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Gambling with the World

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It’s not every day you see somebody do something that has a significant chance to plunge the entire world into chaos. That’s exactly what Theresa May did yesterday.

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I’m not saying that she made the wrong move or that she did something stupid. In fact, calling for a snap election on June 8th may prove to be the smartest move of her career. However, there is a chance albeit small, that this could blow up in her face. The world has enough geopolitical risk at the moment, did we really need any more?

Well, at least the markets are moving. Let’s make some money.

Today’s Highlights

The Event Simplified

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The Market Reaction

What’s Next?

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

So what just happened?

The Prime Minister of the UK wasn’t getting along with her fellow members of the government. Pretty much everybody agrees that Brexit needs to happen, the British people voted for it. However, as politicians do, there’s a lot of arguments about how.

Remember, May was never elected. In the wake of the June referendum, David Cameron stepped down as PM, there was a power struggle and May emerged victoriously. Not an ideal position in a democracy.

At the moment, public opinion seems to be in May’s favor but the distribution of parliament is still fixed at the outcome of the last UK elections about 2 years ago.

By holding a snap election now, May will not only be able to squash any comments about her not having an elected mandate, she is also catching her opponents off-guard as nobody really expected to be running a political race right now, and will now have less than 2 months to prepare and mobilize, an unthinkable time-frame (it took Trump more than 2 years of planning and grandstanding to win in the USA).

Think about UKIP (the UK Independence Party) for example. This British party has been running largely on a single platform campaign, to break away from the EU. Now that that is already underway, what slogan are they going to put on their banners?

So what’s the Risk?

Think about a basketball player who is holding a ball at an uncomfortable angle. In order to get a better grip, he must let go of the ball completely and catch it again for better.

The risk, of course, is dropping the ball. The chance of that happening is very small. Only, we’re not talking about a basketball, we’re talking about the world.

This is a nationwide general election so anything can happen. What if one of May’s opponents outlines the risk that she’s taking and uses it to gain strength? What if the people who didn’t vote for Brexit see this as their second chance to vote against it?

With all the geopolitical risk surrounding France, North Korea, Syria, Turkey, Venezuela, South Africa, etc, even the chance of uncertainty in the UK is just adding fuel to the fire.

Reaction to May

The Pound Sterling is confident. As usual, the markets are already pricing in the most likely outcome. A stronger May government.

The GBPUSD has been beaten bad by Brexit and it’s good to see the currency fighting back…

Massive hedge funds and many traders on eToro have now completely closed out their short positions on the pair and it seems we had a bit of a reverse flash crash yesterday evening.

However, we are now well above the average price so selling sentiment has resumed in short term trading.

The FTSE tells an entirely different tale. In this story, a stronger Pound leads to smaller profits and a nation that is getting fed up with democracy is too weary to take on yet another headwind risk event.

Losses in the UK stocks combined with speculation over a potentially messy French election dragged down the entire European session. New York seemed ready to reverse the losses, especially after Bank of America announced a profit rise of 40%. But…

Less than an hour later, Wall Street’s darling, Goldman Sach, announced some poor results for the first quarter. It was too much for the stock market to bear and the Dow Jones ended the day 113 points lower.

What’s next?

Asian stocks aren’t doing too bad at the moment and Europe just opened up volatile but overall flat. Certainly, there’ll be plenty of traders out there looking to buy this dip but beware of further geopolitical uncertainty.

Also, keep an eye on Crude Oil. Inventories will be posted at 15:30 GMT. We’ve seen some pretty weak price action over the past few days. Any losses in the energy sector could easily prove fatal to this fragile market.

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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Analysis

Crypto Update: Coins Remain Under Pressure but Supports Still Hold

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The correction of the post-crash rally is still dominant in the cryptocurrency segment, despite the encouraging bounce on Friday, as Bitcoin is dragging the market lower. The coin turned relatively weak in recent days after an extended period of outperformance, but even BTC is holding up well, with the bearish momentum being far from disastrous.

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Ethereum’s relative strength, on the other hand, is slowly building, as we first noted it during the Thursday sell-off, and the second largest could be spearhead the next leg higher. The early leaders of the rally, Ethereum Classic and Litecoin are also acting bullish, and the overall picture remains in line with the orderly correction scenario.

BTC/USD, 4-Hour Chart Analysis

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Bitcoin still hasn’t tested the key $9000-$9200 zone despite several waves of selling that hit the coin, but it’s still stuck below the $10,000 level. We expect a short-term bottom in the coming week, as the momentum of the decline suggests accumulation, and investors should use the dip to add to their holdings, even if a test of the primary support zone is still possible here, with further resistance levels ahead above $10,000 at $11,300, $11,750, and $13,000.

LTC/USD, 4-Hour Chart Analysis

Litecoin put in a higher short-term low during the weekend, retaining its leading position in the rally from a technical standpoint. The MACD indicator already gave a bullish signal after dipping into negative territory, but should Bitcoin continue to struggle, LTC could be in for more consolidation before despite the relative strength. The $200 level is still in focus with a strong resistance zone just ahead between $220 and $235, with the rally high at $250, while further key support is at $180.

Altcoins Mixed in Quiet Trading

ETH/USD, 4-Hour Chart Analysis

Percentage changes are not significant today following yesterday’s decline, and most of the majors are holding up above or near key support levels, with relatively low volatility and notable divergence between the coins.

As for the recently weaker coins, Ripple is still trading well below the $1 level, while IOTA managed to bounce hard off the correction low reaching back to the $1.9 resistance, and edging closer to a break-out from the still dominant downtrend.

The rest of most established coins are still drifting lower, with no major moves in the last few days, so without notable red flags, we remain positive regarding the long-term setup.

Featured image from Shutterstock

Disclaimer:  The analyst owns cryptocurrencies. He holds investment positions in the coins, but doesn’t engage in short-term or day-trading, nor does he hold short positions on any of the coins.

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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Analysis

Daily Analysis: Oil Extends Rally as Nasdaq Leads Stocks Higher

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Friday Market Recap

Asset Current Value Daily Change
S&P 500 2749 1.38%
DAX 12,483 0.18%
WTI Crude Oil 63.58 1.29%
GOLD 1330.00 -0.16%
Bitcoin 10,14 -0.09%
EUR/USD 1.2295 -0.28%

US equities built up some bullish momentum towards the end of the week, ignoring the technical damage that the volatility-crash caused, and the major US indices rallied into the close today, squeezing the shorts. The Nasdaq, which led the rally as we expected, took out the key 6850 level in late trading and added another percent to, incredibly enough, finish only a hundred point of the all-time high.

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NASDAQ 100 Futures, 4-Hour Chart Analysis

Should the tech benchmark retest the high next week, it will be amid very strong negative divergences, but hey, those divergences have been building for months now. The rally in equities was boosted by the dip in Treasury yields, especially at the long end of the curve, while Amazon continued ot lead the charge, closing right at the historic $1500 per share level.

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Russell 2000 (Small Cap) Index, 4-Hour Chart Analysis

The advance in the Dow and the S&P 500 is much less convincing and with small caps also lagging the tech-behemoth juggernaut, we remain skeptical regarding the sustainability of the move. That said, if the broader indices stay above the key levels, we will be trading the long side in equities, even as from an investment standpoint, valuations are still way above acceptable.

Forex Markets and Commodities

The lackluster performance of European and Asian stocks adds to the negative divergences, especially as the Euro stopped appreciating against the Greenback, and that should be helping stocks of the old continent. Of course, the DAX and the EuroStoxx 50 could play catch-up next week, barring another surge in the common currency.

EUR/USD, 4-Hour Chart Analysis

The most-traded forex pair remains in a short-term downtrend, as it failed to recapture the previously broken rising trendline, and the commodity related risk-on currencies also remained under pressure. The Canadian Dollar did bounce back off yesterday’s 8-week lows, boosted by the much hihger than expected inflation release and the jump in the price of crude oil.

USD/CAD, 4-Hour Chart Analysis

Oil benefited from the positive shift in sentiment, while the Syrian situation, which took a backseat in the headlines, still supports the rally. The Japanese Yen and gold were stable amid the risk-rally and that adds to our suspicions regarding the upside potential form these levels.

Cryptocurrencies

The segment started out the day with a strong bounce that carried the major coins higher by around 10%, but given the recent steep short-term pullback, even that wasn’t enough to turn the tide, and the day ended with an (almost usual) sell-off after the US close. Despite the recent volatility, the overall picture is still encouraging, with most of the majors being safely above the crash lows, likely in a new bullish cycle that has the potential to last for several more weeks or even months.

While new all-time highs are it guaranteed following the 60-70% declines among the largest coins, but even without those, plenty of upside potential is left for investors. With that in mind, investors should hold on to their coins and even add to their holdings on the short-term dips like the current one.

ETH/USD, 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 115 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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Analysis

Technical Analysis: Majors Stage Rally but Strong Levels Still Ahead

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The cryptocurrency segment has recovered from a broad correction today in early trading, with the most valuable coins all turning into green during the session, despite the bearish start to the overnight session. With bottom-to-top gains of up to 15%, the rally helped in easing the worries of bulls, especially in the case of the relatively weaker coins.

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Bitcoin and most of the largest altcoins remained stable during the selloff, and BTC recaptured the $10,000 level quickly after trading as low as $9600 overnight. The initial rally topped out near $10,400, and the coin is trading back near the $10,000 level, as the bullish momentum faded away somewhat.

BTC/USD, 4-Hour Chart Analysis

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That said, we expect the uptrend to continue even if the correction could still carry Bitcoin lower. Further strong support is found between $9000 and $9200, while targets are ahead at $11,300, $13,000, and $14,250.

ETH/USD, 4-Hour Chart Analysis

Ethereum showed strength during the bounce again after yesterday, together with the early leaders of the rally, and although the coin dipped below the $845 level in the second half of the session, the signs remain positive for bulls. Support levels are now found at $780, $740, $625 and $575, while resistance is ahead near $910 and $1000.

(more…)

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 115 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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