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Analysis

Daily Analysis: North Korea and Cryptocurrencies in Focus as Irma Targets Florida

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Tuesday Market Recap

Asset Current Value Daily Change
S&P 500 2448 -1.09%
DAX 12123 0.18%
WTI Crude Oil 48.66 2.85%
GOLD 1342.00 0.93%
Bitcoin 4278 2.16%
EUR/USD 1.1900 0.03%

With the major North American exchanges closed for Labor Day and Canada Day yesterday, global markets traded with thin volumes, but today, traders and volatility are back in full force. The most important indices are trading lower after the opening bell, and Asian stocks are underperforming their global peers. This is especially true of Japan, as local equities got hit by the Korean escalation and the jump in the Yen that surged together with other safe-haven assets.

After Hurricane Harvey caused devastation in the Gulf of Mexico, another Category 5 storm, Irma is nearing the coast of the US, already causing damages in the Caribbean region, and giving a boost to the risk-off sentiment. The hurricane will likely make landfall in Florida, and although the extent of the damage is highly uncertain, the event contributed to a spike in the VIX and a steep decline in stocks. Crude oil is trading sharply higher on the renewed supply and war fears, nearing the $50 per barrel level agian int he WTI contract amid the persistent long-term fundamental pressures.

S&P 500, 4-Hour Chart Analysis

Forex markets are fairly active on the first post-Labor Day session, as the hydrogen bomb test and coupled by the preparation for yet another ICBM launch in North Korea caused massive buying in safe haven currencies and gold. The Dollar is broadly lower today, and even the Great British Pound is up against it as the currency rebounded strongly from yesterday’s slump, recapturing the 1.30 level in the pair.  The Euro is also slightly higher compared to the USD, although it’s down against most of its peers in the negative environment.

Huge decline towards kewy support in the USD/JPY, 4-Hour Chart Analysis

Cryptocurrencies

The segment experienced an oversold bounce today, as the major coins rallied in early trading after the Monday massacre. The Chinese ICO ban is still affecting the market that has surged tremendously in the past one and a half months, with the likes of NEO and Ethereum suffering steep losses thanks to the legal troubles. Bitcoin is holding up well amid the sell-off, but the long-term picture suggests that more correction is on the horizon for most of the segment after the monster rally.

NEO/USDT, 4-Hour Chart Analysis

Technical Picture

The precious metal is probably approaching a more durable top after Monday’s gap higher, as the daily chart is overbought, and some consolidation is likely after the break-out above $1300. The long-term picture remains encouraging for the metal, and the coming correction could form a bottom slightly below the key $1300 support. That said, further escalation in the North Korean situation could fuel more upside in the commodity, and investors should keep a core position in gold despite the likely pull-back, but wait with adding to their holdings.                

Gold, 4-Hour Chart Analysis

Key Economic Releases on Tuesday

Time, CET Country Release Actual Expected Previous
6:30 AUSTRALIA Rate Decision 1.5% 1.5% 1.5%
6:30 AUSTRALIA RBA Monetary Statement
10:30 UK Services PMI 53.2 53.6 53.8
16:00 US Factory Orders -3.3% -3.1% 3.0%

Key Economic Releases on Wednesday

Time, CET Country Release Expected Previous
3:30 AUSTRALIA GDP 0.8% 0.3%
14:30 CANADA Trade Balance -3.8 bill -3.6 bill
14:30 US Trade Balance -44.6 bill -43.6 bill
16:00 CANADA Rate Decision 0.75% 0.75%
16:00 CANADA Monetary Statement

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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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4.6 stars on average, based on 375 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

Stocks Surge on Earnings as Saudi Tensions Ease

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US stocks started the session in positive territory following the positive earnings surprises by Goldman Sachs (GS) and Morgan Stanley (MS), and from then on, the floodgates opened and we saw the strongest rally on Wall Street since March. President Trump’s more diplomatic stance towards Saudi Arabia helped the bounce in stocks, together with the stability in Treasury yields, but the most important driver was the huge bearish move of last week in stocks.

The major indices all gained more than 2% amid the furious oversold bounce, with, unsurprisingly, the Nasdaq gaining the most on the day, but last week’s deep correction is still far from being erased, and given the negative market internals, we remain defensive towards equities, even regarding the short-term time-frame.

S&P 500 Index Futures, 4-Hour Chart Analysis

We were expecting a similar move since Thursday when stocks reached deeply oversold short-term momentum readings, and as we noted then, these rallies should be treated as selling opportunities, due to the broad technical weakness in emerging markets, Europe, and now on Wall Street as well.

The S&P 500 all but cleared the oversold short-term readings thanks to today’s surge and the preceding choppy consolidation phase, and now the index is near the levels where we would look for a swing high in the coming week. The Volatility Index (VIX) plunged back below, and its behavior in the coming days will be key in judging the real strength behind today’s move.

Russell 2000, 4-Hour Chart Analysis

In spite of the strong move in small-caps as well, the Russell 2000 continues to look wounded from a technical perspective, and the index is facing very strong resistance levels. According to almost all breadth measures, under-the-hood, things are also ugly, and even if the US bull market has legs, this correction is very unlikely to end with a V-shaped bottom, as a lot of healing would be needed to maintain a sustained rally.

Calm US Session in Currencies Amid Stock Surge

USD/JPY, 4-Hour Chart Analysis

Forex markets also saw corrective price action, although the main safe-haven assets, the Japanese Yen and gold gave back only a small portion of their recent gains. The Dollar finished little changed before tomorrow’s key FOMC meeting minutes, while the Pound pulled back after a positive European session.

We expect a larger move in the Greenback in the coming days, and the consolidation in Treasuries could also come to an end, and another leg higher in Yields could be the trigger that ends the oversold bounce in stocks.

Copper Futures, 4-Hour Chart Analysis

Commodities had a quiet and choppy session, except the still active gold, and although crude oil managed to bounce amid the risk-on shift, copper failed to build on its recent resilience. the industrial metal is still stuck in a bearish consolidation pattern, with all eyes on the $2.75 support and the $2.87 resistance.

The way Chinese assets will react to today’s rally will be crucial for the commodity, as a meaningful bounce could help copper to a new swing high, despite the bearish long-term pressures.

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

Oil Bears Decide to Take a Break

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Author: Dmitriy Gurkovskiy, Chief Analyst at RoboForex

On October 16th, the oil market remains under pressure from the bears, though the amount of sale has reduced a bit. At the same time, market sentiment is still quite cautious. Brent is trading close to 81.00 USD today with the weekly low at 79.85 USD. WTI costs 71.70 USD.

According to the Commodity Futures Trading Commission, in October global investors are decreasing the net long position in Brent. By October 9th, the amount had fallen up to three-week lows and was equal to 475.5K contracts (-6.4K.). At the same time, the short position hit four-week highs.

On one hand, the USD behavior offers the oil market an opportunity to recover after sales. On the other hand, the oil rally that occurred not long time ago gave a boost to American companies involved in shale oil production: the more expensive the oil, the more profitable the production and the expansion.

In this light, the statistics on the Crude Oil Inventories and the Natural Gas Storage to be published this week may show excellent numbers. Last week, indicators increased significantly, thus allowing “bears” to become more active. One shouldn’t exclude a possibility that the same might happen this week as well.

In the H4 chart of Brent, the price is trading downwards; it has been already corrected to the downside by 38.2%. The graphical analysis indicates after testing the support line of the descending channel, the price is trying to enter the downside projected channel. Taken together, these facts imply that on its way down the instrument may reach the retracements of 50.0% and 61.8% at 78.63 and 76.61 respectively. The resistance line for the current trend is at 83.08.

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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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4.6 stars on average, based on 14 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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Analysis

Pre-Market Analysis And Chartbook: Stocks Finally Find Footing as Pound Pushes Higher

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Tuesday Market Snapshot

Asset Current Value Daily Change
S&P 500 2,768 0.80%
DAX 30 11,710 0.83%
WTI Crude Oil 71.33 -0.54%
GOLD 1,234 0.30%
Bitcoin 6,441 0.04%
EUR/USD 1.1600 0.18%

Although most of the key global stock benchmarks are still very close to last week’s lows, with some markets even hitting new lows this week, today equities might be in for something more than a dead-cat-bounce. The oversold short-term indicators have been screaming for a relief rally and those conditions still persist, even as the trend in most risk assets is clearly negative.

The US-Saudi tensions look to be slightly easing, with the local stock market staging a strong rebound following yesterday’s plunge, and as Treasury yields are still stable, there is no immediate negative catalyst to drive prices lower.

Shanghai Composite Index CFD, 4-Hour Chart Analysis

The Chinese stock market continues to be in very bad technical shape from a long-term perspective, as trade tensions and the slowdown in the economy are taking their toll. The Shanghai Composite resumed its bear market after the Golden Week, and it continues to hit new 4-year lows, still underperforming its global peers.

FTSE 100 Index CFD, 4-Hour Chart Analysis

European markets are also higher, but the bounce hasn’t even retested the breakdown levels, let alone questioning the downtrend. The FTSE 100 has been relatively weak lately, due to the Pound’s strength, and today it’s among the weaker benchmarks as well, after the releases of the British Employment Report which showed higher than expected wage growth.

Dow 30 Futures, 4-Hour Chart Analysis

The ongoing choppy correction in the US markets still hasn’t retraced more than the initial bounce, and given the still gloomy sentiment, there is plenty of room for correcting without violating the newly established short-term downtrend.

Earnings have been beating the consensus estimates so far across the board, and although expectations have been revised much in recent weeks, the results can still provide some momentum for stocks. Small caps outperformed yesterday, but that relative strength was short-lived, and today, the sector which has been leading the market lower is lagging again, which also confirms the deeper risk-off shift of the recent weeks.

Forex Markets Volatile as Brexit Talks, Dollar in Focus

EUR/GBP, 4-Hour Chart Analysis

The Great British Pound is having a huge day thanks to the wage growth beat and the hopes regarding a breakthrough with regards to the Irish border issues on the Brexit talks. The currency erased much of its recent pullback against the Euro and the Dollar.

The Pound hit multi-month highs compared to its largest peer earlier this month, and it could be starting another leg higher, at least against the weaker Euro, depending on the progress in the negotiations. The Dollar, on the other hand, lost ground once again today, at least in early trading, with only the overbought Yen dipping lower thanks to the improving global sentiment.

ChartBook

Major Stock Indices

S&P 500 Futures, 4-Hour Chart Analysis

Nasdaq 100 Futures, 4-Hour Chart Analysis

VIX (US Volatility Index), 4-Hour Chart Analysis

DAX 30 Index CFD, 4-Hour Chart Analysis

EuroStoxx50 Index CFD, 4-Hour Chart Analysis

Nikkei 225 Futures, 4-Hour Chart Analysis

EEM (Emerging Markets ETF), 4-Hour Chart Analysis

Forex

EUR/USD, 4-Hour Chart Analysis

USD/JPY, 4-Hour Chart Analysis

GBP/USD, 4-Hour Chart Analysis

AUD/USD, 4-Hour Chart Analysis

Commodities

WTI Crude Oil, 4-Hour Chart Analysis

Gold Futures, 4-Hour Chart Analysis

Copper Futures, 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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4.6 stars on average, based on 375 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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