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Analysis

Stocks and Cryptocurrencies Under Pressure as Bond Yields Push Higher

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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

Feutred image fromm 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 Comments

4 Comments

  1. Nachshol

    July 9, 2017 at 6:37 am

    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…

    • Mate Cser

      July 9, 2017 at 2:27 pm

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

  2. embersburnbrightly

    July 9, 2017 at 8:32 am

    “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.

  3. embersburnbrightly

    July 9, 2017 at 8:34 am

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

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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.

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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.

(more…)

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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