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Analysis

Stocks Bounce Higher As Markets Await Crucial Vote

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Wednesday Market Recap

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 Asset Current Value Daily Change
S&P 500 2,355 0.53%
DAX 12,017 0.63%
WTI Crude Oil 47.77 -0.56%
GOLD 1,249 -0.05%
Bitcoin 1,045 -4.71%
EUR/USD 1.0787 -0.08%

 

The major stock markets continued to trade nervously following the biggest drop in the S&P 500 in the last six months on Tuesday. Stocks ended slightly higher after a negative start, but they remain well below the levels seen in the beginning of the week. Safe-haven assets were bought all day long, with Gold, the Japanese Yen, and the Swiss Franc all pushing higher. Traders haven’t been used to these kinds of moves lately, but the long-term trends are still positive concerning the major markets.

Political tensions regarding Donald Trump’s health-care reform were in the spotlight, although technical factors dominated trading after the surprisingly large decline of the previous day. The tragic London terror attack only caused a minor dip in the afternoon, as the major indices continued to drift higher. This morning’s price action was choppy, as most traders took a step back before the key US health-care vote.

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Oil continues to be the weakest major asset, following the key technical breakdown last week. Crude oil inventories jumped unexpectedly by 5.0 million barrels last week, but oil ended the day on a positive note despite the bad news. The US Dollar continues to suffer; ever since last week’s interest rate hike on the Federal Reserve’s meeting. Cryptocurrencies are volatile once again, led by Bitcoin that remains in a short-term correction after breaching 1200 for the second time last week.

Technical Picture

S&P 500 Index, Hourly Chart

The S&P 500 broke a major trend line on the hourly chart on Tuesday, so traders should be cautious with long positions until the current falling trend is intact. The main technical indicators show some oversold signs today, and that could lead to a correction in most assets on the last two sessions of the week. That said, the dominant short-term trends remain clear — negative on Oil, Stocks, US Dollar, while positive Gold, Yen, Euro, Swiss Franc. Day- and swing-traders could take profits on their existing positions and wait for the correction to put their chips back on the table.

Key Economic Releases on Wednesday

Time, CET Country Release Actual Expected Previous
10:30 US Existing Home Sales 5.48 million 5.59 million 5.69 million
14:30 US Crude Oil Inventories 5.0 million 1.9 million -0.2 million

 

Key Economic Releases on Thursday

Time, CET Country Release Actual Expected Previous
10:30 UK Retail Sales (monthly) 1.40% 0.40% -0.30%
14:30 US Initial Jobless Claims (weekly) 258,000 240,000 241,000
14:45 US Fed Chair Janet Yellen Speaks
15:00 US New Home Sales 592,000 566,000 555,000

  

The Federal Reserve was in the focus once again today, but Fed Chair failed to shed more light on the future of the central bank’s interest rate, especially the timing of the next hike in her speech. As of now, the market expects a move by the FED in June or September. Any major change in the tone of the bank is likely to affect the Dollar and all asset classes.

The British retail sales report helped a bullish move in the Pound and on the European exchanges, while the weekly initial jobless claims number and new home didn’t shake the markets.

Key Economic Releases on Friday

Time, CET Country Release Expected Previous
9:30 EUROZONE Manufacturing PMI 55.3 55.4
9:30 EUROZONE Services PMI 55.4 55.5
13:30 CANADA CPI (monthly) 0.20% 0.90%
13:30 US Core Durable Orders (monthly) 0.50% 0%

 

Featured image from Shutterstock.

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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

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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

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.

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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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