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Market Overview

Front Running for Christmas

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HSBC’s former head of global forex cash trading was just found guilty of front-running a $3.5 Billion trade.

There’s actually a recording that was heard in court of Mark Johnson saying “oh f***ing Christmas” when he learned that the trade would go through.

Front-running is a huge issue across the world of finance and it is fraud. The idea is that if you have a client who’s about to make a large trade you get your small trade out just in front of him and take advantage of the price move.

This is one of the issues that blockchain will be able to fix quite easily if/once it reaches mass adoption.

@MatiGreenspan
eToro, Senior Market Analyst

 

Please note: All data, figures & graphs are valid as of October 24th. All trading carries risk. Only risk capital you’re prepared to lose.

Market Overview

Stocks on Wall Street actually went down yesterday. A rare sight these days but it still happens every once in a while. Though they did end up down, they were able to reach new record highs before the declines.

For the Dow Jones, this marks the first losing session in almost two weeks and the fourth losing session so far this month. Even though the declines are small it has many market commentators [half-jokingly] screaming “buy the dip!”

Analysts are still arguing about whether or not the increasingly likely tax reforms are priced into the markets, but they also have their eyes on the individual stocks in this particularly interesting earnings season.

A critical vote will happen in the US House of Representatives that should allow Trump to enact his tax plan without Democratic support.

More than 120 companies are expected to announce their Q3 earnings reports today so things may get a bit volatile.

Slippery Sterling

Yesterday the Deputy Governor at the Bank of England Jon Cunliffe cast some FUD on the upcoming rate hike announcement.

He says that the timing just might not be right for a hike next week. The Pound did see a small dip on this statement but it quickly recovered.

Jon’s comments clearly run contrary to the views of the rest of the markets. After all, Mark Carney is the one to make the final decision on rates and he seemed fairly confident about an impending hike during the BoE’s last meeting on September 14th.

Market expectations have also not changed much since that last meeting and remain solid with an 82% chance of a hike on Thursday the 2nd. So mark your calendar.

Crypto-contrary

The Crypto Market has been seeing a lot of action lately. However, the headline market cap, which is the value of all cryptos in circulation has remained fairly stable over the past week and a half (blue) just below the all time highest levels of September 2nd (black).

The main battle has been between bitcoin and the rest. We’re very often seeing bitcoin in the green with everything else in red and then vice versa. This is in stark contrast to what we saw throughout September when all the cryptocurrencies were sharing a tight correlation.

For those of you who are in it for the long term, don’t worry about this short term drama. A well-diversified portfolio should be all you need.

As always, let me know if you have any questions or if you need anything further.

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 (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 133 rated postsSenior Market Analyst at Etoro.com.




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Analysis

Volatile and Flat US Session Ends a Hectic Week for Stocks

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The major US indices finished virtually unchanged today, despite the positive open, while short-dated Treasuries closed the week near their multi-year lows. The session had several ups and downs, but the uptick in yields and the weakness in Europe proved too much for a sustained move higher to develop, despite the string of better-than-expected quarterly earnings reports.

S&P 500 Index Futures, 4-Hour Chart Analysis

From a broader perspective we can say that another bounce faded in stocks, with small-caps underperforming yet again, so the risk-off trend got one more confirmation.

Russell 2000, 4-Hour Chart Analysis

We have been tracking the main US small-cap benchmark all week long, as it has been precisely leading the broader market in recent weeks, and today the index got very close hitting a new 6-month low. The next week will be crucial for global risk assets, as given the long-term breakdowns in the main European benchmarks, the new bear market lows in Chinese stocks, and the ugly market internals on Wall Street, this might be the last opportunity to avoid protracted bearish period, or even a global bear market.

While Italian assets are under severe pressure, with government bond yields charging higher, decoupling from the “core” of the Eurozone, credit markets in general are not showing signs of broad distress. With that in mind, we don’t expect 2008-like dislocations in financial markets, for now, but investors should watch high-yield corporate bonds, where large excesses built up in recent years.

Forex Markets Turn Choppy as Dollar Pulls Back Again

EUR/USD, 4-Hour Chart Analysis

The China-led rebound in equities, which faded in late trading, and the Dollar’s retreat were the two main drivers in forex markets today. The EUR/USD recovered above the key 1.15 level after reaching as low as 1.1430 in early trading, while the Dollar index also failed to rise above its recent swing high, so the reserve currency could continue to consolidate before re-testing the August lows.

The bounce in the Euro was helped by the rumors regarding a possible new budget proposal from Italy, and as Moody’s downgraded Italy after the US market close, we will likely see further choppy, hard-to-trade action in currencies, especially given the large moves in US Treasury yields.

Gold Futures, 4-Hour Chart Analysis

Commodities had a mostly bullish day thanks to the Dollar’s dip, with copper and crude oil both recovering after yesterday’s selloff. The WTI crude contract bounced back all the way to the $70 per barrel level, while copper avoided a key breakdown out of its lengthy consolidation pattern.

Gold is also consolidating, albeit in a much different technical position, as the precious metal is trying to form a swing low that would confirm a short-term uptrend after last week’s breakout. A move above short-term resistance would likely lead to a test of the $1245-$1250 zone, with a likely rally up to the next major resistance level near $1260.

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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4.6 stars on average, based on 380 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

Market Update: U.S. Stocks Settle Mixed in Choppy Trade; Cryptocurrencies Endure Modest Pullback

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U.S. stocks traded mixed on Friday, as only one of three major bourses managed to bounce back from the heavy losses incurred in the previous session. Cryptocurrencies showed signs of wobbling early on before a modest recovery kept the market near break-even.

Stocks Lose Steam

The large-cap S&P 500 Index held higher up until the final moments of trade before running out of gas. It settled flat at 2,767.78 following a back-and-forth session. Among the 11 major sectors tracked by the index, five reported gains. Consumer staples were the strongest contributors, surging more than 2% as a whole. Utilities companies and financials stocks also reported firm gains.

The Dow Jones Industrial Average also finished in positive territory, adding 64.89 points, or 0.3%, to close at 25,444.34.

Meanwhile, the technology-driven Nasdaq Composite Index fell further into the red, shedding 0.4% to 7,449.03.

A measure of implied volatility known as the CBOE VIX held near the historic average on Friday, as the recent string of tumultuous sessions eroded risk sentiment on Wall Street. The so-called fear gauge closed just below 20 on a scale of 1-100.

U.S. equity markets pulled back sharply on Thursday as China-induced volatility weighed on investors’ sentiment. Chinese stocks led a global recovery on Friday as policymakers offered soothing remarks on the health of the economy. Still, the benchmark Shanghai Composite Index is down double-digits this month.

Earnings Show Promise

Another batch of upbeat corporate earnings have helped smooth out the recent bout of volatility in U.S. markets. On Friday, Dow blue-chip Procter & Gamble (PG) reported better than expected revenue growth as well as the sharpest rise in quarterly sales in five years. The company posted adjusted per-share earnings of $1.12 on revenues of $16.69 billion.

Other companies to report higher than expected results include Honeywell International Inc. (HON) and Schlumberger Limited (SLB).

As of last Friday, 86% of S&P 500 companies had reported earnings surprises for Q3, according to FactSet. The current blended earnings growth rate for S&P 500 companies is 19.1%.

Crypto Volumes Plunge

Cryptocurrency prices saw limited upside on Friday, as a sharp decline in trading volumes kept investors on the sidelines. The combined market capitalization of all coins bottomed near $206 billion overnight Thursday before recovering near $208 billion. Overall, the market is little changed compared with previous sessions.

Trade volumes are down some 6% over the previous day and nearly 20% compared with a week ago. As CCN recently reported, daily turnover in bitcoin is approaching yearly lows – a clear indication that bullish upside is limited.

Bitcoin posted a quick and dramatic upsurge on Monday as Tether’s USDT token lost its peg to the U.S. dollar. According to Galaxy Digital’s Mike Novogratz, the selloff of USDT is due to a lack of transparency at the parent company.

“I think Tether didn’t do a great job in terms of creating transparency,” he said at a recent conference in Frankfurt, as quoted by Bloomberg. Until now, Tether has refused to provide an audit of its dollar-backed reserves, igniting concerns that it was artificially inflating its stablecoin circulation.

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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4.6 stars on average, based on 647 rated postsSam Bourgi is Chief Editor to Hacked.com, where he leads content development for one of the world's foremost cryptocurrency resources. Over the past eight years Sam has authored more than 10,000 articles and over 40 whitepapers in the fields of labor market economics, emerging technologies, cryptocurrency and traditional finance. Sam's work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Contact: sam@hacked.com Twitter: @hsbourgi




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Analysis

Pre-Market Analysis And Chartbook: Risk Assets Higher Thanks to Chinese Bounce

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Friday Market Snapshot

Asset Current Value Daily Change
S&P 500 2,797 0.81
DAX 30 11,568 -0.18%
WTI Crude Oil 69.61 1.35%
GOLD 1,230 0.16%
Bitcoin 6,379 -0.24%
EUR/USD 1.1480 0.24%

Risk assets are having an active and already very busy day after yesterday’s tumultuous session, as volatility continues to be high, especially in equities. All eyes were on Chinese stocks and the Yuan today in early trading, as several key economic numbers were published in the country. Chinese officials lived up to the occasion, doing everything in their power to prop up the market verbally and most likely more directly too.

USD/CNH, 4-Hour Chart Analysis

Chinese stocks started the day lower due to yesterday’s broad global selloff, and although they surged higher towards the end of the session, erasing their early losses, the main benchmarks remain in steep downtrends on all time-frames, and the Yuan is also very close to its cycle lows.

Shanghai Composite Index CFD, 4-Hour Chart Analysis

The quarterly GDP and industrial production came in slightly below expected, continuing the deterioration of the recent quarters, while retail sales beat the consensus estimate, as the consumer segment is still outperforming.

 While the official numbers are far from disastrous, it’s hard to trust the government statistics, given the history of “controlled” releases, and looking at the unofficial indicators, the country’s economy and financial system are under larger stress than reported.

EuroStoxx50 Index CFD, 4-Hour Chart Analysis

Global stock futures celebrated the Chinese rally for a few hours, but a large chunk of the gains is already gone near the end of the European session, and the focus is back on the Italian budget crisis and the looming Brexit deadline.

The Italian banking sector is under heavy pressure on rumors suggesting increased capital flight from the country and although the Euro is stable, the risk-off trade is well and alive on the Old Continent.

The EuroStoxx 50, which has been performing relatively well form a long-term standpoint failed to leave the vicinity of the spring lows, and the mega-cap index is now threatening to join the long-term breakdown of the DAX after the decline of the past couple of sessions.

US Stocks Rebound as Dollar Rally Pauses

Dow 30 Futures, 4-Hour Chart Analysis

The major US indices opened modestly above yesterday’s closing levels, as Treasury yields settled down following the volatile post-Fed-minutes period. The Dow, the S&P 500, and Nasdaq are all stuck in declining short-term trends, and despite the recent strong bounce, last week’s panic lows are still close.

The Volatility Index (VIX) fell back below 20 today, small caps are performing in line with the broader market, so while we remain bearish form a broader perspective, the immediate outlook for equities is mixed, with no strong divergences before the last session of the week.

Today’s bounce is helped by the better-than-expected earnings report of Procter & Gamble (PG), which opened 6% higher, and the slight pullback Dollar, which got close to its 2-month highs today in European trading. Forex markets, in general, are showing a risk-on bias today, with the Australian Dollar and the Kiwi being helped by the Chinese bounce, and with Pound being stable after yesterday’s selloff.

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

Nikkei 225 Futures, 4-Hour Chart Analysis

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

Forex

EUR/USD, 4-Hour Chart Analysis

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

Gold Futures, 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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4.6 stars on average, based on 380 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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