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Market Overview

Liquidity Crunch

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It could be said that one of the main drivers of the crypto-currency market is the available liquidity… or lack thereof.

If everybody is buying an asset and nobody is out there selling, the price of the asset will invariably and sometimes exponentially rise as the few who are selling demand an ever higher price on the dwindling supply.

At the risk of spreading FUD, I’d like to remind everyone that thin liquidity also has the ability to affect prices negatively. For example, IF a motivated seller did come to one of the major exchanges and dump a significant amount of coins, they could potentially take out the entire buy side of the exchange causing what’s known as a flash crash.

Such an incident happened in October 2014, when a bear-whale sold 30,000 BTC at $300 each when the market was trading at $320. As you can see, the market did recover pretty quickly and those that did buy the dip are well in the green by now, with more than 18% of the total bitcoin supply being held by the top 100 wallets, it pays to be cautious.

Crypto trading is extremely risky, but then again you can’t see percentage gains in the quadruple digits without significant risk. Always diversify your investment!!

Anybody who would like to learn how this is done is welcome to join our Premium Webinar today hosted by yours truly, which as a one time event will be open to everyone.

Click here to register now

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

Taxes Good; Globalism Bad

South African Surge

Ethereum Breakout

Please note: All data, figures & graphs are valid as of December 19th. All trading carries risk. Only risk capital you’re prepared to lose.

Market Overview

Santa Clause did indeed visit Wall Street yesterday and in his bag of gifts, he carried the promise of lower taxes for rich Americans. The Dow Jones marked its 70th record close this year.

The Nasdaq came close to crossing 7000 points and I may end up owing one of our clients in Holland a beer on a bet we had earlier this year. :/

President Trump’s America First speech was largely ignored and stock markets around the world are rising.

Fresh Leadership

I would like to congratulate the country of South Africa on their political victory yesterday. The ruling ANC party has picked a new head named Cyril Ramaphosa who has been campaigning on the notion of political reform and purging corruption.

His main rival was one of the wifes of the current ruler Jacob Zuma and a lady who was one time the backer of a cure for AIDS which was made primarily of alcoholic beverages, garlic, and beetroot. Though he may not know how to count that high, Jacob Zuma’s days as President are now numbered. Sill, he will serve as the president until after the next election in 2019.

Ramaphosa’s victory will hopefully be a huge step forward for the country and we can see the overwhelming reaction in the South African Rand, which is now trading at it’s strongest levels since March and just a few hundred pips away from its 2 year highs.

Ethereum Breakout

As of this writing, Digital Oil is trading as high as $875 a coin. We saw a strong breakout above the psychological resistance of $750 yesterday afternoon and if this current leg is as strong as the last one, we could easily end up near $1,000 before seeing further resistance.

At the moment, Bitcoin is consolidating and trying to build up enough strength to surpass $20,000. This deliberation is having a positive effect on some of the other cryptocurrencies.

Money is still pouring into this market and we can see thousands upon thousands of new digital currency investors/adopters every day. The overall value of all coins in circulation has risen 173% over the past 30 days and now stands at $642 Billion. Though I realize this is a lousy metric to monitor it’s the best one we have at the moment.

One good thing is that as the prices rise and more people enter the market as traders, and especially with the addition of the futures markets on Wall Street who are only getting started, the liquidity of the market will gradually rise, which will in turn drastically reduce the risks of any liquidity crunch.

As always, please feel free to contact me with any comments, questions or feedback. I’m always happy to hear it. 😀

Have a fantastic day ahead!

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.

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

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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Market Overview

Signs of Slowing China Rattle U.S. Stocks; Cryptos on the Verge of New Lows

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U.S. stocks sold off anew Friday after Chinese retail sales data pointed to a severe slowdown in the nation’s consumption-oriented growth, triggering fresh concern over the health of the global economy. Meanwhile, the cryptocurrency market approached $100 billion for the first time since August 2017, a level that would have seemed unfathomable just six months ago.

Learn more about the factors that influenced the market in our weekly review.

Hard Fall on Wall Street

The benchmark U.S. indexes fell hard in the final session of the week. The Dow Jones Industrial Average plunged 496.87 points, or 2%, to close a 24,100.51. The Dow 30 is down a staggering 2,700 points from its October peak.

The much broader S&P 500 Index fell 1.9% to 2,599.95, the lowest in over eight months. All 11 primary sectors finished in the red, with health care and energy stocks leading the market lower. Health stocks plunged by an average 3.4%. Shares of energy companies were down 2.4%. Information technology and consumer staples also posted heavy losses.

A hard slide for information technology dragged the Nasdaq Composite Index sharply lower. In doing so, the tech-heavy index nearly joined its counterparts in negative territory for the year. The Nasdaq closed at 6,910.67, having lost 2.3%.

The CBOE Volatility Index, also known as the VIX, rose in the final session of the week, painting a grim picture for Wall Street over the next 30 days. VIX climbed 4.8% to close at 21.63 on a scale of 1-100 where 20 represents the historic mean. The so-called “fear index” has gained a whopping 87% this year.

Investors are exiting U.S. stocks in nearly record fashion, according to Bank of America Merrill Lynch. In a note obtained by Bloomberg, the bank said U.S. equity funds have experienced their second-biggest run in history, bleeding $27.6 billion through Dec. 12. As Bloomberg notes, the bloodbath on Wall Street has erased up to $4 trillion in U.S. stocks since the end of September, a period that was characterized by record highs.

China’s Cause for Alarm

Once again, China was at the center of the selloff on Friday after Beijing reported the biggest slowdown in retail sales in over 15 years. Receipts at Chinese retail stores rose just 8.1% annually in November, which was well below forecasts calling for 8.8%. Industrial production also languished, rising just 5.4% annually during the same month.

The world’s second-largest economy is in the midst of a multi-year cooldown marked by slowing industrial output and a gradual shift away from export-oriented industries. This is part of a much broader strategy to transform China into a consumer-oriented economy. However, heavy reliance on traditional smokestack industries remains a focal point to the nation’s short-term economic well-being.

China remains heavily dependent on exports, which means it relies on a strong U.S. economy as a destination market. This has given the Trump administration considerable leeway in pressuring Beijing to reform its trade policies. China and the U.S. have made considerable progress on trade talks in recent weeks but a comprehensive deal has yet to be reached.

Cryptos Locked in Bearish Retreat

Cryptocurrency prices on Friday touched new lows for the year, offering little doubt that a new bear-market bottom was around the corner. The combined value of all coins in circulation fell to $102 billion, the lowest in 16 months.

Bitcoin’s price briefly fell below $3,200 for the first time this year, extending its daily loss to more than 4%. The leading digital currency is down roughly 5% for the week, though its share of the overall market continues to grow amid a mass exodus from altcoins.

XRP, Ethereum and EOS each recorded declines of at least 3% on Friday; Stellar XLM was down 9%, falling below 10 cents for the first time this year.

With the exception of Tether, a dollar-backed stablecoin valued at $1.00, all cryptocurrencies in the top-20 were down at least 4% during the session. Twentieth ranked Maker (MKR) was the biggest laggard, falling 13% on the day.

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 700 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

Forex Update: Dismal Chinese Data Causes Turmoil in Markets

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Forex Market Snapshot

Asset Current Value Daily Change
EUR/USD 1.1302 -0.47%
GBP/USD 1.2571 -0.68%
USD/JPY 113.35 -0.21%
AUD/USD 0.7179 -0.66%
GOLD 1,243 -0.20%
WTI Crude Oil 51.16 -3.18%
BTC/USD 3,180 -2.54%

We continue to have an unusually active December in traditional financial markets, as the recent bearish shift, the continued Brexit woes and the slowing global economy add up to a very nervous trading environment. Volatility is especially high in stock markets compared to seasonal averages but currencies are also having very active days, with the Dollar clearly being in focus.

Today we had negative headlines in China with both industrial production and retail sales missing the consensus estimates by a mile, and the history of manufactured economic releases from the country makes that even scarier.

It’s no surprise that the Chinese stock market is leading the way lower globally, while the Chinese Yuan is also among the weakest currencies globally, even amid the improving trade-related sentiment. Risk-on currencies got it hard today, and the Dollar is defying its bearish seasonality, trading very close to its recent lows, confirming the broad risk-off shift.

Technical Analysis

GBP/USD, 4-Hour Chart Analysis

The Great British Pound continues to trade with pronounced relative weakness, and as Prime Minister Theresa May was sent home empty-handed from Brussels, with the leaders of the EU refusing to renegotiate the draft Brexit plan, the currency’s position just got even shakier.

From a technical standpoint, the Cable confirmed the key breakdown with a failed pullback in the past couple of days, and with no major support found above the generational lows near 1.20, long-term odds now favor a test of that zone, and bulls shouldn’t enter positions below the key 1.27 level.

EUR/USD, 4-Hour Chart Analysis

The EUR/USD pair dipped below the 1.13 level after yesterday’s the dovish growth and inflation forecast by the European Central Bank and today’s strong US Retail Sales report. The US economy continues to perform relatively well compared to its global peers, and although we think that the slowdown will eventually reach the US, the fiscal stimulus and the labor momentum could keep the engines going for a while.

That only adds to the buying pressure which is pushing the USD higher, and the troubles in the European financial system are also mounting, which could lead to another leg lower in the common currency next year. The main technical levels to watch are still the 1.12 support and the 1.1440 resistance, and with the broader downtrend clearly being intact in the most traded currency pair.

AUD/USD, 4-Hour Chart Analysis

The AUD/USD pair fell below the bearish wedge pattern on the negative Chinese news as we expected, and it’s now testing the 0.7165 support zone. A move towards the 0.70 level is likely in the coming weeks, should the pair violate the support zone, and the short-term trend change is close to being confirmed, while the broader downtrend is clearly intact, with strong resistance ahead near 0.7250 and 0.74.

WTI Crude Oil, 4-Hour Chart Analysis

Another rally attempt faded away today in crude oil, and the crucial commodity continues to trade in a bearish consolidation range following the series of dead-cat-bounces. The top of the range is found near the $54.25 per barrel price level, while strong support is found in the $49.50-$50 per barrel range.

Given the deeply oversold long-term momentum readings, bulls can open speculative long positions near the bottom of the range, despite the clearly intact long-term downtrend, while bears should wait for a larger scale bounce to reenter the market.

Key Economic Events on Monday

ChartBook

Forex

USD/JPY, 4-Hour Chart Analysis

EUR/GBP, 4-Hour Chart Analysis

EUR/JPY, 4-Hour Chart Analysis

AUD/JPY, 4-Hour Chart Analysis

GBP/JPY, 4-Hour Chart Analysis

USD/CHF, 4-Hour Chart Analysis

USD/CNH, 4-Hour Chart Analysis

Commodities

Gold Futures, 4-Hour Chart Analysis

Copper Futures, 4-Hour Chart Analysis

Major Stock Indices

S&P 500 Futures, 4-Hour Chart Analysis

DAX 30 Index CFD, 4-Hour Chart Analysis

Nikkei 225 Futures, 4-Hour Chart Analysis

Shanghai Composite Index CFD, 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 417 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

Tighten that Belt!!

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Hi Everyone,

Over the last four years, the European Central Bank has managed to inject €2.6 trillion into the banking system in order to maintain economic stability.

To be clear, these cash injections have been one of the only things propping up the economy, and even the Governor of the ECB has now admitted that.

Now, €2.6 trillion may not sound like a lot of money but we need to consider that this money is then multiplied by the fractional reserve banking system with each Euro created then being lent out multiple times. So the actual amount of money that went into the system is much higher.

Here we can see the level of M3 money in the Eurozone going from less than €10 quadrillion to more than €12.27 quadrillion in just four years.

Yesterday, the ECB announced that they will stop injecting new money into the system. In the United States, they are already starting to extract money by allowing the bonds they’d purchased to lapse. In Europe, they’ll be renewing their bonds for now.

So, for those of you reading these daily updates and wondering what monetary tightening is, this is how it works and it is having a massive impact on the markets.

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

  • Poor China Data
  • USD Getting Strong
  • Bitcoin Bulls are Still Bullish

Please note: All data, figures & graphs are valid as of December 24th. All trading carries risk. Only risk capital you can afford to lose.

Traditional Markets

Stocks declined during the New York session yesterday. There were a bunch of headlines about a possible government shutdown but that’s probably not the catalyst for falling stocks. Just a sideshow distraction.

As we mentioned above tightening monetary policy is the driver here. During most of the year, stock bulls were able to say that the economy is still doing very well, but unfortunately, they don’t even have that leg to stand on anymore.

The US jobs report last week was dismal and the GDP in Q3 was a clip below the national average.

Things didn’t get much better in the Asian session either. Chinese investors drank their morning coffee reading headlines like this

To put the numbers into perspective, here is a graph of China’s industrial production since the crisis.


… and here is one for the retails sales. These are the lowest figures in more than a decade. An outright shock for economists whose forecasts were already low.

As you can probably imagine, the entire global stock markets are in risk-off mode by now.

USD Strength

In line with the risk-off mood, it’s likely that many traders are moving to cash. This could be the reason the US Dollar is testing new highs at the moment.

Here’s the graph we’ve been tracking that shows a rather clear ascending triangle for the US Dollar index. Definitely looks like a breakout pattern.

Similar to what we saw in August, the emerging market currencies are getting the biggest wallop. Here we can see the LiraRand, and Peso getting bucked.

At this point, only the Japanese Yen is a bigger safe haven but only slightly.

Bulls Gotta Bull It

To say that I’m bullish on bitcoin is an understatement, but even my extreme optimism is overshadowed by some of the other analysts in the industry.

As much as I respect Mr. Lee and appreciate his view, the above headline did raise a few alarm bells in my head.

In my personal philosophy, the market is never wrong. Fair value is what someone is willing to pay for it. I can understand how using metrics to try and determine what the price of an asset should be can be helpful. However, if nobody is willing to pay that amount, then it isn’t the correct value.

During the interview, Thomas even went as far as trying to reverse engineer his own calculations showing how given the current price of bitcoin, there should be far fewer active wallets. This thinking sounded a bit silly to me as well.

Sure, I believe that bitcoin can grow in value very quickly. After all, there is an extremely limited supply. But for that to happen demand needs to pick up first.

Have an amazing weekend!!

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 LinkedInMatiGreenspan |Facebook:MatiGreenspa

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 139 rated postsSenior Market Analyst at Etoro.com.




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