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Analysis

Daily Analysis: Oil and Gold Shine as War Fears Persist

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Wednesday Market Recap

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Asset Current Value Daily Change
S&P 500 2347 -0.25%
DAX 12139 -0.15%
WTI Crude Oil 53.63 0.24%
GOLD 1277.75 1.05%
Bitcoin 1213 0.10%
EUR/USD 1.0614 0.00%

 

Global stocks are relatively strong today, despite the surge in safe-haven assets such as gold and the Japanese Yen. The surprising escalation regarding North Korea added to the tensions concerning Syria, although no direct conflict is likely between Russia, the US, and China. Oil also continued to march higher as Saudi Arabia voiced its intentions to extend the production cuts that were started in late 2016. The major indices are well above the lows from yesterday afternoon, with the European benchmarks being stronger and Japanese stocks being relatively weaker thanks to the yen’s rise.

Currencies are little changed so far, even the Pound is stable, despite the release of the crucial British employment report earlier today, which came in mixed. Wages grew by more than expected, while employment growth disappointed analysts. WTI crude oil is now back to the $54 per barrel level, right where it was in early March before it’s strong move lower, as geopolitical fears drive the price of the crucial commodity higher.

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WTI Crude Oil, 4-Hour Chart Analysis

Crytpocurrencies are mostly stable today, with Bitcoin still holding above the $1200 level, but below the short-term resistance at $1215. Litecoin remains the most volatile major altcoin, as it continues to trade around the $10 level in a wide consolidation pattern. Monero, Ripple and Dash are also trading near yesterday’s levels with Dash still being the weakest of pack. Ethereum is also still in the range that it has been hovering in for two weeks now.

Technical Picture

S&P 500, 4-Hour Chart Analysis

The S&P 500 had a strong momentum move to the downside yesterday afternoon, but the index proved its short-term strength once again as it shot back higher later on and now it’s trading near the line-in-the-sand support/resistance zone near $2350 once again. The MACD also confirms the sideways price action, as t remains stuck near the 0 level, giving no clear signals. The low volatility environment could soon lead to a violent move, when the price leaves the current range.

Key Economic Releases on Wednesday

Time, CET Country Release Actual Expected Previous
10:30 CHINA CPI (yearly) 0.90% 1.10% 0.80%
11:00 UK Average Earnings 2.30% 2.10% 2.20%
14:30 UK Unemployment Rate 4.70% 4.70% 4,7%
14:30 CANADA Base Interest Rate 0.50% 0.50% 0.50%
14:30 US Crude Oil Inventories -2.2 million -0.7 million 1.6 million

 

Key Economic Releases on Thursday

Time, CET Country Release Expected Previous
2:30 AUSTRALIA Employment Change 20,300 -6,400
2:30 AUSTRALIA Unemployment Rate 5.90% 5.90%
3:30 CHINA Trade Balance 76 billion -60 billion
14:30 CANADA Manufacturing Sales -0.40% 0.6%
14:30 US PPI (monthly) 0.00% 0.3%
14:30 US Initial Jobless Claims (weekly) 242,000 234,000
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 275 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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4 Comments

  1. Ershad

    April 12, 2017 at 9:43 pm

    Hi Mate,

    Thanks for your article, I was going to ask you two questions, firstly what price would you recommend selling Ethereum at, and also what price would you recommend selling gold at before we see a pullback?

    kind regards,

    Ershad

  2. Mate Cser

    April 12, 2017 at 10:21 pm

    Hi Ershad,

    in both cases, I would separate long-term investment positions and short-term trading positions. Ethereum is in a powerful long-term uptrend, while gold is most likely starting a new long-term uptrend, so a core investment position should be held through the corrections.

    As for trading, gold is late in its daily cycle and a correction is likely starting around the $1300-$1315 zone. Picking the exact top shouldn’t be your goal, you can simply follow the rise with your stop-loss; that takes away the urge of tracking your positions too closely.

    Same goes for Ethereum, but it’s a much more volatile asset, positions should be smaller. A sustained break below $38 could lead to a deep correction, but for now, another leg up is more likely. In that case, I would sell a part of my position near $53-$55 and follow the rest with a wider stop. I recommend following Jim’s (Jim Fredrickson) articles on cryptocurrencies as well, he has a deep understanding of the price movements.

    • naruto9xit

      April 13, 2017 at 9:14 am

      Hello, can you give me more predictions of how much money you can invest long term

      • Mate Cser

        April 13, 2017 at 5:01 pm

        Hi naruto9xit,

        thanks for your question! Stay tuned for our coming recap of the long-term trends and investment opportunities in global markets in the next few days!

        Mate

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Analysis

Long-Term Cryptocurrency Analysis: Bull Market in Jeopardy

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As the crucial rally attempt that we pointed out in our previous long-term analysis failed, and the major coins sold off heavily afterwards, the segment is now in a difficult situation. While Bitcoin and especially Ethereum are still in bullish setups, the most valuable coin is now close to a major breakdown that could lead to structural bear market as we laid it out back in January.

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Some of the weaker coins are already below the large-scale consolidation patterns that developed after the year-end run-up, and as the divergence between the leaders and the laggards widens, the path of the two dominant coins even more importance.

BTC/USD, Daily Chart Analysis

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Bitcoin failed to trigger a short-term buy signal throughout the Ethereum-led rally in May and early June, and that technical weakness still persists, as BTC is now trading right at the April low, testing the key long-term base pattern.

A break below the strong support zone near $5850 would be the first similar event since the beginning of the bear market in 2014, and it could lead to an extended period of bearish bias for Bitcoin after the spectacular bull run of 2017. For now, the bull market is intact, with support found near between $6000 and $6275, at $5850 and below that at $5500, while resistance is ahead at $6500, $7000, $7350, and $7650.

ETH/USD, Daily Chart Analysis

Although Ethereum is clearly stronger from a technical perspective compared to Bitcoin, the coin is struggling to hold the key $500 level, as it is resumed its short-term downtrend. The April lows are well below the current price level and the long-term setup is bullish, so long-term investors could still add to their positions during the selloffs. Resistance above $500 is ahead between $555 and $575, while strong support is near $450, $400, $380.

(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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Altcoins

Crypto Psycho:  Crazy Price Action

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Say what you will about the cryptocurrency bubble of 2017 not making sense, what about the action lately?  Prices are acting terribly. Professor John Griffin claims last year’s bitcoin rally was manufactured by Bitfinex. Economist Nouriel Roubini proclaims bitcoin is going to zero. The founder of Crypto Asset Management says about bitcoin: “We are shorting it like maniacs at the moment.”  If that is not enough, technical indicators keep barking downtrend.

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Over the past week already depressed prices have fallen further with things like bitcoin down 14%+, Ethereum 17% and XRP 21%.  Yes, there were those stories about the CFTC digging into price manipulation and demanding more data from Coinbase and other exchanges. And then there was the hack on that small exchange in South Korea.  But nobody could reasonably pin the blame of this week’s performance on these two factors.

MarketWatch quoted Matt Hougan, head of global trading at Bitwise Asset Management: “The big story to me is the absence of positive news”.  There is some truth to this but that is only part of the story. As we pointed out in a recent article, most serious investors in crypto don’t pretend to understand what is causing the mess.  

When bitcoin evangelist Alistair Milne published a survey of his Twitter followers, 81% of them had nary a clue.  Interestingly enough though, almost half of these respondents checked the box “Crypto iz ded”.

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What exactly to conclude from this is open to interpretation but one thing is clear.  It is a big part of the problem long term investors face today. Crypto psychology sucks, the worst it has been since the Mt. Gox hack of 2010.

Good News Being Ignored

One of the barriers to progress in the crypto wars was the issue of regulatory clarification. Are cryptocurrencies simply digital assets or a class of securities that fall under the regulation of the Securities and Exchange Commission?

That question has now been answered.  On Thursday, the SEC’s announced that both bitcoin and Ethereum were not securities but digital assets.  However, the good news does not end here.

William Himman, representing the SEC, clarified the position of Initial Coin Offerings.  In cases where the ICO does not convey equity ownership of an enterprise and where the digital asset is sold only to be used to purchase a good or service available through the network on which it was created, it does not qualify as a security.

This represents one huge step forward in clarifying the regulatory environment and yet the markets response was brief and uninspiring as the full week’s performance unfortunately demonstrates. Honestly, this is a bit bizarre.

Other Good News Being Ignored

Crypto Asset Management may be short selling lots of currencies, but they are not alone.  According to www.bfxdata.com/swaphistory/usd  margin interest in bitcoin and Ethereum is in excess of $1.2 billion.  While this is down from around $2 billion last December it still represents a sizable pool of future buyers.

It’s In The Mind

For digital asset prices reflect not only investor sentiment but also those who represent ultimate users.  For a digital currency to represent a storehouse of value, it must have public trust. Right now that appears to be at a low.

According to the British publication London Loves Business, the story is pretty clear. Headlines state “71% of the UK public think the value of Bitcoin will either decrease or collapse over the next six months.”  According to LLB,  this represents a 10% fall in investor confidence since the same question was last asked in April’s 2018 poll and a 24% fall in investor confidence from November’s 2017 poll figures.  In other words, the price of bitcoin holds the same implication for investors as it does for potential users.

This Too Shall Pass

Mob psychology often proves wrong and this negative mindset appears to be feeding off of itself right now.  Even one of crypto’s biggest critics Warren Buffett would agree that betting against the mob has been a big part of his investment strategy. At some point the mob will once again be proven wrong when short sellers get spooked and forced to cover positions or value investors will filter over from an overpriced U.S. equity market.  Either way, there is value in the crypto market that has not existed for quite some time. In the end, 71% of the Brits surveyed will be proven wrong also.

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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4.4 stars on average, based on 81 rated postsJames Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.




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Analysis

Stocks Pull Back as Euro Rebounds after Carnage

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Stocks are broadly lower today after yesterday’s mixed session, as European equities, which performed much better following the ECB’s meeting, also turned lower, following the major US indices. The losses are limited, as volatility remained relatively low, despite the week’s central bank bonanza that caused turmoil across asset classes.

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NASDAQ, 4-Hour Chart Analysis

The NASDAQ is still the strongest among the main benchmarks, while the Dow is the weakest, dragged lower by the weakness in financials and the energy segment. Small caps are still outperforming the broader indices together with tech stocks, and Trump’s new tariffs targeted at China boosted the segment yet again today.

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EUR/USD, 4-Hour Chart Analysis

The EUR/USD forex pair has been in the center of attention in the last couple of days as expected, while currencies turned volatile across the board in the aftermath of the Fed’s and the ECB’s monetary meetings. The Dollar index surged higher, boosted by the weakness of the common currency and after a brief positive period that weighed somewhat on stocks and other risk assets.

Economic releases were mixed today after a strong weak, at least in the US, as the Empire State Index and the UOM Consumer Sentiment Index were better than expected while Industrial Production slightly missed the consensus estimate. The Eurozone CPI was in line with expectations, while Canadian Manufacturing Production missed by a mile, putting further pressure on the already weak Canadian Dollar.

Commodities Smacked Lower amid Risk-Off Shift

Currencies were by far the most active assets, as we expected after the dovish surprise by the ECB yesterday, with the Dollar’s strength affecting the majors and the recently weak emerging market currencies as well.

USD/TRY, 4-Hour Chart Analysis

The initial bullish reaction in commodities and emerging currencies quickly faded, as the fragility of the most vulnerable countries continues to pose contagion risk, and although the Brazilian Real and the Turkish Lira are both above their recent lows, the charts still look dangerous.

WTI Crude Oil, 4-Hour Chart Analysis

The Dollar’s strength put an end to oil’s bounce, as the WTI contract fell back below the $65 per barrel level, while gold is also testing its lows from May. Oil looks bearish before next week’s OPEC meeting, but the outcome of the event is as hard to predict as ever, especially given the recent volatility in the price of the Black Gold.

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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 275 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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