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Market Overview

Flipped Upside Down

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Hi Everyone,

After weeks of uncertainty in the stock markets and a relief rally yesterday, investors now have fresh cause for concern.

It seems the US bond markets are flashing fresh warning signs that the economy is about to take a turn for the worse.

When the yields of the 10-year bonds go lower than the yield on the 2-year, it has in the past been a strong indicator that a recession is coming. Well, that hasn’t quite happened yet, but we did get an inversion yesterday of the 3-year and the 5-year for the first time in a decade.

Though the 3-5 spread is not as strong an indicator as the 2-10, it’s still not a very good sign. In this graph, we can see that even though a 3-5 inversion doesn’t always lead to an immediate recession, it can still be considered as an early indicator.

This should come as no surprise to those who are reading these updates regularly. As we’ve been saying, just about every stock mogul and their brother have been predicting that we’re nearing the end of the bull cycle.

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

  • More Inversion Markets
  • Scaling Into Positions
  • Bitcoin Getting Easier

Please note: All data, figures & graphs are valid as of December 4th. All trading carries risk. Only risk capital you can afford to lose.

Traditional Markets

In the crypto market, we’ve seen a fair amount jostling for position among the top three assets by market cap.

It seems a similar dynamic is now playing out in the stock market as Apple, Amazon, and Microsoft are in a close running for the top spot.

This chart from the Financial Times shows the respective market caps of the top four tech stocks…

The FAANG stocks have all come down significantly from their all-time highs, with some falling harder than others.

Perhaps this is not surprising as many of these companies were previously priced for perfection, but the question now becomes at what point do they bottom out?

Scaling Into Positions

With the above in mind, and with the recent downturn in crypto prices, I thought it relevant to highlight an old strategy in the market that may now be relevant for investors who are currently sitting on the sidelines and looking to get in.

The problem is that we never really know when the bottom will come and it’s impossible to time the markets perfectly, but there are options you can explore to increase your chance of success from your investments.

For your convenience, I’ve now published a blog on eToro outlining a simple strategy called Dollar Cost Averaging and the advantages of spreading out your orders in order to take advantage of markets that are low now but might go lower.

Feel free to read it here: www.etoro.com/blog/market-insights/a-simple-strategy/

Let me know what you think.

Bitcoin is Getting Easier

There’s been a lot of talk lately about the decrease in mining activity in bitcoin and we’ve discussed it in these updates already. However, it seems this story has taken on a new form that I feel is worth revisiting.

Yesterday, this opinion post was published on Market Watch, which saw the crypto community in an uproar on social media last night.

In the article, Economist Atuyla Sarin describes what he calls the Bitcoin Death Spiral, where he predicts that the hashrate of bitcoin could drop so suddenly that it would no longer be profitable for miners to operate and all at once they could shut down, effectively killing the Bitcoin network.

This theory isn’t new. In fact, here’s an article published on February 5th, 2015 that explains the phenomenon quite well…

The point to note here is that the publish date was almost exactly at the bottom of the last bitcoin cycle, just after it had come down from a high of around $1,200 and was trading at just $220 per coin.

For a full explanation of what the bitcoin death spiral theory is, please see the expert Andrea Antonopolis who has responded to these claims in a video last night.

To be clear, it is extremely unlikely for such an event to occur, simply because any time a miner does shut down their rig it makes it more profitable for all other miners to continue their operations.

In fact, thanks to the recent reduction in hashrate the bitcoin mining difficulty has just been re-adjusted. So anyone who did drop out lost out and those who remained are far better off.

You see, Satoshi Nakamoto wasn’t a fool. There are always new people coming into the crypto space and that’s why these type of stories tend to re-emerge. When a newcomer grasps a specific concept, they can sometimes fail to consider the wider implications of their line of reasoning.

But that’s Ok. Those who are interested will learn and today’s newcomers will become tomorrow’s experts.

Let’s have an amazing day ahead.

This content is provided for information and educational purposes only and should not be considered to be investment advice or recommendation.

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

The outlook presented is a personal opinion of the analyst and does not represent an official position of eToro.

eToro is a multi-asset platform which offers both investing in stocks and cryptocurrencies, as well as trading CFD assets.

Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 65% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

Cryptocurrencies can widely fluctuate in prices and are not appropriate for all investors. Trading cryptocurrencies is not supervised by any EU regulatory framework.

Best regards,
Mati Greenspan
Senior Market Analyst

Connect with me on….

eToro: @MatiGreenspan | Twitter: @MatiGreenspan | LinkedIn: MatiGreenspan | Facebook:MatiGreenspan

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 152 rated postsSenior Market Analyst at Etoro.com.




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Market Overview

Walmart Earnings Propel Stocks Higher; Crypto Market Cap Hits $135 Billion

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U.S. stocks extended their rally on Tuesday, as a positive earnings surprise from Walmart Stores Inc. (WMT) propelled the major indexes higher. Cryptocurrencies maintained their upward edge with EOS, Stellar and Binance Coin leading the gainers.

Relief Rally Continues

The major indexes overcame a tepid start to finish sharply higher on Tuesday. The broad S&P 500 Index rose 0.2% to 2,779.76, its seventh gain in the past eight sessions. Eight of 11 primary sectors finished in positive territory, led by materials. Consumer stocks also outperformed.

The Dow Jones Industrial Average gave up most of its gains to finish only moderately higher. The index closed at 25,891.32, having gained 8.07 points, or 0.03%.

Shares of Walmart Stores rose 2.2% after the retail giant reported better than expected quarterly results. For its fiscal fourth quarter, the Bentonville, Arkansas-based company reported per-share earnings of $1.41 on sales of $133.79 billion. Both figures topped analysts’ median estimate.

Steady performances for information technology and communication stocks lifted the Nasdaq Composite Index to higher ground. The tech-heavy benchmark climbed 0.2% to 7,486.77.

The Dow extended its winning streak to eight weeks on Friday. Read more: Stocks Surge on U.S.-China Trade Optimism; Dow Notches Eighth Consecutive Weekly Gain.

U.S.-China Trade Talks Resume

China’s trade envoy has arrived in Washington to resume high-stakes negotiations with the Trump administration this week. Both the U.S. and China are upping the ante ahead of a self-imposed trade-deal deadline on Mar. 1. President Trump says he may let the deadline “slide” if both sides make progress toward a new deal.

The latest round of talks between the U.S. and China wrapped up on Friday in Beijing. The White House said the two-day meeting was “detailed and intensive.”

“Both sides will continue working on all outstanding issues in advance of the March 1, 2019, deadline for an increase in the 10 percent tariff on certain imported Chinese goods,” the White House said Friday in a statement.

Return of the Crypto Bulls?

Crypto markets flashed green on Tuesday, as bitcoin clawed back above $4,000 for the first time since early January. The largest cryptocurrency by market cap and trading volume reached a session high of $4,083.50 on Bitfinex. To negate the downtrend, bitcoin’s price must cross above $4,200.

In terms of percentage gains, Binance Coin was the best-performing major on Tuesday. It rose 12.7% to $10.88, where it held firm to tenth spot on the market-cap index.

EOS climbed 5.5% to $3.66. Stellar Lumens advanced 12.7% to reach $0.0912.

At the time of writing, the total market capitalization of all cryptocurrencies is $135.5 billion. Trade volumes have surged to $33.9 billion, with all major exchanges reporting a significant increase in turnover since Sunday.

Read more: Crypto Markets are Up $16 Billion Since Sunday; What’s Behind the Rally?

Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 772 rated postsChief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi




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Analysis

3 Things You Need to Know About the Market Today: New High in Gold, Dow 26,000?, Euro Weakness

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1, Gold Jumps to 9-Month High, $1360 in Sight

Gold Futures, 4-Hour Chart Analysis

We have been following the resurrection of gold in the past few months, and since fundamentals just got better for the precious metal, the current technical strength is great news for long-term investors. Today, gold quietly reached a new 9-month high, despite the still ongoing risk rally and the relative strength of the US Dollar.

The metal topped the $1330 level, and with the next major resistance level being found near $1360, a quick surge to the vicinity is in the cards in the coming days. We continue to advise holding gold for the long run, and for now, the short-term technicals also remain bullish. Should the risk rally finally roll over, the uptrend could even accelerate, with longer-term targets being found near $1400 and $1550.

2, US Stocks Drift Lower After Long Weekend as Trade Talks Resume

Dow 30 Futures, 4-Hour Chart Analysis

US stocks are having a quiet start for the day, with the major indices drifting slightly lower following the long weekend. The US economic calendar is empty today, and all eyes will be on the trade talks with China which are set to resume today in Washington in the wake of the unexpected extension of last week’s round of negotiations in Beijing.

The Dow, which approached the 26,000 level last week during the Friday surge to new 9-week highs, is lower today, in-line with the market-wide trends. The mega-cap index could get a lift in early trading thanks to the better-than-expected quarterly report by Walmart (WMT). The firm’s holiday-quarter sales topped estimates, despite the reports regarding the widening growth-gap between online and brick-and-mortar stores, and in light of the positive guidance by the company, the pre-market surge in the stock is no surprise.

With the week’s main economic releases coming in the second half of the period, today we could be in for another choppy session on Wall Street. That said, the momentum of the recovery-rally continues to be suspicious, and especially given the weakness in the Nasdaq, investors should pay close attention to the Volatility Index (VIX), market internals and other under-the-hood indicators for signs of negative divergences.

3, Euro Under Pressure Again, Despite Sentiment Beat

EUR/USD, 4-Hour Chart Analysis

While the Dollar’s break-out to new multi-year highs still didn’t happen last week, technicals continue to agree that the long-term uptrend in the reserve currency will continue. The Euro, on the other hand, is still showing signs of broad weaknes, drifing lower against the Dollar and the Pound today, despite the better-than-expected German Zew Economic Sentiment report.

The indicator is still deep in negative territory, and together with the recent weakness in the Eurozone PMIs and industrial production, recessionary fears seem to be legit in Europe.

We will have a new batch of PMIs coming out tomorrow, and together with the Fed minutes a huge day could be ahead for forex markets and especially for the EUR/USD pair. The 1.12 level could be tested in the case of another negative surprise in the PMIs, while the Fed minutes will be under scrutiny even more than usual following the sharp dovish shift by the Central Bank.

ChartBook

Major Stock Indices

S&P 500 Futures, 4-Hour Chart Analysis

Nasdaq 100 Futures, 4-Hour Chart Analysis

VIX (US Volatility Index), 4-Hour Chart Analysis

DAX 30 Index CFD, 4-Hour Chart Analysis

FTSE 100 Index CFD, 4-Hour Chart Analysis

EuroStoxx50 Index CFD, 4-Hour Chart Analysis

Nikkei 225 Futures, 4-Hour Chart Analysis

Shanghai Composite Index CFD, 4-Hour Chart Analysis

EEM (Emerging Markets ETF), 4-Hour Chart Analysis

Forex

USD/JPY, 4-Hour Chart Analysis

GBP/USD, 4-Hour Chart Analysis

EUR/GBP, 4-Hour Chart Analysis

AUD/USD, 4-Hour Chart Analysis

Commodities

WTI Crude Oil, 4-Hour Chart Analysis

Copper Futures, 4-Hour Chart Analysis

Featured image from Shutterstock

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 466 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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Market Overview

Pieces of April

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Hi Everyone,

An 86-year-old lady returns to work today after fracturing three ribs and removing several cancerous nodules from her left lung.

She isn’t a victim of social or economic injustice though. Ruth Ginsburg is a Justice on the United States Supreme Court and she is arguably holding the balance in a fragile legal system. So there’s a lot riding on her ability to perform. In fact, this was her first notably absence in 25 years.

President Trump has already managed to appoint two conservative Justices to America’s highest court. So there are now 5 conservative and 4 liberal judges serving. Should Ginsburg retire now or otherwise be unable to continue her work, it would give Trump the opportunity to sway the Supreme court to a 6 – 3 majority. Something that could very well shape US laws and policy for decades to come.

In this graph from The Economist, we can see conservatives enjoying a slight judicial bias since 1980. We would like to wish Ruth the best of success, may she live a very long and healthy life!

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

  • US-China trade deadline: 10 days | Days to Brexit: 38

Please note: All data, figures & graphs are valid as of February 19th. All trading carries risk. Only risk capital you can afford to lose.

Traditional Markets

Now that a shutdown has been successfully averted…

Sixteen states have already formed a coalition to ask the courts to block the President from proceeding and this battle could play out for some time to come. However, as the amount of money they’re squabbling over is relatively small, this partisan bickering probably won’t have much impact on the markets, short of any major breakthroughs or escalation.

Markets were up earlier during the Asian session but by now they are decidedly down. Brexit concerns, US-China Trade, and an apparent European slowdown are taking their toll, despite pledges from the central banks to prop them up.

The United States will come back from their long weekend today so the first few minutes after Wall Street rings the opening bell will be fairly significant.

Gold Surges

The shiny yellow metal has reached fresh highs this morning and is now at levels not seen since last April.

Precious metals such as Gold, Silver, Copper, and Platinum are increasingly being seen as a viable hedge against all the geopolitical tension mentioned above.

Crypto Optimism Continues

The crypto market is once again capturing the imagination of traders across the globe as volumes have now reached levels not seen since last April.

One of the cool things is that the number one gainer over the last 24 hours is EOS. As I mentioned in a YouTube session with Thinking Crypto last week, EOS is the number one coin in my portfolio, simply based on the token economics.

Though it’s easy to get excited. Please remember that we’re still very much in a bear market. So please trade with caution. Always remember to diversify your portfolio with other assets in order to keep your risk to a minimum.

Special thanks to Three Dog Night for the title of today’s market update.

Have an amazing day ahead!!

Best regards,

Mati Greenspan
Senior Market Analyst

Connect with me on….

eToro: @MatiGreenspan Twitter: @MatiGreenspan LinkedInMatiGreenspan |Facebook:MatiGreen

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 152 rated postsSenior Market Analyst at Etoro.com.




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