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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.

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.

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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4.6 stars on average, based on 348 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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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: Market Remains Weak Despite Ripple’s Surge

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Ripple made headlines today in the cryptocurrency segment, as the third largest coin jumped by more than 15% after trading in a narrow range for several days. Most of the major coins joined the rally, but the gains were muted and the technical setup remained unchanged in most cases, with the long-term outlook still being bearish, while the short-term picture remaining mixed.

Ethereum, which has been in the center of the trends in the segment for weeks rallied back above $200, but stayed below the recent swing high, leaving several questions unanswered concerning the short-term trend. Bitcoin also got stuck near the $6275 level yet again, and the total value of the market is still below the $200 billion mark, with still no clear signs of major capital inflows in the segment.

ETH/USD, 4-Hour Chart Analysis

Ethereum quickly recovered above $200 after dipping below the weekend lows yesterday in late trading, retaining the short-term buy signal in our trend model. That said the coin still needs to show stronger bullish momentum to avoid a resumption of the clearly declining long-term trend. As sustained dip below $200 would still warn of a move to last week’s lows, while a move above $235 would open up the way towards $260 and the confluence resistance near $275.

BTC/USD, 4-Hour Chart Analysis

Bitcoin has been showing weakness in the last couple of days, and although the coin is still on a short-term buy signal, similarly to Ethereum, a quick recovery above $6500 would be needed to avoid a bearish turn.

Traders should hold on to their positions here, but given the still bearish segment-wide trends, we still don’t advise full positions even in the stronger coins. Below $6275, weaker support is found at $6000, close to the key long-term zone near $5850, while resistance is ahead at $6500, $6750, and $7000.

Ripple Needs Follow Through For a Buy Signal

XRP/USDT, 4-Hour Chart Analysis

While today’s spike in Ripple is encouraging, the coin needs to show further signs of strength, as the recent sudden spikes in the majors were quickly sold as the bearish trend remained dominant in the segment.

With that in mind, despite the broken resistance levels, XRP remains on a neutral short-term signal in our trend model, while still being bearish from a long-term perspective. The coin is currently trading right at the $0.32 level, with support found at $0.3130, $0.30 and near $0.30, while strong resistance is ahead at $0.35.

DASH/USD, 4-Hour Chart Analysis

Dash is among the stronger coins from a short-term technical standpoint, trading in a bullish consolidation pattern just below the key $200 level. That said, the coin failed to show strength today amid Ripple’s rally, and that still points to a dominant bearish trend in the segment. With that in mind, traders should wait for further positive signs before entering new positions, especially since a bullish leadership still hasn’t developed.

IOT/USD, 4-Hour Chart Analysis

IOTA is still weaker than average, together with NEO, EOS, and ETC, and the coin is still just above the August lows, clearly being in a broad downtrend, despite holding up above the lower boundary of its short-term range. A test of the lows is likely in the coming weeks, and the coin remains on sell signals on both time-frames, with support found between $0.455 and $0.475, and near $0.405, and with key resistance ahead near $0.57 and $0.64.

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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4.6 stars on average, based on 348 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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Analysis

NIO Means Tesla Monopoly Ends

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By Dmitriy Gurkovskiy, Chief Analyst at RoboMarkets

On Sep 12, NIO made its IPO on the NYSE, which is a very important event for all automotive investors. Founded in 2014 by William Lee, NIO is one of the first companies to compete with Tesla in the premium electric car segment. NIO is based in Shanghai, China, and it already got investment support from such renowned companies as Baidu, Lenovo, Temasek, Tencent, Sequoia, and others.

There are currently over 4,000 employees at NIO.

In June 2018, the company started selling NIO ES8; currently, 481 electric cars have been sold and 17,000 more have been pre-ordered. This is Tesla Model X’s direct competition, while its price is twice as low thanks to some good support from the Chinese government, which is interested in promoting electric cars.

NIO ES8 starts from $67,000 (basic configuration). It has two engines of 635 horsepowers and can ride 355 km before charging. A good difference from Tesla is an option to use replaceable batteries; the monthly subscription is $193, and it takes just around 3 minutes to replace a battery. Tesla planned to offer this option, too, but did not implement it.

The underwriters of NIO at NYSE were BofA Merrill Lynch, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan, Morgan Stanley, and UBS. The initial price per share was $6.26. During the first day, 160M of shares were sold, which allowed NIO to get around $1B and get a place in top US IPO’s rating in 2018.

During the first day, the share price increased to $7, while the next day it jumped above $13, allowing investors to make over 100% profit. This shows investors are very much interested in the company, perhaps because of the good pre-IPO promotion. Before buying NIO shares now, though, one should wait first for the volatility to calm down.

Comparing Tesla and NIO is not the best job now, as Tesla already has over 14-year experience; however, this comparison may well become valid in a year or two, when more data arrive. While NIO is just starting out, its management may make accidental mistakes.

The lockup period (the period during which investors are not allowed to sell their shares) is 180d, which may additionally support the price, while after that the Q2 results will come out. Among NIO’s advantages, one may name government support as one of the biggest. While the trade war between the US and China is here to stay, the demand is high, and company may cater to Chinese customers first. When it starts conquering the US market, though, the conflict may have already come to an end. The company also admits that the customs duties may indirectly influence the car prices.

The issues NIO might face are already known, and the most obvious one is that of meeting the demand. Over the first 6 months of 2018, NIO had a loss of $502M, while the profit earned afterwards is currently just $7M.

Another risk is in the news that Tesla has come to an agreement with Shanghai authorities to build a car factory in the city, which means high competition for NIO. Still, NIO is likely to win thanks to the price, as the parts for Tesla are produced in the US only, and they are subject to customs duties.

NIO management also announced they had had no mass electric car production experience before, and this may have negative influence on the company growth – an issue already overcome by Tesla. Finally, for ES8, there are around 1,700 used coming from 160 vendors; with so many suppliers, delays in shipments may become quite a common thing.

Many things depend on how NIO is going to rise its production volume and how true the declarations of the management are. Previously, we’ve seen how Elon Musk’s words were sometimes very different from what happened in fact.

One of the key topics here is financing, as the development will require a lot of money. Even Tesla has failed to book net profits so far, its losses and debts still growing.

NIO shares are likely to rise in the short term, as investors will be playing on the fact the company is quite promising at first sight. Other conclusions may be only made after there are at least some financial data at hand.

Technically, there are two support levels for NIO: one at $7 and another at $9.

Disclaimer

Any predictions contained herein are based on the authors’ particular opinion. This analysis shall not be treated as trading advice. RoboForex shall not be held liable for the results of the trades arising from relying upon trading recommendations and reviews contained herein.

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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4.4 stars on average, based on 7 rated postsHaving majored in both Social Psychology and Economics, I went on to continue my education in post graduate. Later I worked as a team lead of a tech and fundamental analysis lab in the Applied System Analysis Research Institute. This helped me to acquire all necessary skills and experience to become a successful trader and analyst, as well as a portfolio manager in an investment company. I'm a pro in the financial field and the author of articles for various international media. I also hold the position of Chief Analyst at RoboMarkets.




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Analysis

Pre-Market: Sell The Rumor, Buy The News?

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After a long period of uncertainty, the US finally decided to commence with the second round of tariffs directed at China, slapping a 10% levy on $200 billion worth of goods, and threatening with tariffs on another $267 billion of goods in case of a Chinese retaliation. The tariffs will increase to 25% in 2019, but for now, the Chinese response was measured, with only an announcement coming from the Chinese ministry of commerce, saying that the country has no choice but to retaliate.

Shanghai Composite, 4-Hour Chart Analysis

While stock futures fell initially following the after-hours announcement by Donald Trump, today equities are slightly higher across the board, with even the Shanghai Composite staging a rally off its fresh bear market low. The new tariffs were widely expected by the market, so the “buy-the-news” response is understandable, but for a sustained rally in Chinese assets, a resumption of the trade talks between the two largest economies would likely be needed.

DAX 30 Index, 4-Hour Chart Analysis

The main European indices are little changed with the DAX still hovering around the 12,000 level and the EuroStoxx 50 being stuck ear 3350. Both benchmarks hit three-week highs in early trading, but the rally on the Old Continent is still lacking real momentum, especially given the distance to the bull market highs.

EEM (Emerging Markets ETF), 4-Hour Chart Analysis

Emerging markets are still very weak with the recent bounce being barely visible on the charts, and the segment is still stuck in a strong downtrend, with especially the most vulnerable countries weighing heavily. Emerging market currencies are mixed today, with the Turkish Lira completely erasing its rate hike gains, but with the Brazilian Real, the Chinese Yuan, and the Argentinean Peso being relatively stable after the US trade announcement.

S&P 500 Index Futures, 4-Hour Chart Analysis

Stocks are set to open slightly in the green on Wall Street, with the major indices still being within striking distance of their all-time highs, and with only the Nasdaq pulling back meaningfully recently. The S&P 500 is just a tad below its record high, and with the MACD indicator back in neutral territory, a move to new highs could still be just around the corner.

Dollar Stable as Oil Jumps Amid Syria Escalation

Interestingly forex markets remained stable despite the trade war escalation, with the Dollar drifting slightly lower compared to its major peers, and losing a bit more ground against the main China-related currencies. Commodities are also higher today, with especially the China-linked copper and crude oil being in the green and gold trading virtually unchanged.

WTI Crude Oil Futures, 4-Hour Chart Analysis

While the scope of the Syrian conflict shrank in recent months, the tensions around the last rebel stronghold Idlib are rising. Russia and Turkey (which back opposing forces) surprisingly announced the formation of a demilitarized zone around the city to avoid a siege and a likely bloodbath, but overnight, a Russian recon plane was downed, which could lead to a reescalation in the country.

Russia is blaming Israeli forces for the casualty, and an open conflict between the two countries would be increase risks in the region, and possibly drive oil prices higher. The Brent Oil contract has been already outperforming the WTI one thanks to the sanctions against Iran, and today Saudi officials stated that the Kingdom is comfortable with the $80 per barrel Brent price, further widening the divergence between the two contracts.

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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4.6 stars on average, based on 348 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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