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Daily Analysis: Stock Decline Continues as Credit Markets Signal Turmoil

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Wednesday Market Recap

Asset Current Value Daily Change
S&P 500 2564 -0.53%
DAX 12976 -0.45%
WTI Crude Oil 55.30 -0.72%
GOLD 1278.00 -0.36%
Bitcoin 7310 10.39%
EUR/USD 1.1776 -0.13%

The red flags that popped up last week regarding US stocks led to a so far subtle correction, as European and Asian stocks continued to contract. The epicenter of the decline is still the credit market though, as the US yield curve is still flattening, and junk bonds are suffering across the globe. While US high-yield bonds did hit an 8-month low yesterday, the decline is minuscule from a long-term perspective, which can be interpreted both in bullish and bearish ways.

It can be a positive thing because this dip might be only a small bump in a continued bull run, giving yield-hungry investors a buying opportunity. That said, bears could argue that this only means that there are lot more shoes to be dropped and the real decline is just beginning. We tend to lean towards the second solution, but the answer is only important for traders, as from in investment standpoint, it’s no question that stocks and especially corporate bonds are severely overvalued.

HYG, Daily Chart Analysis

The Dollar had a rollercoaster ride amid the equity weakness, as first, it sold off sharply against most of its major peers, adding to the tax plan related losses, but then it rebounded on some mixed economic news, the CPI and Retail Sales reports, to close virtually unchanged. The Yen was the strongest currency at the end of the day, as it benefited from the risk-off sentiment, and held on to some of its gains against the rallying Dollar as well.

Gold, on the other hand, gave back almost all of its early gains, as it remains inside a choppy consolidation. Chinese selling weighed on crude oil throughout the day, while the Saudi crisis also took a backseat, and the crucial commodity pulled-back as low as $55 regarding the WTI contract.

NASDAQ 100 Futures, 4-Hour Chart Analysis

Cryptocurrencies

It has been a predominantly bullish day for the major cryptocoins, with Bitcoin and IOTA leading the way higher amid the declining volatility. While some of the altcoins drifted slightly lower, namely Dash, Monero, Ethereum Classic, and NEO; Ethereum, Litecoin, and Ripple gained were neutral and that helped the total value of the market above the $220 billion mark.  IOTA rose more than 20% during the session, and it not only surged past $0.64, but also hit the next target for the move at $0.75 in late trading.

IOTA/USD, 4-Hour Chart Analysis

Bitcoin also jumped by double digits, and that weighed on the price of Bitcoin Cash, although the moves were nowhere near as wild as during the previous weekend.  That said, Bitcoin’s overbought correction will likely continue, as odds still favor another leg lower.

Key Economic Releases on Wednesday

Time, CET Country Release Actual Expected Previous
01:50 JAPAN Prelim GDP 0.3% 0.4% 0.6%
02:30 AUSTRALIA Wage Price Index 0.5% 0.7% 0.5%
11:30 UK Average Earnings 2.2% 2.1% 2.2%
11:30 UK Unemployment Rate 4.3% 4.3% 4.3%
11:30 UK Claimant Count 1,100 2,400 1,700
15:30 US CPI Index 0.1% 0.1% 0.5%
15:30 US Core Retail Sales 0.1% 0.2% 1.0%
15:30 US Retail Sales 0.2% 0.00% 1.6%
17:30 US Crude Oil Inventories 1.9 mill -2.1 mill 2.2 mill

Key Economic Releases on Thursday

Time, CET Country Release Expected Previous
02:30 AUSTRALIA Unemployment Rate 5.5% 5.5%
02:30 AUSTRALIA Employment Change 18,900 19,800
11:30 UK Retail Sales 0.2% -0.8%
15:30 CANADA Manufacturing Sales -0.4% 1.6%
15:30 US Unemployment Claims 236,000 239,000
15:30 US Philly Fed Index 24.3 27.9
16:15 US Capacity Utilization 76.3% 76%
16:15 US Industrial Production 0.5% 0.3%

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 377 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

Crypto Update: Altcoin Market Cap on the Verge of Trend Reversal

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Fund managers and investors often rely on a market index to get a general sense of where the market may be headed. Usually, an index is the weighted average of the largest or the best performing equities in the market. For example, the Standard and Poor’s 500 Index (SPX) is the combination of 500 of the largest US stocks represented as one index value. These indices act as a barometer as they represent and influence the performance of the entire market.

For someone who invests in stocks and cryptos, I understand the importance of an index and apparently, I’m not alone. Cryptocurrencies don’t have an official index that could serve as a weather vane so someone created one. The creator/s of coinsignals.trade pulled data from coinmarketcap.com to provide charts and candles and reflect the price movement of the entire altcoin market (coin market capitalization minus bitcoin capitalization). This gives us the opportunity to analyze the direction of all altcoins. What we saw was promising.

In this article, we reveal how the altcoin market cap is on the verge of reversing its trend.

Weak Breakout from Falling Wedge  

The altcoin market cap managed to go as high as $554.916 billion in January 2018. At that market cap level, the parabolic run of altcoins came to a screeching halt. The market went into a downward spiral as it generated a series of lower highs and lower lows. A quick look at the weekly chart shows that the market cap was inside a large falling wedge.

The weekly chart of Alts

The market eventually broke out of the pattern in September 2018. However, the breakout had no legs as volume was actually thinner than its weekly average. Even so, alts attempted to generate a breakout rally, which was firmly rejected at $112 billion several times. As a result, the market tumbled.

Nevertheless, this weak volume breakout would set the stage for the market’s bounce.

Key Support Levels to the Rescue

In technical analysis, former resistances become reliable support areas. These former resistances turned out to be crucial in the bottoming out process of the altcoin market.

A quick look at the daily chart reveals that two support levels have kept bears at bay. The first one was the former resistance of the falling wedge. Notice how the altcoin market smoothly slid down to this support without breaching it. Even though this support is weak, it proved to be instrumental in the market’s bounce.

The daily chart of Alts

The other one is the parabolic support of $80 billion. This support was also a former resistance level. The altcoin market struggled to get above this level in October 2017. When it did, altcoins soared. The market apparently remembers this price action even after a year later as participants bought at this area.  

We’ve seen numerous altcoins such as Ripple (XRP/USD) and Monero (XMR/USD) become bullish after bouncing off parabolic support levels. Will we see the same action for the entire altcoin market cap? Perhaps, the emerging pattern on the daily chart can give us more clues.

Potential Inverse Head and Shoulders on the Daily

The market’s bounce at $80 billion was met with heavy selling at $112 billion on September 23. This is the same level that rejected the breakout rally that would have turned the market bullish. With bears defending the resistance, the altcoin market lost over $22 billion in value as it pulled back below $90 billion.

Inverse head and shoulders in the making

The good news is the retracement has enabled bulls to create a bullish higher low setup. This is the first higher low generated by the altcoin market in 2018. This is a huge development. If the lower high can kill bullish momentum, the higher low can suck the energy out of bearish momentum.

With a higher low in place, it appears that the altcoin market is creating an inverse head and shoulders pattern in preparation for a bullish breakout. I’ve said it many times: this is one of the most reliable structures in reversing a market’s trend. If altcoins follow the projected path, then we’re on the verge of a bullish breakout.

Bottom Line

Our analysis of the altcoin market capitalization chart reveals that the market is on verge of taking off. The weak breakout from the falling wedge, bounce from key support areas, and the emergence of an inverse head and shoulders pattern are all setting the stage for a massive crypto comeback. To those who are still bearish, maybe it’s time to reconsider your stance.

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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3.6 stars on average, based on 249 rated postsKiril is a financial professional with 4+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and ETFs, as he does his own crypto research and is the subject matter expert at ETFdb.com. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.




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Analysis

Crypto Update: Sideways Drift in Cryptoland

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Not much has changed in the past 24 hours in the cryptocurrency segment, with most of the majors experiencing light trading activity and low volumes following Monday’s spike.

Ripple stayed in the center of attention as the third largest coin has been drifting higher together with Stellar, outperforming the broader market. Despite the gains, XRP also remained clearly in Monday’s range, and the technical setup continues to be shaky even concerning the strongest digital currencies.

While Tether continues to trade with a discount, leading to a slight premium in the price of cryptos on several exchanges, volatility is very low in the markets. Although most of the top coins are slightly lower today, the small moves mean that the total value of the market is still near the $210 billion level, and Ripple is edging closer to Ethereum in market cap yet again.

XRP/USDT, 4-Hour Chart Analysis

Ripple is holding on above the key $0.42-$0.46 zone thanks to its relative strength, but the coin is still on a short-term sell signal in our trend model, as it failed to show real momentum since the surge that was fueled by the dislocation in Tether’s market. XRP still faces strong resistance levels near $0.51, $0.54, and $0.57, and until a move above the spike high, a new short-term uptrend is not confirmed and traders should still not enter new positions.

BTC/USD, 4-Hour Chart Analysis

Bitcoin failed to rally back above the primary resistance level at $6500, even as the coin stabilized well north of the $6275 level and its pre-surge price zone. With that in mind, the coin remained on a short-term sell signal, with a test of the $6000 support still being likely.

While the long-term setup is still neutral, and the long-term support zone near $5850 is fairly safe currently, given the overwhelmingly bearish long-term outlook in the segment, we continue to be defensive towards Bitcoin as well. Further resistance levels are ahead at $6750 near $7000, while below $5850 the next major support zone is found between $5000 and $5100.

Ethereum Holds Just Above $200 as Litecoin and Dash Continue to Lag

ETH/USD, 4-Hour Chart Analysis

With the exception of Ripple and Stellar, altcoins are leaning bearish today, with Ethereum still being the most important laggard of the segment. While ETH is trading above $200, it remains in bearish technical setups on both time-frames, and the recent days confirmed the weakness of the second largest coin again.

Traders and investors shouldn’t enter positions here, as a move towards the $170 bear market low is still likely in the coming period, with strong support level as also found near $180 and $160 and with resistance ahead near $235 and $260.

Dash/USD, 4-Hour Chart Analysis

Dash has been showing weakness throughout this month, and the coin is now likely headed back towards the key $150 level. A move below primary support would warn of a test of the bear market low near $130, while an unlikely move above $170 would signal a trend change. For now, Dash remains on sell signals on both time-frames, and trades should stay away from the coin.

LTC/USD, 4-Hour Chart Analysis

While Litecoin experienced an encouraging bounce in September, it is among the weaker major coins again, and the $51 support level is back in the spotlight. A move below that level is still likely even after the spike above $56 on Monday, since sellers are clearly in control of the currency’s market.

The next major support zone is found near $44, with the bear market low above that at $47, while further resistance is ahead near $59 and $64.

Featured image from Shutterstock

Disclaimer:  The analyst owns cryptocurrencies. He holds investment positions in the coins, but doesn’t engage in short-term or day-trading, nor does he hold short positions on any of the coins.

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 377 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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Altcoins

TRON Price Analysis: TRX/USD Cools After Reports Suggest of Potential Baidu Partnership, but Not Blockchain Focused

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  • Reports of TRON and Baidu partnership focused on cloud computing resources.
  • TRX/USD price has cooled over the past two sessions, but supported within an ascending channel.

Potential TRON and Baidu Partnership – Not Blockchain Related

The founder of TRON Justin Sun, had left the community very excited on Friday, after tweeting “Finally, First time to partner with tens of billions USD valuation industry giant. Guess the name.”

According to ODaily, a local Chinese newswire, the partnership will be focused on cloud computing resources, not blockchain. It covered that TRON would be buying cloud computing resources from China’s equivalent to Google, Baidu. This was cited and translated by CNLedger.

If this being the case, it could be somewhat disappointing for some of the TRON community. There would have been general expectation and hope, of this being related to the foundation’s blockchain network. As it states the partnership remains focused on the purchase and use of Baidu’s basic cloud computing resources, rather than being a connection “at the blockchain business level.”

The report covered that Tron and Baidu will be working to maximize inter-compatibility. In addition, “to build, operate and debug blockchain products” based on Baidu Cloud. Baidu and Tron have not yet formed any connection at the blockchain business level. Currently the cooperation mainly focuses on the purchase and use of (Baidu’s) basic cloud computing resources.” As covered by CNLedger’s translated report.

Despite the circulating details, there has not been an official confirmation from either TRON or Baidu.

TRON Launches TronGrid

Most recently, TRON launched a website known as TronGrid, which will toolbox for developers. As a result, it will assist them in being able to integrate DApps smoothly into the TRON ecosystem. The move somewhat similar to Ethereum’s Infura.

Technical Review – 4-hour Chart View

TRX/USD 4-hour chart

TRX/USD price has cooled over the past two days now. Following a large spike up to $0.027980 on 15th October, the price had headed deep into a known supply zone. This is seen tracking form around $0.02700 – 0.028500 range. As a result, sellers forced TRX/USD back down within an ascending channel pattern.  It has been grinding higher within this channel since the 12th October.

Given the cooling in price action, it is worth noting the support seen at the lower trend line of the mentioned pattern. Furthermore, comfort can be observed around $0.024850. A breach may see a very fast move back south, reversing the upside move from 12th October. This could see a drop down to $0.020670.

Looking to the upside, should this ascending channel continue supporting the price, as it has been. Then expect bulls to give the near-term supply zone another retest. However, this area has been respected since the back-end of September. It is evident that sellers remain camped within this territory, not an easy task for the bulls to break down. ­

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 30 rated postsKen has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.




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