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Analysis

Daily Analysis: US Stocks Surge as War Tensions Ease

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Monday Market Recap

Asset Current Value Daily Change
S&P 500 2464 0.96%
DAX 12165 1.25%
WTI Crude Oil 47.84 -2.01%
GOLD 1288.00 -0.45%
Bitcoin 4296 6.39%
EUR/USD 1.1780 -0.37%

Global stock markets opened sharply higher this week, as diplomatic options including Chinese sanctions got into the forefront of the North Korea standoff. The slight de-escalation was enough for US equities to regain most a big chunk of their losses, as volatility collapsed. European and Asian stocks are also higher, although the DAX and the EuroStoxx 50 are still relatively weak, with the Euro trading just below its recent highs against the Dollar. The Greenback bounced back after Friday’s CPI surprise, but it remains near its long-term lows, as the “weak-US- growth” trade is still on, underlined by the strength in US Treasuries.

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Dollar Index (DXY), 4-Hour Chart Analysis

Gold is still stuck below the $1300 level as safe haven flows stopped helping the precious metals today, but the trend remains positive, and the ongoing Dollar-weakness might push the metal above the crucial level in the coming days. Oil received a hard blow from China, as refining in the country tumbled in July, putting the energy segments rebalancing in jeopardy. WTI Crude fell below key short-term levels, and it might be ready to test the lower boundary of its long-standing trading range.

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Crude Oil, 4-Hour Chart Analysis

Cryptocurrencies

Trading has been dominated by BTC in the last two weeks, and the most valuable coin continued to draw record volumes, as it surged to new all-time highs almost every day of last week. The rest of the market has been quiet for several days now, with IOTA and NEO being in the center of attention, while the more established coins trading mostly in narrow ranges. NEM got under pressure in the low liquidity environment, as the currency retraced all of its recent gains against the high flying Bitcoin. Ethereum, Litecoin, Dash, and Monero were unchanged, but remained bullish, while Ethereum Classic and Ripple are still lagging the other majors.

BTC/USD, 4-Hour Chart Analysis

Technical Picture

The DAX spiked below 12,000 on Friday but it recovered above that and the crucial support near 12,150 today. The index is still in clear short-term downtrend, but it is showing a positive momentum divergence that could be the sign of a durable bottom. Traders could open long positions around these levels, targeting a rally towards the 12,500 resistance. Investors are still closely watching the Euro, as further strength in the currency would weigh heavily on Eurozone equities.

DAX, 4-Hour Chart Analysis

Key Economic Releases on Monday

Time, CET Country Release Actual Expected Previous
1:50 JAPAN Prelim GDP 1.0% 0.3%
4:00 CHINA Industrial Production 6.4% 7.1% 7.6%
4:00 CHINA Retail Sales 10.4% 10.9% 11.0%
11:00 EUEOZONE Industrial Production -0.6% -0.4% 1.3%

Key Economic Releases on Tuesday

Time, CET Country Release Expected Previous
3:30 AUSTRALIA RBA Meeting Minutes
8:00 GERMANY Prelim GDP 0.7% 0.6%
9:15 SWITZERLAND PPI Index 0.0% -0.1%
10:30 UK CPI Index 2.7% 2.6%
14:30 US Retail Sales 0.3% -0.2%
14:30 US Core Retail Sales 0.4% -0.2%
14:30 US Empire Manufacturing Index 10.2 9.8

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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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Analysis

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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