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Shhhh, Don’t Wake the Sleeping Markets

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All the stock markets really want to do is focus on the upcoming earnings season. Unfortunately, it seems that politics are once again getting in the way of profits.

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Several analysts see the latest update from Washington as a game changer that will very likely impact the time frame for healthcare reform, which in turn would delay the much awaited tax cuts and infrastructure spending.

However, while this drama is certainly weighing on the stock markets there hasn’t been any crash. There hasn’t even been a major correction in more than a year and a half.

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It seems like the catalyst still hasn’t come yet. As long is there is no major shock to the financial markets, no surprising piece of news that completely changes the way people think about the health of the economy, stocks might just keep going up forever.

@MatiGreenspan
eToro, Senior Market Analyst

 

Please note: All data, figures, and graphs are valid as of July 12th. All trading carries risk. Only risk capital you can afford to lose.

Market Overview

If the negative pressure is indeed coming from questions surrounding the Trump family and the White House, then why are the US markets flat while the rest of the world is down about 0.5% over the past 24 hours?

The US Dollar is definitely taking a beating. Here’s a graphical representation from finvizthat show the relative performance since the beginning of the year.

The strongest performing currency is the Euro. No surprises there. Election outcomes from France, the Netherlands, and even the United Kingdom have helped propel the Single Currency forward.

So, it’s time to zoom out on the chart and see what the long-term outlook could be.

The Red line shows the recent low of 1.0339. Uncertainty was mounting around the Italian Referendum last December.

The spotted yellow line is the declining trend that’s been in place since the ECB announced they would be ramping up their QE program in September 2014.

The yellow line was broken strongly on Macron’s sweeping victory in France.

The Blue Line represents the psychological resistance of 1.1800.

Everything within red and blue represents the current range that has been holding steady since early 2015.

The rise since the beginning of the year has been pretty steady. The most likely outcome on a technical level is for the strong range to hold. However, a break of that blue line could easily send us back to pre-2015 values of around 1.35.

Canada on Board

Today, Bank of Canada Governor Stephen Poloz is expected to do something he’s never done before and raise interest rates.

It’s a dangerous move for sure. Canadian citizens have been borrowing money a lot since the interest rates are so low. Raising them now would very likely put pressure on homeowners.

However, we mustn’t keep rates on the floor forever. All the central banks of the world seem to be making a significant effort to tighten up the loose money system that’s been in place since 2009 and Canada has always been a team player.

It will be important to hear Poloz’s remarks today to see if this is a wholehearted move and whether or not to expect more of the same going forward.

Testify Ms. Yellen

The Fed Boss will most likely do everything in her power not to call too much attention to herself. This will not be an easy task. Congress has a lot of questions for the institution that holds awesome powers over all money on this planet.

Sometimes, true power is best demonstrated by restraint, which is exactly what Janet will try to prove in her carefully worded comments.

As we’ve been talking about in the daily updates, the Fed has amassed a gargantuan balance sheet that now stands at $4.5 Trillion. Lately, they’ve been mulling the thought of selling some of those assets.

For the Fed, creating money to buy assets is quite an easy task. Selling those assets is likely to be a lot more tricky.

The VIX volatility index has been seeing record lows over the past few months. Spikes on the chart indicate the market may be about to roar back into action but it would likely take a strong external force to wake groggy investors during this particularly hot summer. Yellen would prefer to let them slumber.

As always, feel free to reach me directly with any questions, comments, or feedback. My handle is @MatiGreenspan

Have a superb day ahead!

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

Past performance is not an indication of future results. All trading carries risk. Only risk capital you’re prepared to lose.

Important: Never invest money you can't afford to lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here.



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Analysis

Cryptocurrency Analysis: Ripple Continues Rampage as Litecoin and Ethereum Enter Correction

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Ripple remained in the center of attention in the segment after breaking out to a new all-time high yesterday, and the coin almost doubled in value, climbing above the $0.80 level. The currency concluded a 6-month long consolidation pattern with the move after being the only major on a long-term buy signal in our trend model.

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XRP gave a short-term sell signal today, while turning neutral regarding the long-term setup. Investors now shouldn’t add to their positions, although further gains are still possible, and reducing holdings somewhat is a good idea here. Major support is still found at the prior high near $0.4250 and in the $0.30-$0.32 range.

XRP/USDT, 4-Hour Chart Analysis

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While Bitcoin stagnated, and Bitcoin Cash jumped, Ethereum, Litecoin, Dash, and IOTA has been drifting slightly lower, although the recent gains are still mostly intact, and the basic setup in the segment is unchanged.

Litecoin fell below the $300 level after yesterday’s consolidation, and the coin faced strong selling pressure in the latter half of the session. The currency remains extremely stretched regarding the long-term momentum indicators, and although the short-term uptrend is still intact, a deeper correction is likely in the coming weeks, with key support levels found at $125 and $100, and weaker levels at $260 and $170.

LTC/USD, 4-Hour Chart Analysis

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Altcoins

Trade Recommendation: XMR/BTC Pair Throwback

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The XMR/BTC market (Monero) has been in downtrend on the hourly chart after posting a high of 0.0225 on December 6 and failing to hold critical support at 0.02. It went to as low as 0.0145 on December 8 before respecting RSI at 32 where it established support. The market used the new support level to rally and generate one higher low after the other. It recently attempted to reclaim support at 0.02 but was repelled by bears. Currently, the market is trading around 0.019 levels where it appears to have created another higher low.

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Technical analysis shows a large reversal pattern in the hourly chart that can take the XMR/BTC pair to 0.025. Even though the market failed to breach resistance at 0.02, investors should not see it as a failed breakout. What we’re seeing is a throwback which is a temporary retreat in price. Throwbacks are common in breakout plays and are often seen as a bullish signal. The next time the market attempts to breach 0.02 resistance, it has a much better chance of breaking it with conviction.

The strategy is to buy breakout at 0.02 with immediate stop at 0.0189.

Hourly XMR/BTC Chart on Poloniex

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As of this writing, XMR/BTC is trading at 0.018714 on Poloniex.

Summary of Strategy

Buy: breakout at 0.02

Target: 0.025

Stop: move below 0.0189 after buying breakout at 0.02.

Disclaimer: The writer 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 money you can't afford to lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here.



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Altcoins

Trade Recommendation: FCT/BTC Bullish Reversal

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The market reach its all-time high back in June this year when FTC/BTC (Factom) reached 0.01463162. Unfortunately, the pair wasn’t able to sustain its momentum. It created a lower high several days later at 0.01066744 which signalled investors to take profits or cut their losses. As a result, the market tumbled and lost 93.17% in value from its all-time high. Such a tremendous loss would have created an atmosphere of despair in the market. Usually, that’s when the savviest traders come in.

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Technical analysis reveals that the worst is behind the pair. FCT/BTC touched support at 0.001 on the daily chart twice and respected it on both occasions. This is a good indication that the market has found a reliable support level. In addition, hourly chart shows that a large reversal pattern is underway. The pair may have retreated when it nearly touched 0.002, but it generated a new higher low in the process at 0.00156566. The throwback is a bullish signal that enables the pair to gather momentum to break resistance at 0.002.

The strategy is buy on breakout at 0.002. Breach that level and the market reclaims 0.003. Sell that level because it is a strong resistance.

Hourly FCT/BTC Chart on Poloniex

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As of this writing, FCT/BTC is trading at 0.001738 on Poloniex.

Summary of Strategy

Buy: breakout at 0.002

Target: 0.003

Stop: move below 0.0018 after buying breakout at 0.002.  

 

Disclaimer: The writer 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 money you can't afford to lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here.



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