking the steepest short-term uptrend. Strong support is only found at $3 and $1.5, but potential Fibonacci support is at $2.35.

IOT/USD, Daily Chart Analysis

Let’s see how the long-term charts of the other altcoins look after the crazy week.

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