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Daily Analysis: Stocks Rebound as US Policy Worries Loom

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Friday Market Recap

Asset Current Value Daily Change
S&P 500 2430 0.05%
DAX 12165 -0.31%
WTI Crude Oil 48.38 2.72%
GOLD 1293.00 0.05%
Bitcoin 4174 -2.89%
EUR/USD 1.1753 0.23%

The major US indices showed weakness yesterday for the second day in a row, as investors got spooked by the weakening position of the Trump administration and the uncertainty regarding the planned reforms and the Spanish terror attacks. Stocks rallied today after a weak overnight session, as the short-term oversold readings led to the usual dip-buying strategies to kick in, while the trigger of the rally is Steve Bannon’s firing from Trump’s staff. While the internal weakness in the markets would justify a meaningful correction, the current rising trend could remain intact until September when market activity will pick up.

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S&P 500, 4-Hour Chart Analysis

Currency markets remained very choppy, as the central bank related speculations continued to push the major currencies around. Safe haven flows also intensified, as it is apparent in the strength of the Japanese Yen and Gold. The Shiny Metal broke above the $1300 level amid the stock sell-off, but it failed to sustain the break-out, as the commodity is overbought and the upper boundary of the long-standing trading range means strong resistance at the current levels. Oil surged higher during the US session on a favorable production release, and the WTI contract quickly surged back to the $49 per barrel level after one week of losses, pushing commodity currencies higher against the Greenback.

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Gold, 4-Hour Chart Analysis

Cryptocurrencies

The more established coins are little changed today, with a bearish bias as the ongoing Bitcoin consolidation is weighing on the segment. Dash is trading lower after yesterday’s strong move, while Litecoin is the best performing coin of the day. Bitcoin is still just 5% off its all-time high, and although the long-term picture is clearly overbought the short-term momentum might still carry the currency to new highs in the coming day. The weekend could once again bring strong moves, as speculative interest in the segment is at all-time highs.

BTC/USD, 4-Hour Chart Analysis

Technical Picture

The tech benchmark followed the other major indices lower on Thursday, and the relative strength that it showed previously vanished amid the broad correction. Today’s bounce carried the index back above crucial short-term support, but the NASDAQ is not out of the woods yet, as the short-term rising trend is clearly in danger. The 5800 and 5750 levels will likely stay in focus in the coming days, with the rising trendline being only slightly below at 5700. A breakdown could trigger a sell-off towards the 5600 level.

NASDAQ, 4-Hour Chart Analysis

Key Economic Releases on Friday

Time, CET Country Release Actual Expected Previous
14:30 CANADA CPI Index 0.0% 0.0% -0.1%
16:00 US UOM Cinsumer Sentiment 97.6 94.0 93.4

Key Economic Releases on Monday

Time, CET Country Release Expected Previous
14:30 CANADA Wholesale Sales 0.6% 0.9%

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Analysis

Technical Analysis: Bitcoin Grinds Higher as Records Tumble in Altcoins

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The historical surge in the segment, which is the second such move this year, continued today, with another round of break-outs in some of the major altcoins and tepid gains for BTC investors. Ethereum, Ripple, Dash, and first and foremost Litecoin was leading the charge, with the recent star LTC topping $300, just after a day of hitting the $200 mark.

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Litecoin defied all odds after reaching extremely overbought readings, and the coin rode the speculative wave, turning exponential, not unlike IOTA and Bitcoin previously. With the coin being stretched in an unprecedented way on all time-frames, investors could even consider selling their core positions at the current levels, as a deep correction is almost granted in the coming period. The first meaningful support level is found at $125, and a re-test of the $100 level is probable during the next major correction.

LTC/USD, 4-Hour Chart Analysis

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Ripple finally ended a long period of relative weakness today, and the only major on a long-term by signal jumped over primary resistance at $0.26 and crossed the $0.30-$0.32 too in the euphoric sentiment. As the coin is not long-term overbought following the 6-month long consolidation, the buy signal in XRP remains intact, with the only major resistance level being found at the all-time high near $0.425.

XRPUSDT/USD, 4-Hour Chart Analysis

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Technical Analysis: Litecoin Continues Surge as Bitcoin Tests Highs

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With the crypto world being focused on the historical futures launch, the major coins all enjoyed buying following a hectic weekend, and a volatile week as a whole. BTC itself got another boost from the widespread publicity and the volatile correction of the recent days ended, with the most valuable coin bouncing back towards its all-time high.

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While the long-term picture remains severely overbought, the short-term picture is not stretched and further gains are possible even amid the elevated correction risk. That said, investors should wait for a more favorable entry point to ad dot their holdings, while traders should control position sizes in the light of the long-term setup. Major support levels are now near $13,000, $11,300, and $10,000, with stronger levels still at $8200 and $7700.

BTC/USD, 4-Hour Chart Analysis

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The major altcoins are all up today, but only Monero and Litecoin are still within short-term uptrends, and the segment as a whole is still dangerously overextended, and a deeper correction is very likely in the coming weeks. LTC continued its recent break-out, getting close to the $200 level, and joining the extremely overbought group regarding the long-term momentum, and triggering a long-term sell signal in our trend model. Key support levels are found $100 at $75 and $64, with a weaker primary level at $125.

LTC/USD, 4-Hour Chart Analysis

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Analysis

Long-Term Analysis of the Silver Market

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Silver

The silver market has once again caught investors’ interest as the price is nearing areas not seen since late 2008.

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2017 started at a low point for silver, and it seems it will end the year that way as well, meaning investors who bought at the beginning of the year haven’t suffered nor gained much.

This doesn’t mean, however, that the price hasn’t moved during the year. After the low start of the year, silver quickly tacked on about 18% to a top of $17.50 per ounce.

In terms of fundamentals in the silver market, things look a bit complicated for 2018. There are multiple forces pulling in different directions for the price of silver going forward:

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Positives

  • A sharp stock market correction can be expected to occur some time in 2018. Most likely, this will happen sooner rather than later. Stock market crashes always trigger a flight to safety, meaning gold, silver, and quite possibly bitcoin, can benefit.
  • We are seeing signs that inflation may be starting to rise again, although this is not confirmed yet. Rising inflation is always good for precious metals.
  • If the US federal budget deficit widens as a result of the new tax reform, the US dollar may suffer as a consequence. Goldman Sachs put out a note to investors in November 2017 saying that the US debt is “on track” to reach an “unsustainable” level in coming years. Fed Chair Janet Yellen has also said about the US debt that it is “the type of thing that should keep people awake at night.” Rising debt levels creates uncertainty about the economy, which is generally good for gold and silver.

Negatives

  • Central banks around the world seem committed to raise interest rates in 2018. Rising interest rates are bad for precious metals because it would make it more attractive to put money in the bank.
  • The cryptocurrency bull market is on track to continue, diverting attention and capital away from precious metals as a traditional store of value. However, this one is uncertain, as it may also be considered a positive in the way that the rise of cryptocurrencies brings the inflationary and unsustainable nature of fiat currencies into focus.
  • The US dollar may have hit a bottom in 2017 and trade higher compared to other major fiat currencies going into 2018. A stronger dollar is always bad for precious metals, which are priced in dollars.

Silver chart

When looking at the chart, we can see that silver is back down to were it started the year, which coincides with a major support area where it has turned several times in the past few years.

From a technical perspective, silver has been trading in a triangle pattern on the longer-term weekly chart, with the price now trading very near the lower end of the triangle, adding confluence to our bias that silver will trade up from here.

Silver failed to live up to our prediction from early 2017, and is now even trading well below the level from that time.

A low price by any measure combined with two major technical support levels adds confidence to our trade and makes silver a low risk and potentially high reward trade for 2018.

Depending on your own strategy and investment style, you may want to wait for the price to break out from the current triangle pattern it has been trading in for the past year and a half. You would then give up some of the potential return for an even safer trade. After that, major resistance is found around $17.50 and $18, with lots of upside potential if we can finally break through those levels.

Featured image from Pixabay.

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