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Analysis

Daily Analysis: Markets Tank as Trump Fears Escalate

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Thursday Market Recap

Asset Current Value Daily Change
S&P 500 2351 -0.35%
DAX 12530 -1.23%
WTI Crude Oil 48.80 -0.11%
GOLD 1258.00 0.21%
Bitcoin 1847 0.72%
EUR/USD 1.1118 -0.16%

Global stocks had their worst day since September on Wednesday, as the low-volatility levitation ended, with Donald Trump’s biggest scandal yet. One congressman already called for impeachment following the leaked words of the President, and that triggered a broad sell-off in risk assets and the US Dollar. All global indices suffered heavy losses, with the prior leaders, the NASDAQ and the DAX losing well over 2%. The benchmarks are trading lower again today, as the risk-off sentiment spread to the Asian markets, with the strength of the Yen adding to the losses. The Brazilian political crisis added to the worries today, as the Real and local stocks both plunged, delivering another blow for bulls.

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The Yen charged higher in tandem with gold yesterday, with the US Dollar being hit hard. The USD/JPY pair got close to the 110 level today while, gold rose above $1260. Commodity-currencies are holding up relatively well against the USD, as crude oil is just slightly lower. The Pound got a boost from the better than expected British Retail Sales report, and it cleared the 1.30 hurdle against the Dollar in early trading. The Euro and the Swiss Franc also continues to appreciate compared to the USD, as the scandal weighs heavily on US assets.

Cryptocurrencies

Cryptocurrencies are broadly higher amid the stock sell-off, with NEM leading the way, being up by almost 50%. Bitcoin is still below its prior all-time high, but it remained stable, despite its lofty gains. Ethereum and Ethereum Classic are also in the green, as well as the other recently struggling majors, Dash, Monero, and Litecoin. Stellar is more than 10% higher today, while Ripple is consolidating just below yesterday’s highs. The total market capitalization of the coins passed $62 billion, as money continues to pour in to the segment. Bitcoin turned sharply higher this morning getting close to its recent all-time highs once again.

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Bitcoin, Daily Chart Analysis

Technical Picture

The NASDAQ quickly gave back several weeks of gains as its relative strength turned into underperformance during yesterday’s market rout. The internal weakness that we observed in the past week led to a widespread decline, as volatility exploded, with the VIX rising by 50% in one session, above the 15 level. The NASDAQ bounced off its short-term support after the market close yesterday, but today it easily broke below it, as the overnight rally faded. The short-term trend-line has also been broken, and the strong downside momentum suggests more losses for the broader market and the tech sector as well.


NASADQ, Daily Chart Analysis

Key Economic Releases on Thursday

Time, CET Country Release Actual Expected Previous
1:50 JAPAN Prelim GDP -0.8% 0.4% 0.3%
3:30 AUSTRALIA Employment Change 37,400 4,000 60,000
10:30 UK Retail Sales 2.3% 1.2% -1.8%
14:30 US Initial Jobless Claims 232,000 240,000 236,000
14:30 US Philly Fed Index 38.8 18.9 22.0

Key Economic Releases on Friday

Time, CET Country Release Expected Previous
14:30 CANADA CPI Index 0.5% 0.2%
14:30 CANADA Core Retail Sales 0.2% 0.1%
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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

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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

Technical Analysis: Majors Stage Rally but Strong Levels Still Ahead

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The cryptocurrency segment has recovered from a broad correction today in early trading, with the most valuable coins all turning into green during the session, despite the bearish start to the overnight session. With bottom-to-top gains of up to 15%, the rally helped in easing the worries of bulls, especially in the case of the relatively weaker coins.

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Bitcoin and most of the largest altcoins remained stable during the selloff, and BTC recaptured the $10,000 level quickly after trading as low as $9600 overnight. The initial rally topped out near $10,400, and the coin is trading back near the $10,000 level, as the bullish momentum faded away somewhat.

BTC/USD, 4-Hour Chart Analysis

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That said, we expect the uptrend to continue even if the correction could still carry Bitcoin lower. Further strong support is found between $9000 and $9200, while targets are ahead at $11,300, $13,000, and $14,250.

ETH/USD, 4-Hour Chart Analysis

Ethereum showed strength during the bounce again after yesterday, together with the early leaders of the rally, and although the coin dipped below the $845 level in the second half of the session, the signs remain positive for bulls. Support levels are now found at $780, $740, $625 and $575, while resistance is ahead near $910 and $1000.

(more…)

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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