Thursday Market Recap
|Asset||Current Value||Daily Change|
|WTI Crude Oil||48.56||-2.12%|
The broad plans of the much-awaited US tax-reform were revealed yesterday, and “the biggest tax-cut in human history” disappointed investors somewhat, pushing the major indices slightly lower. The Bank of Japan and the European Central Bank have been in the center of attention so far today, as both central banks released their monetary statements. The BOJ left its policies unchanged, but cut its inflation forecast, boosting Japanese equities and hurting the Yen. The ECB also lowered its inflation outlook, while the bank’s president Mario Draghi was optimistic about the prospects of the Eurozone. The Euro is trading lower following the mixed announcements.
Oil got another today, as the WTI contract fell below the $49 per barrel level after yesterday’s bounce. Gold is still holding up above its crucial support levels, despite the recent risk-on rally and the weakness in other safe-haven assets. Commodity-related currencies are under pressure again, while the Great British Pound is drifting higher, hitting another multi-month high against its major peers. The Canadian Dollar remains volatile, as the surprise lumber-tax by the US poses a risk to the trade relations between the two countries.
Gold futures, 4-Hour Chart Analysis
Bitcoin is up again today, following an overnight correction, as the cryptocurrency is trading at new all-time highs for the first time since the correction caused by hard-fork fears this spring. Ethereum, Ethereum Classic, Monero, and NEM are up by double digits today, as US authorities are weighing the possibilities of an Ether-based ETF. Dash is also participating in the broad rally, pushing above the $75 level. Litecoin entered a correction today, as it failed to break-out above its weekend highs. Ripple is still well within its trading range, with activity still being low in the coin.
Monero, 4-Hour Chart Analysis
The NASDAQ continues to lead the way higher despite the negative economic numbers (new jobless claims and core durable orders) that were released today in the US. The tech index hit yet another all-time high today, as the other major benchmarks are struggling to gain traction. With all the tech giants scheduled to release their earnings reports in the next couple of weeks, volatility is expected to increase (look for Google’s report today after the closing bell). The index might re-test the break-out level at 5475, as the bearish cross on the MACD suggests a correction or at least a consolidation in the coming days.
NASDAQ 100 Futures, 4-Hour Chart Analysis
Key Economic Releases on Thursday
|5:50||JAPAN||Monetary Policy Satement||–||–||–|
|9:00||EUROZONE||Base Interest Rate||0||0||0|
|14:30||EUROZONE||Monetary Policy Satement||–||–||–|
|14:30||US||Core Durable Goods||-0.20%||0.40%||0.50%|
|14:30||US||Initial Jobless Claims (weekly)||257,000||241,000||244,000|
Key Economic Releases on Friday
Daily Analysis: Volatility Near Record Low 30 Years After Black Monday
Monday Market Recap
|Asset||Current Value||Daily Change|
|WTI Crude Oil||51.88||0.82%|
Stocks markets in the US are at a standstill near their all-time highs, with the major indices trading in extremely narrow ranges yet again. Volatility, as measured by the VIX, is close to its all-time high, in stark contrast to the average October readings, as this month is the most negative for equities regarding seasonality. In fact, this October is the least volatile ever so far, while this week is the 30th anniversary of the most volatile day ever on Wall Street.
A Riskless Market?
On Black Monday in 1987, the Dow crashed by more than 23% during one session, as widespread bullishness coupled and novel portfolio techniques lead to a massive wave of selling. Although such one-day moves should be prevented by circuit breaking rules in today’s market, the notion that risk is non-existent in the current environment is as dangerous as it was three decades ago.
VIX, Weekly Chart
Stocks have been very quiet across the globe today, with only the Nikkei continuing its break-out to two-decade highs yet again. In Europe, British assets were the most active, as the Brexit talks seem to be in quite a big trouble, and that pushed the Pound and the Euro lower compared to the Dollar. The Greenback’s rally put pressure on gold as well, and the Japanese Yen also declined, as safe-haven assets were sold in the calm environment.
Nikkei Index, 4-Hour Chart Analysis
Oil has been very active as the Iraqi army took control of Kirkuk defying the Kurdish resistance, the WTI contract rose as much as 2% before retreating below the $52 per barrel level, and as we speculated during the weekend, the spike is unlikely to cause a structural change in energy markets, and we expect the range trading environment to continue in the crucial commodity.
WTI Crude Oil, 4-Hour Chart Analysis
Today was a big day for the crypto segment thanks to the Byzantium update of the Ethereum network, and although the hard fork went smoothly, the session ended on a slightly negative note. Ethereum pulled back towards the $330 support/resistance level, while Bitcoin remained stuck near the $5700 level after recovering from Sunday’s dip.
Ripple has been the other major mover of the day as the coin first surged higher and hit the $0.30 resistance just to fall back swiftly below the $0.26 level towards the end of the day. Despite the decline, the currency is still in a clear uptrend, but more volatile moves are expected in its price. Among the smaller coins, Stellar Lumens more than doubled in price after the announcement of a deal with IBM, as blockchain adoption continues in full force, pointing out the sound fundamentals behind the boom in the segment
ETH/USD, 4-Hour Chart Analysis
Key Economic Releases on Monday
|14:30||US||Empire Manufacturing Index||30.2||20.3||24.4|
Key Economic Releases on Tuesday
|2:30||AUSTRALIA||RBA Meeting Minutes||–||–|
|15:15||US||Capacity Utilization Rate||0.4%||0.2%|
Featured image from Shutterstock
Technical Analysis: Ripple Breaks Out Amid Ethereum Upgrade
The major cryptocurrencies are on the rise once again today, with Ethereum’s major Byzantium update being in the center of attention. The second largest blockchain network has been updated through a hard fork, as usual, and the successful lock-in led to an initial surge in the price of the ETH token. The digital currency recovered above the $330 level after Sunday’s pull-back, but so far it failed to durably break-out above the prior swing high just above $340.
With the long-term momentum readings still being neutral, the coin could be on the verge of testing the $380 resistance soon, with the all-time high near $400 being the last major technical obstacle. Below $330 further support is found at $300 and $285.
ETH/USD, Daily Chart Analysis
Bitcoin is also on the rise after dipping below $5500 during the weekend, and the most valuable coin is joined in the rally by Ripple, which most likely finished its short-term correction and could be ready for another leg higher. The other majors are also generally higher, with NEO and IOTA being ahead of the pack, while the rest of the market trading near unchanged. As the broad rally seems to be well and alive, let’s see how the short-term charts are shaping up.
5 Things to Watch Next Week: Byzantium, Bitcoin Stretched, Gold’s Strength, The Next Fed Chair, Kirkuk and Crude Oil
1. Ethereum’s Byzantium Upgrade is Here
In only a few hours time the second largest blockchain network will go through one of its biggest upgrades yet, when the block 4,370,000 is hit sometime around 6:00 UTC on Monday. The large Byzantium upgrade, the first part of Metropolis, seems to be in for a smooth start, but the coin is headed into the much-awaited event with mixed price action. The digital currency first hit a 5-week high above $340 on Saturday, thanks to the positive prospects of the fork, but it pulled back today to trade back below the crucial $330 support/resistance line.
Should the hard-fork upgrade go as planned, the price of the token might follow the path of Bitcoin after the Bitcoin Cash fork, and approach all-time highs in the coming weeks. In any case, volatility should increase significantly tomorrow, so short-term traders should be controlling position sizes even more than usual.
ETH, Daily Chart Analysis
2. Bitcoin Overbought but Will that Matter?
The most valuable coin had a great run, gaining almost 100% since the latest deep correction. The digital currency was the definite leader of the segment, storming past the historic $5000 price level and the previous all-time high, while altcoins lagged behind. With Ethererum and Litecoin gathering strength and Monero also showing signs of activity, another round of “rotation” might be happening in crypto world.
Low correlations are the hallmarks of bull markets, and a healthy correction in BTC would be a welcome development for bulls. That said, with the great fundamental background the coin might be in for another mind-blowing surge, so keeping some chips on the table is a good idea, without forgetting the rising correction risk, of course.
BTC, 4-Hour Chart Analysis
3. Gold Defying Gravity
The precious metal is after an orderly correction that followed the much-awaited beak-out above the long-standing resistance at $1300. Gold spiked below the $1275 level before turning north again, and with the short-term environment for the metal being mixed at best, its performance is encouraging for bulls.
As we expect the headwinds to change in the coming months, gold might be ready to take the next step in the developing bullish trend and even reach the zone between $1375 and $1400 in a matter of weeks. With equities still looking stretched a risk-off turn in financial markets could supply the fuel for such a move.
Gold, 4-Hour Chart Analysis
4. Yellen or Somebody New Will Lead the Fed?
The first (?) term of Janet Yellen is ending soon, and the speculation regarding the Fed Chair is getting heated. The stakes are high, and the POTUS, as usual, has been very vague about his nomination plans. For now, Mrs. Yellen’s chances for a second term are slim, but she might turn out to be the safe bet for the sensitive position. Kevin Warsh has been the favorite for quite a while, but the hawkish candidate has lost ground to Jerome Powell lately after Trump met all the major contenders for the post.
We all know that Yellen is uber-dove when it comes to monetary policy, and both of the major candidates (Warsh is a prior while Powell is a current Fed governor) would likely be stricter with regards to interest rates and balance sheet decisions. That said, Warsh is considered to be the more hawkish of the two, and the Dollar and Treasury yields would likely rally on his nomination, with an even stornger reaction to the newly emerged name of John Taylor.
The timing of the decision is a bit shaky, as the President indicated mid-October, but even a few more weeks could pass before the real thing, so investors should be on alert for volatility spikes in bonds and currencies in the coming period.
The prediction market of the next Fed Chair as of October 15, Predictit.org
5. The Kurdish-Iraqi Standoff Reaching the Next Phase?
Following the somewhat tricky Kurdish independence vote, which was most likely a slight bluff from the Pesmerga leadership, the Iraqi army started to assemble forces near the strategic city of Kirkuk. The territory is known for one of the largest oil reserves of the world, and as such it’s not a surprise that Iraq wants to control it, although they miserably failed against ISIS to do so. With only a few kilometers between the opposing forces, a conflict is not out of the question, although there is still chance for a peaceful solution.
The outcome could be vital for the future of the autonomous region, as Iran and Turkey are also against an independent state, and with the threat of ISIS declining the US might also back away from the Kurds. Oil could pop higher in the case of an escalation, but with the fundamental picture being mixed at best, we wouldn’t bet on a structural change in the energy market.
Key Economic Releases Next Week
|Monday||US||Empire Manufacturing Index||20.3||24.4|
|Tuesday||AUSTRALIA||RBA Meeting Minutes||–||–|
|Tuesday||US||Capacity Utilization Rate||0.4%||0.2%|
|Wednesday||EUROZONE||Mario Draghi Speaks||–||–|
|Wednesday||US||Building Permits||1.25 mill||1.27 mill|
|Wednesday||US||Housing Starts||1.18 mill||1.18 mill|
|Wednesday||US||Crude Oil Inventories||–||-2.7 bill|
|Thursday||US||Phill Fed Index||22.2||23.8|
|Friday||CANADA||Core Retail Sales||–||0.2%|
|Friday||US||Existing Home Sales||5.32 mill||5.35 mill|
Featured image from Shutterstock
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