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Don’t Jinx the Market

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Being the second Friday this year that happens to fall on the 13th of the month may not bear much significance. The fact that the doomsday theorists who believe that today is the day Planet X will make a move on Earth may bear even less.

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However, according to a study by the University of Chicago Booth School of Business, even if you don’t believe in superstitions they can still have an impact.

Today we’ll keep a close eye on Donald Trump’s speech regarding the future of the Iran Nuclear program. Though Trump has expressed his disdain for the deal that was struck by his predecessor he is largely expected to uphold the agreement.

As wildfires rage throughout California and much of Mexico and the Carribean islands are still in shambles following multiple horrific hurricanes and earthquakes the world and the markets could certainly use a bit of calm.

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@MatiGreenspan
eToro, Senior Market Analyst

 

Please note: All data, figures & graphs are valid as of October 13th. All trading carries risk. Only risk capital you’re prepared to lose.

Market Overview

Wall Street’s focus is quickly shifting from the Fed to earnings.

The FOMC minutes released on Wednesday failed to provide investors with any sort of certainty regarding the fate of a rate hike in December. In fact, it showed that the Fed is quite confused about the lack of inflation and torn over how to proceed.

Yesterday some of the big banks released their earnings. Although the profits were largely better than forecasted financial stocks did end up declining and taking the rest of the market with them.

For example, JP Morgan shares fell 0.9% even though earnings and revenue growth came out good and shares in Citigroup tumbled 3.4% because even though they did better than analysts expected their return on equity was much worse than other banks.

On the long term though this loss is barely even noticeable. Looking at the chart of the S&P 500 the technical setup does seem prepared to break into new record territory above 2,555 points.

Though I usually prefer not to apply technical analysis to a stock index, in this case, the rising support line (yellow) meeting a horizontal “psychological” resistance (blue) cannot be ignored.

Central Banks Still Underpin

Though the focus of investors may shift from time to time we need to always keep in mind who is running the show.

Those of you who have been reading my updates for a while know very well who I’m talking about.

Over the past 9 years, Central Banks have been the main buyer of financial assets and are the main driver of market activity. However, this trend is quickly changing behind the scenes.

The European Central Bank is currently printing €60 Billion per month to support the market but according to a report out this morning, they’re now considering to cut that amount in half as of January.

This move, if it happens, will be largely in line with other central banks who are all trying to “normalize” their monetary policy to keep from flooding the world with cash.

(Some) Cryptos Fly

A spectacular display is now happening in the crypto-market.

Yesterday morning Bitcoin popped above the previous highest level of $5000 a coin and didn’t slow down until surpassing a breathtaking height of $5,800.

Unlike the moves that we saw previously where all cryptos moved in sync, alternative investors are now differentiating between different coins and there is a distinct flight to quality.

Over the past 24 hours, Bitcoin is up 13% and Litecoin has risen 11%. Ethereum yet again has shown up to the party fashionably late and just within the last two hours has risen more than 10%.

Of course, I wouldn’t want to say anything to jinx it at this point but the value of all cryptos now stands just $3.8 Billion short of it’s all time high, which was marked on September 2nd.

As always, let me know if you have any questions, comments, or feedback, or if you need any assistance in your portfolio. Wishing you an amazing weekend.

This content is provided for information and educational purposes only and should not be considered to be investment advice or recommendation.
The outlook presented is a personal opinion of the analyst and does not represent an official position of eToro.

Past performance is not an indication of future results. All trading involves risk; only risk capital you are prepared to lose.

Important: Never invest money you can't afford to lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here.



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Bitcoin

Bitcoin Returns to Health After Flash Crash

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The value of bitcoin stabilized Thursday after a flash crash wiped nearly 9% from its value, a sign that investors are getting over the initial fear of regulatory encroachment on their tokens.

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Bitcoin’s Epic Drop

Beginning at around 12:45 UTC, the BTC/USD began an epic decline that continued for 90 minutes until prices bottomed in the low $5,100 region. At its worst, bitcoin was down nearly 9% on the day.

Prices would soon recover, and do so in a big way. BTC/USD regained more than $300 over the next two hours before continuing higher for the rest of the day. At press time, bitcoin is up 1.3% at $5,646, having traded within a $180 range early Thursday.

At present values, bitcoin is capitalized at $94 billion, according to CoinMarketCap. The token peaked above $97 billion last week as it set multiple record highs.

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Bitcoin continues to trade in overbought territory, according to the Relative Strength Index (RSI). As the following chart illustrates, the BTC/USD has been technically overbought on several occasions over the past six months.

As CCN reports, bitcoin wasn’t the only digital currency to experience a sharp drop. Ripple plunged by 12% and Ethereum shed 8%. For bitcoin and ether, the losses would later prove to be a healthy correction after last week’s run-up. The ETH/USD is currently trading around $314.

Ripple is still down roughly 9%, where it is trading near three-week lows.

Bitcoin, ether and Ripple are the world’s top-three digital currencies by market cap. Combined, they’re worth more than $131 billion.

Regulatory Fears Emerge

The plunge came just a day after the U.S. Commodity Futures Trading Commission said it has jurisdiction to regulate bitcoin derivatives. In a report titled A CFTC Primer on Virtual Currencies, analysts at the Commission reaffirmed that bitcoin and others like it are commodities.

The report said:

The CFTC’s jurisdiction is implicated when a virtual currency is used in a derivatives contract, or if there is fraud or manipulation involving a virtual currency traded in interstate commerce.

A commodity is defined in various ways by the CFTC. It can be a physical commodity or natural resource, a currency or interest rate and “services, rights, and interests… in which contracts for future delivery are presently or in the future dealt in.”

Three bitcoin exchanges were listed as examples of permitted cryptocurrency activity. They included TeraExchange, LLC, North American Derivatives Inc. (NADEX) and LedgerX, LLC.

The report also said there was no inconsistency between how it defines cryptocurrency and how the Securities and Exchange Commission (SEC) dealt with The DAO. SEC regulators deemed The DAO tokens to be “securities” under federal law.

There is no inconsistency between the SEC’s analysis and the CFTC’s determination that virtual currencies are commodities and that virtual tokens may be commodities or derivatives contracts depending on the particular facts and circumstances. (CFTC)

As cryptocurrency trading expands in scope, investors can expect a slew of products designed to track the market. The Chicago Board Options Exchange (CBOE) plans to launch its own bitcoin derivatives product next year.

Meanwhile, Grayscale currently operates the Bitcoin Investment Trust, a traditional investment vehicle with shares solely invested in BTC.

Featured image courtesy of Shutterstock. 

Important: Never invest money you can't afford to lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here.



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Analysis

Technical Analysis: Bitcoin Dumps and Pumps amid Broad Volatile Correction

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The crypto segment has been in turmoil today, as the most valuable coins turned significantly lower, leading to a mini-panic, but they rallied strongly off their slows as buyers stepped in the second half of the session.

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Bitcoin fell as low as $5100, for a 15% correction top-to-bottom, but it is now trading near the prior short-term support at $5400. As the long-term picture remains overbought, investors shouldn’t open new positions here, but traders could play a likely move towards the $6000 level, although we still advise small sizes, as correction risks remain elevated.

BTC/USD, 4-Hour Chart Analysis

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The other majors were also declining in early trading, led by Ripple, with only NEO and IOTA, holding up well during the sell-off.  Both of the latter coins faded away as the rest of the market recovered, but Ripple continued to suffer. For now, the long-term bullish picture is unchanged for the segment, but BTC’s overbought correction could still cause volatility in the coming period. Let’s see the short-term charts after the busy session.

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Cryptocurrencies

Trade Recommendation: DigiByte

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Based on the daily chart we have a buy opportunity. Possible upward movement is confirmed  by RSI reversal in the oversold zone and MACD histogram. We can use lower time frame for getting a better entry level. If we look at the 4H chart, we can see a bullish divergence at the support level. It gives us a trend reversal signal. MACD supports upward movement. We can place pending orders for buy at 0.00000220 level with stop orders at 0.00000150 level. Profit targets are 0.00000300 and 0.00000450 levels. Also the part of long positions can be left for long run. If you don’t use leverage, recommended trading volume for this trade is up to 5% from your deposit.

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Market: DGBBTC
Buy: 0.00000220
Stop: 0.00000150
Profit Targets: 0.00000300 and 0.00000450

The trading signal is based on Poloniex chart.

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Important: Never invest money you can't afford to lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here.



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