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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.

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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

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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%

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Analysis

Long-Term Cryptocurrency Analysis: All Majors Stretched as Ripple Finally Breaks-Out

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Although the previous leaders of the rally started to correct or at least consolidate in the wake of the overbought long-term setups, another batch of coins turned exponential, with Litecoin, Ripple, and Ethereum all registering lofty gains this week. Bitcoin, Monero, and Dash have been holding up well, and even drifted to new marginal highs during the period, while Ethereum Classic had a more volatile week, before moving to new highs today.

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XRP left the broad trading range that has dominated its market since May, and surged to new all-time highs while almost quadrupling in the process. As the coin was the only major on a long-term buy signal according to our trend model, and the move triggered a sell signal on Thursday, now all of our tracked coins are on sell signals.

Ripple could be in for further short-term gains but long-term investors should reduce their positions after this week’s spike. Support levels are found Major at the prior high near $0.4250 and in the $0.30-$0.32 range.

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XRP/USDT, Daily Chart Analysis

IOTA, which has been leading the market higher before is down by more than 30% off its all-time high, but given the exponential move before, an even deeper correction is likely in the coming weeks, and investors should wait until a more favorable setup to add to their positions. 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 majors look this weekend.

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Analysis

Technical Analysis: Bitcoin Up Again as Altcoins Mixed in Volatile Trading

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Bitcoin is at a new all-time high today, although the momentum of today’s move is far below from what we saw recently, and the coin only managed to reach a marginal record high yet again. BTC is now worth $300 billion, and it is still trading right at the short-term trendline, inside a rising wedge pattern that shows a clear momentum divergence.

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With the short-term trend still being intact further gains are still possible, but as all the majors are overbought from a long-term perspective, we still advise investors to wait for a better buying opportunity before adding to their holdings. Primary support is still found near $13,000, with further levels at $11,300, $10,000, $9000, and stronger levels at $8200 and $7700.

BTC/USD, 4-Hour Chart Analysis

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 XRP entered a volatile short-term correction after its two-day surge after giving a short-term sell signal yesterday, and the coin spiked back towards $0.60 before settling down just below yesterday’s highs. The long-term setup also turned overbought thanks to the almost 300% rally, and now investors should reduce their holdings, even as further gains are still possible. Major support is still found at the prior high near $0.4250 and in the $0.30-$0.32 range.

XRP/USDT, 4-Hour Chart Analysis

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Analysis

Cryptocurrency Analysis: Ripple Continues Rampage as Litecoin and Ethereum Enter Correction

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Ripple remained in the center of attention in the segment after breaking out to a new all-time high yesterday, and the coin almost doubled in value, climbing above the $0.80 level. The currency concluded a 6-month long consolidation pattern with the move after being the only major on a long-term buy signal in our trend model.

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XRP gave a short-term sell signal today, while turning neutral regarding the long-term setup. Investors now shouldn’t add to their positions, although further gains are still possible, and reducing holdings somewhat is a good idea here. Major support is still found at the prior high near $0.4250 and in the $0.30-$0.32 range.

XRP/USDT, 4-Hour Chart Analysis

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While Bitcoin stagnated, and Bitcoin Cash jumped, Ethereum, Litecoin, Dash, and IOTA has been drifting slightly lower, although the recent gains are still mostly intact, and the basic setup in the segment is unchanged.

Litecoin fell below the $300 level after yesterday’s consolidation, and the coin faced strong selling pressure in the latter half of the session. The currency remains extremely stretched regarding the long-term momentum indicators, and although the short-term uptrend is still intact, a deeper correction is likely in the coming weeks, with key support levels found at $125 and $100, and weaker levels at $260 and $170.

LTC/USD, 4-Hour Chart Analysis

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