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Stocks and Cryptocurrencies Under Pressure as Bond Yields Push Higher

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Stocks and Cryptocurrencies Under Pressure as Bond Yields Push Higher

Introduction

This article was posted on Saturday, 16:12, UTC.

Weekly Recap

Asset Current Value Weekly Change
S&P 500 2423 0.03%
DAX 12415 0.05%
WTI Crude Oil 44.28 -4.10%
GOLD 1212.00 -2.48%
Bitcoin 2520 4.23%
EUR/USD 1.1400 -0.08%

Stock Weakness Continues as Yields Rise Across the Board

European stocks and the NASDAQ led the markets lower for the second week in a row, as the European Central Bank’s alleged shift towards monetary tightening continued to influence global trends. Yields were rallying hard throughout the developed world, and with the returning strength of the Europe, it delivered a double blow to European equities. Friday’s session was a much-welcomed relief for bulls, as the good, but not too good US employment report kept up hopes of further moderate economic growth alongside a cautious Federal Reserve.

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EUR/USD, 4-hour Chart Analysis

That said, the DAX, the Euro Stoxx 50 and the NASDAQ are all looking wounded short-term, although the S&P 500 is holding up well thanks to the financial sector which is being helped by rising yields. The deadline of the Qatar ultimatum could have been a defining event of the week, but with the help of the US and other Western powers, the Saudi-led alliance backed off a little and let the country pass with its less than satisfying response to the 13 demands. While the diplomatic blockade is set to continue against the Gulf-state, further escalation is averted, for now.

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Oil on Rollercoaster Ride while Gold Slammed

Crude oil staged a relief rally thanks to the peaceful “resolution”, and it was also helped by last week’s somewhat encouraging US supply report, but the hopes regarding the latter was crashed this Friday, as output surged once again, as the shale industry is still showing resilience to low prices and rising yields. The de-escalation hurt gold, and the Yen as well, despite the Dollar weakness, as the ECB’s hawkish rhetoric convinced investors that, in fact, we are in a global monetary tightening cycle.

WTI Crude Oil 4-Hour Chart Analysis

And as it is the new norm now in the algo-led financial markets, traders saw yet another flash-crash on Friday (what is it with Friday’s anyway??), this time in silver. The precious metal was crushed in a matter of seconds, and although it recovered initially, the market remained nervous and shaky throughout the session. Both gold and silver finished the week near their lows, and although the long-term prospects are still looking good, the regular “fat finger” declines will likely keep short-term traders away for a while.

Silver, 10-Min Chart Analysis

Cryptocurrencies Decline after Quiet Week

Small-cap cryptos are taking a beating since Friday morning, with double-digit losses across the board. The continued influx of ICOs draws capital away from the already public coins for sure, while the continued correction in Bitcoin and Ethereum also weighs on the segment. The majors are still well above the correction lows, despite the deterioration this weekend, while the two most active currencies of the week, Litecoin and Dash are correcting as well. The main reason for the move lower is still the previous stellar rally, and the euphoric sentiment that needs to be reset to have a good base for the next rising cycle.

Ethereum, 4-Hour Chart Analysis

Economic Numbers

The slight uptick in US economic numbers was enough to fuel the rally in yields, as more weakness would definitely be needed in order to change the mind of the Fed regarding the rate hikes this year. The ISM Manufacturing and Services PMIs plus the Non-Farm Payrolls number all beat the consensus estimates, although Factory Orders disappointed. Europe, and especially the UK, didn’t impress, while the Canadian economy continues to be the bright spot, with employment, housing, and manufacturing all providing bullish numbers.

Technical Corner

S&P 500, 4-hour Chart Analysis

The most important US index has been showing relative strength compared to the NASDAQ this week and it remains well inside its rising long-term trend. The benchmark is hovering around the 2420 value area since the end of May, and it hasn’t left a 2% range for almost two months. The picture would only change with a break below 2400, and the next week could be crucial for the market, as the bearish tilt of the NASDAQ takes on the strength of the S&P and the financial sector.

Key Economic Releases of the Week

Day Country Release Actual Expected Previous
Monday JAPAN Tankan Manufactring Index 17 15 12
Monday JAPAN Tankan Services Index 23 24 20
Monday CHINA Caixin Manufacturing PMI 50.4 49.9 49.6
Monday SPAIN Manufacturing PMI 54.7 55.6 55.4
Monday UK Manufacturing PMI 54.3 56.4 56.7
Monday US ISM Manufacturing PMI 57.8 55 54.9
Monday US Vehicle Sales 16.7 mill
Tuesday AUSTRALIA Retail Sales 0.6% 0.3% 1.0%
Tuesday AUSTRALIA RBA Rate Decision 1.50% 1.50% 1.50%
Tuesday AUSTRALIA Monetary Statement
Tuesday UK Construction PMI 54.8 55.2 56.0
Wednesday UK Services PMI 53.4 53.5 53.8
Wednesday US Factory Orders -0.8% -0.4% -0.2%
Wednesday US FOMC Meeting Minutes
Thursday AUSTRALIA Trade Balance 2.47 bill 1.11 bill 0.56 bill
Thursday SWITZERLAND CPI Index -0.1% 0.0% 0.25
Thursday EUROZONE Monetary Meeting Accounts
Thursday US ADP Employment Change 158,000 181,000 253,000
Thursday CANADA Trade Balance -1.1 bill -0.5 bill -0.4 bill
Thursday US Initial Jobless Claims 248,000 245,000 244,000
Thursday US ISM Non-Manufacturing PMI 57.4 56.6 56.9
Friday UK Current Account -16.9 bill -16.5 bill -12.1 bill
Friday UK Halifax HPI -1.0% 0.2% 0.4%
Friday UK Manufacturing Production -0.2% 0.4% 0.2%
Friday CANADA Employment Change 45,300 11,400 54,500
Friday CANADA Unemployment Rate 6.5% 6.6% 6.6%
Friday US Non-Farm Payrolls 222,000 175,000 138,000
Friday US Unemployment Rate 4.4% 4.3% 4.3%
Friday US Hourly Earnings 0.2% 0.3% 0.2%
Friday CANADA Ivey PMI 61.6 57.7 53.8
Friday US FED Monetary Policy Report

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Feedback or Requests?

Mate Cser

Mate Cser

Trader 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.

Comments
  • user

    AUTHOR Nachshol

    Posted on 6:37 am July 9, 2017.

    Great article! Can you make a table of upcoming events regarding crypto currency? Ive noticed the most notorious rallies of coins start due/after a conference or convention. Like the crazy rally of ANS to 10$ last month for example…

    • user

      AUTHOR Mate Cser

      Posted on 2:27 pm July 9, 2017.

      Great idea, will get back to you on that. Thanks for the feedback.

  • user

    AUTHOR embersburnbrightly

    Posted on 8:32 am July 9, 2017.

    “Traders saw yet another flash-crash on Friday (what is it with Friday’s anyway??)” I am seriously considering just putting my coins into fiat each Friday and then putting them back in on the following Monday. Seems to have become a regular thing, “Fat Finger Friday,” [I will go ahead and “coin” that term right now, thank you]; then a further decline over the weekend around jitters plus lower volume; then “Manic Monday” as volume returns and traders rush to snatch up coins at their new low prices. I have at times expected market manipulation, but maybe in jittery markets, traders just go ahead and cash out on Fridays so they can then use that money to party on the weekends and/or not have to worry about coming back on Monday to find that their assets have dropped in value unexpectedly. Either way, Fridays do seem to be treacherous currently, for sure.

  • user

    AUTHOR embersburnbrightly

    Posted on 8:34 am July 9, 2017.

    *”suspected,” not “expected,” above. My voice to text program shall receive a light flogging for the error.

  • View Comments (4) ...
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