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Market Update: Stocks Recover from U.S.-China Trade Doubts Lingering as Crypto Assets Plunge

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U.S. stocks reversed losses Wednesday after the minutes of the Federal Reserve’s latest meeting showed no urgency from policymakers to raise interest rates.

Stocks Recover

Wall Street spent much of Wednesday in the red as lingering trade risks dampened investor sentiment. The major indexes reversed course in afternoon trading, the S&P 500 Index advancing 0.3% to 2,733.28. Six of 11 primary sectors finished higher.

The Dow Jones Industrial Average reversed declines to finish up 0.2% at 24,886.74. Dow industrials were down triple digits earlier in the day.

The technology-focused Nasdaq Composite Index swung into positive territory, adding 062% to close at 7,425.96.

Equity markets got some reprieve after FOMC meeting minutes showed the central bank was in no hurry to hike interest rates even as the economy and inflation continued to improve. Nevertheless, the Fed is widely expected to raise interest rates by a quarter point at its next meeting in June.

Trade Tensions on Multiple Fronts

President Trump’s pledge to help telecom giant ZTE get back to work has been challenged by the Senate Banking Committee, which on Tuesday approved a host of measures targeting exports and Chinese companies.

Senate lawmakers have agreed on new rules to bolster national security reviews of Chinese technology firms as well as strengthen export controls. This includes limiting the Trump administration’s ability to lift penalties imposed on ZTE.

Stocks rallied Monday on signs the Trump administration would suspend its plans to tax $150 billion worth of Chinese imports.

Reports of a stalemate over NAFTA also sent jitters throughout Wall Street as it became apparent that the U.S., Canada and Mexico would not reach an agreement in time for the Mexican elections this summer.

In a statement released last week, Trump’s top trade negotiator Robert Lighthizer said “NAFTA countries are nowhere near close to a deal,” pointing to “gaping differences” on a number of key issues.

Crypto Markets Plunge

Cryptocurrency prices declined sharply on Wednesday, with bitcoin threatening a bearish reversal following weeks of lateral moves.

The cryptocurrency market shed more than $50 billion, reaching a low of around $324 billion. That was the weakest reading since early April.

Bitcoin values fell more than 6% to $7,620, its lowest since April 12. Total trade volume in BTC was valued $6.1 billion, which is equivalent to roughly 31% of total daily turnover.

Although bitcoin declined heavily, its share of the total market improved to 39.5% as altcoins registered significant losses. With the exception of bitcoin, every major asset in the top ten recorded double-digit percentage losses. Declines ranged between 11% and 20%.

Ethereum prices plunged to $591, Ripple XRP declined to $0.61 and bitcoin cash touched down below $1,000 before recovering at $1,033..

There was no immediate catalyst for the price decline, which suggests that a broad consolidation trend is afoot. Some researchers have called for the general unwind to continue through the summer before accumulation returns in the fall.

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 691 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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Market Overview

U.S. Stocks Bounce Back and Brexit Brakes: Market Wrap

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U.S. stocks overcame a volatile morning to finish higher on Monday, though trade-related risks remained in focus following the arrest of a high-ranking Chinese technology executive. The U.K.’s Brexit process stalled on the eve of a critical parliamentary vote after Prime Minister Theresa May’s cabinet warned of a major backlash in the House of Commons.

Stocks Push Higher

Wall Street turned positive in the final hour of trading, with the S&P 500 Index gaining 0.2% to 2,637.72. The large-cap index was down as much as 1.9% earlier in the day.

At the sector level, losses on Monday were largely concentrated in energy and financials shares. Large gains were reported for information technology and communications services.

A strong performance in tech-related sectors drove the Nasdaq Composite Index firmly higher. The benchmark added 0.7% to close at 7,020.52.

The Dow Jones Industrial Average reversed losses and gained 34.31 points, or 0.1%,to close at 24,423.26. The Dow was briefly down more than 500 points on Monday.

Brexit Vote on Hold

In the face of broad opposition, U.K. Prime Minister Theresa May has delayed a parliamentary vote on her government’s Brexit plan, a move that could undermine the March 2019 timeline for leaving the European Union. As The Wall Street Journal reported, May postponed he vote, originally scheduled for Tuesday, after consulting with her cabinet. Cabinet members believe that May’s bill will have little chance of being passed amid the ongoing debate over Northern Ireland’s border following Brexit.

The news triggered a massive drop in the British pound, which fell on Monday to the lowest level in over a year. Sterling bottomed near $1.2510 U.S. before recovering around $1.2556 U.S., where it was still down 1.3%.

Theresa May has struggled to fulfill her government’s Brexit mandate since she took over as prime minister from David Cameron more than two years ago. This included botching an early election, which weakened her party’s standing in the House of Commons, and struggling to unite hard Brexiteers with those calling for a softer exiting from the EU.

Oil at a Standstill

The price of crude resumed its defensive posture on Monday, as traders continued to doubt the ability of OPEC and its allies to re-balance an oversupplied market.

On Friday, the Organization of the Petroleum Exporting Countries and Russia agreed to curb their daily crude production by a combined 1.2 million barrels. The output cut is intended to bring global supplies back in line with demand ahead of a tepid consumption forecast for 2019. Slower economic growth and trade uncertainty between China and the West are expected to put a damper on crude demand over the next 12 months.

Citi, a U.S.-based financial institution, believes global crude prices will average $60 a barrel in 2019, which is virtually identical with today’s prices. Citi analysts believe that OPEC’s production cuts may push prices higher in the short run, which will allow U.S. producers to ramp up their production over the longer term.

“OPEC+ did the work of drawing down inventories that otherwise would have to be done through a painful period for shale producers,” Citi said in a research note, according to CNBC. Additionally, “the more OPEC+ tries to support prices by withholding oil from the market, the more they give the US shale sector an out from rationing supply growth themselves.”

As Hacked recently reported, the United States recently became a net exporter of crude for the first time in 75 years, raising optimism for a new era of energy independence.

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 691 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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Market Overview

Fundamental Dissonance

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Hi Everyone,

As with many things in the crypto world, the methods we use to determine the value of cryptoassets is still under construction.

We did make an introductory video about this last month, take a look here. One of the thought leaders when it comes to building these fundamentals is a Venture Capitalist named Christopher Burniske.
Over the weekend, Chris put out a blog called “Bitcoin & Ethereum: Prices are Down More than the Fundamentals.”

As the title suggests, the post takes a good look at some of the network factors including the supply side (hashrate) and the demand side (daily transactions, functionality, active wallets) for two of the most popular cryptos.

Overall, these factors tend to line up fairly well with the price but Chris points out a divergence that could suggest the market is now oversold.

Here’s one graph that jumped out at me. It shows that usage of the Ethereum network has remained incredibly consistent since the beginning of 2018, yet the price has done nothing but fall in that time.

This research is a strong affirmation of our previous assessment that the volatility we’ve seen over the last month is primarily a technical sell-off and there is no fundamental reason for it.

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

  • Gaps Despite Good News
  • OPEC Strikes a Deal
  • Dash Fast Food

Please note: All data, figures & graphs are valid as of December 10th. All trading carries risk. Only risk capital you can afford to lose.

Traditional Markets

The Jobs numbers didn’t come in so hot on Friday and the markets ended up falling to their lows. The sentiment was so negative by the end of the week that when the futures opened last night, they opened with a large gap down.

However, headlines this morning saying that stocks are down may not be entirely forthcoming. The down they’re referring to is simply because of the gap down at the open. Since the open, they’ve been fairly mixed with some regions up, some down, and some flat.

So far this morning, the news cycle is rather gloomy but it really doesn’t seem to matter. The markets are far from reacting to the fundamentals anyway. The weaker than expected jobs numbers on Friday should probably have been taken by the markets as a positive sign. Yet, here we are.

The weaker stance taken by the Fed coupled with the recent agreement between Xi and Trump should be supporting the markets at the moment but I rest my case.

Focus has now shifted to central bank policy again. This Thursday we’ll get the interest rate decisions from the European Central Bank and the Swiss National Bank. Next week we’ll hear from the US Federal Reserve.

OPEC Strikes a Deal

Seems that OPEC was able to strike a deal on Friday to cut global production.

The market reaction shortly after the deal was announced (purple circle) was a swift rally in crude oil prices, but half the move reversed by the time the markets closed and so far this week prices are remarkably stable.

Also, keep an eye on gold today. The shiny yellow metal has been gaining on the back of a weaker Greenback.

Dash to Fast Food Adoption

Just as we noticed above, there is a great diversion between what’s happening in the news and what’s happening in the prices. An excellent example of that is Dash currency, which has had some excellent updates lately yet has fallen about twice as much as any other crypto in the last 24 hours.

Dash has been making excellent progress on the ground lately, especially where crypto is needed most. This latest headline shows they are set to vastly increase their market share of overall money in Venezuela.

KFC isn’t the first major fast food chain to go Dash either. Both Papa John’s and Subway are already successfully using Dash for fast fast-food payments.

In general, Dash has been adding merchants left and right. The directory site keeping track has already counted more than 4,400 locations, especially in Venezuela.

Furthermore, the Dash Core Foundation has recently reported that they’re weathering the storm quite well and that the network’s coffers are more than sufficient to sustain operations and even expand further.
Addressing directly the bear market and the climate squeeze that we mentioned in our daily update last Wednesday (titled: Digital Natural Selection), the CEO of Dash Core Group has written this blog post explaining that the finances of DCG are in excellent shape.
Given this type of fundamental dissonance at play, it can make it difficult for the average investor to choose the projects that have a bright future and distinguish them from those that are in for a sharper downturn.
Let’s hope for some swift clarity and return to harmony.

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 138 rated postsSenior Market Analyst at Etoro.com.




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Analysis

5 Things To Watch Next Week + ChartBook

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Crucial Brexit Vote On Tuesday

GBP/USD, 4-Hour Chart Analysis

The all-important vote in the British Parliament got even more likely to fail this week, since Theresa May lost several battles already, and the math just doesn’t work for the Prime Minister, for now. Risk assets sold off sharply towards the end of the week, in part of the Brexit related fears and the Great British Pound is hovering near key technical levels ahead of the decision.

While the GBP avoided a major breakdown against the US Dollar so far, holding on near the 1.27 level, the currency remains relatively weak, and should the uncertain situation persist, the pair will likely move below the 1.25 level soon. The broader downtrend is clearly intact in the GBP/USD, and technicals support a bearish move too, following the more than three-month-long consolidation.

Stock Markets Breaking Down?

Dow 30 Futures, 4-Hour Chart Analysis

We had another crazy week on Wall to a lesser extent the global stock markets, as the swift changes in the US-Chinese relations caused wild swings in equities across the globe. While the real reasons behind the broad bearish shift in risk assets are the quantitative tightening by the key central banks and the global economic slowdown, trade headlines continue to dominate trading, together with the large moves in yields.

Even as yields fell sharply last week, that wasn’t enough to stabilize equities, and several key benchmarks hit new bear market or deep correction lows. The major US indices are trading very close to their October lows, and on a negative note the Russell 2000, the main small cap index already closed on its lowest level since February. While seasonality still favors a bounce in stocks, we still view all rallies as selling opportunities, and we expect the bearish shift to be persistent in risk assets.

Gold Finally Turning Bullish?

Gold Futures, 4-Hour Chart Analysis

We have been favoring gold as a key long-term investment for a long time now, and we continue to think that it should be a key component of a long-term portfolio, and last week, finally technicals seemed to be shifting in the precious metal’s market as well. Should gold hold above the $1250 level, a short-term trend change would be confirmed and that could open up the way to the yearly highs just above $1350.

The bearish shift in risk assets, the collapsing yields, and the Dollar’s sideways drift all helped gold in the recent period, but it’s important to note, that compared to the other major currencies, the metal already acted in a bullish fashion ever since August, and we expect that trend to continue in the coming months.

Dead Cat Bounce in Crude Oil?


WTI Crude Oil, 4-Hour Chart Analysis

The OPEC countries and Russia agreed on a larger than expected 1.2 million barrel/day production cut this week, and following a tectonic shift in the market of crude oil in the past two months, we only saw a weak intraday bounce in the crucial commodity.

The WTI contract is still only slightly above the $50 per barrel price level, and with the US turning into a net exporter for the first time in 75 years last week, thanks to the record production levels, fundamentals remain weak, even as the commodity is still severely oversold. The slowing global growth and the re-escalation in the US-Chinese relations also weigh heavily on the price of oil, and given the broad bearish technical shift the long-term trend will likely remain negative.

Inflation Worries Likely Taking a Back Seat

As for economic releases, the British and the US indicators will likely steal the show next week. The British GDP and Manufacturing Production will be coming out on Monday, while the British Employment Report is scheduled for Tuesday, together with the German ZEW Sentiment and the US Producer Price Index (PPI).

Wednesday will be highlighted by the US Consumer Price Index (CPI) and given the current consensus of no rate hikes in 2019, barring a huge surprise, the measure will likely have a smaller-than-usual impact on markets. The ECB’ s monetary meeting will be held on Thursday, and following the recent turmoil in financial markets, together with the clear economic slowdown, it’s hard to imagine a hawkish shift in the central bank’s stance.

The week will end with the US Retail Sales Report and the European flash PMIs, and it will be interesting to see how Europe faired in November following three months of disappointing releases.

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

EUR/USD, 4-Hour Chart Analysis

USD/JPY, 4-Hour Chart Analysis

EUR/GBP, 4-Hour Chart Analysis

AUD/USD, 4-Hour Chart Analysis

Commodities

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 411 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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