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Stocks Fall as Arrest of Huawei Executive Stokes Fresh U.S.-China Confrontation

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U.S. stocks fell anew Thursday after it came to light that a senior Chinese business executive was apprehended in Canada over possible U.S. sanctions violation, intensifying the trade impasse between Washington and Beijing. The United States last week became a net oil exporter for the first time in 75 years, highlighting the significance of the decade-long shale boom.

Stocks Pare Losses

After languishing heavily for much of the day, U.S. stocks managed to pare most of their losses in the final hour of trading. The Dow Jones Industrial Average fell 78.05 points, or 0.3%, to 24,947.67. The blue-chip index was down more than 500 points earlier in the day. By the close, it had extended its two-day slide to nearly 900 points.

The much broader S&P 500 Index also pared its losses, falling 0.2% to close at 2,695.95. Seven of 11 primary sectors finished in the red, with energy, materials and financials leading the market lower.

Meanwhile, the technology-heavy Nasdaq Composite index reversed course to finish slightly higher, adding 0.4% to 7,188.26.

The CBOE VIX, also known as the fear index, rose to its highest level in over a month, offering a bleak picture of the holiday-shortened season. VIX touched a session high of 25.94 on a scale of 1-100 where 20 represents the historic average. It would eventually settle 2% higher at 21.15.

Huawei Arrest Raises Risk of U.S.-China Standoff

A senior executive of Chinese telecommunications giant Huawei has been arrested in Canada and faces extradition to the United States on suspicion of sanctions violation. The arrest comes less than a week after the U.S. and China agreed to suspend their trade war for 90 days in pursuit of a more comprehensive deal.

Meng Wanzhou, Huawei’s chief financial officer, was apprehended on Dec.1 following a lengthy investigation by the U.S. Justice Department. Although the company has been given very little information on the detention, Huawei has been under federal probe for its business dealings with Iran. This puts it in direct violation of U.S. sanctions against the Islamic Republic.

“The company has been provided very little information regarding the charges and is not aware of any wrongdoing by Ms. Meng,” a Huawei spokesperson said, according to CNN. “The company believes the Canadian and US legal systems will ultimately reach a just conclusion. Huawei complies with all applicable laws and regulations where it operates, including applicable export control and sanction laws and regulations of the UN, US and EU.”

China’s Foreign Ministry has called on Meng to be released and has asked the U.S. and Canada to explain why she was arrested.

U.S. Becomes a Net Oil Exporter

For the first time in 75 years, the United States has become a net exporter of oil, signaling the start of a profound shift in the global energy balance. According to Bloomberg, the shift from net importer to net exporter occurred last week and followed years of unprecedented growth in domestic shale production. U.S. crude shipments rose to 3.2 million barrels last week, the highest on record.

The news came just as the Organization of the Petroleum Exporting Countries (OPEC) was planning to announce a new round of production cuts. The 15-member cartel will likely lower output by at least 1 million barrels per day beginning in January, though the exact amount is still pending confirmation from Russia, OPEC’s major ally.

As we’ve seen before, tapering crude output provides only temporary reprieve against America’s oil resurgence, where low-cost shale producers have managed to maintain profitability in the face of falling prices. A supply cut that brings U.S. oil prices back above $60 a barrel will invite shale producers to ramp up production in the short run. This plays into the hands of President Trump’s stated goal of attaining “energy independence.”

Featured image courtesy of 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 703 rated postsSam Bourgi is Chief Editor to Hacked.com, where he leads content development for one of the world's foremost cryptocurrency resources. Over the past eight years Sam has authored more than 10,000 articles and over 40 whitepapers in the fields of labor market economics, emerging technologies, cryptocurrency and traditional finance. Sam's work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Contact: sam@hacked.com Twitter: @hsbourgi




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Market Overview

The Ghost of Crypto Anarchy

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Hi Everyone,

Today we bid farewell to the Godfather of the Cypherpunk movement, which gave birth to bitcoin.

If you’ve never heard of Tim May (may he rest in peace), I refer you to his words of 1992. This short passage was so ahead of its time that it may as well have been written last Tuesday.

Quick read: The Crypto Anarchist Manifesto

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

  • Sell Off Continued
  • Breakouts Forming
  • Bounce off the Floor

Please note: All data, figures & graphs are valid as of December 18th. All trading carries risk. Only risk capital you can afford to lose.

Traditional Markets

The global sell-off in the stock markets continues. For a brief moment after the bell rang at the New York Stock Exchange, it did seem like there would be some sort of bounce, but by the end of the session, the major indices were back at the lows.

The S&P500 index fell within a single point of its lowest rate this year (yellow line).

The negative sentiment has carried through into Asia, but it seems the Europeans are a bit more optimistic today, especially in Germany where the DAX is in green.

The feeling is that we could be getting some much-needed relief from the US Federal Reserve as they head into their two-day meeting today. So things might calm down as we approach the announcement tomorrow evening.

Breakout Time

Looking at some of the other assets out there, volatility has increased over the past few sessions. Here we can see the VIX Volatility Index making a move to the upside over the last few days along with the selloff in the stocks.

With that, it pays to take a look at the US Dollar, which continues to push the highs with some upward facing consolidation. This will be critical going into the Fed meeting, where they are largely expected to raise rates.

However, since the rate hike is expected to be dovish, we could just as easily see a downward breakout. Watch this space.

Gold is also looking for a breakout of the psychological barrier at $1,250 an ounce.

Ever avantgarde, crude oil has already broken below $50 yesterday, a staunch indication that the oversupply issues aren’t quite behind us.

Just for good measure we’ll add in the USDJPY as well here. Especially if the dovish rate hike does indeed do the Dollar in, and Asian traders look for safety in the Yen, we could see 112.22 give way.

Crypto Bounce Acquired

Yesterday, on the 10th anniversary of Bitcoin’s all-time high, we did manage to see a strong push off the floor. Though it’s not clear what exactly caused the bounce, it does appear to be a short squeeze that took out a few of the high-risk traders. I did put up a few charts on Twitter as it was happening.

Ever since the break below $5,000 we’ve been talking about light support at $3,500 and heavy support at $3,000, so this bounce off the $3,000 level couldn’t be more picture perfect.

The biggest winner emerging from this move was EOS, which rose a total of 29% within a few short hours. Yet still nowhere near its all-time high of $23.33.

Though it is possible that we do continue downward from here, this type of movement is very encouraging for technical analysts and may just end up creating a bottom for this battered market possibly even giving way to a bullish trend in 2019. Who knows… maybe we’ll get a Santa Claus Rally after all.

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

Past performance is not an indication of future results. All trading involves risk; only risk capital you are prepared to lose.

The outlook presented is a personal opinion of the analyst and does not represent an official position of eToro.

eToro is a multi-asset platform which offers both investing in stocks and cryptocurrencies, as well as trading CFD assets.

Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 65% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

Cryptocurrencies can widely fluctuate in prices and are not appropriate for all investors. Trading cryptocurrencies is not supervised by any EU regulatory framework.

Best regards,
Mati Greenspan
Senior Market Analyst

Connect with me on….

eToro: @MatiGreenspan Twitter: @MatiGreenspan LinkedInMatiGreenspan |Facebook:MatiGreens

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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4.7 stars on average, based on 139 rated postsSenior Market Analyst at Etoro.com.




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Analysis

Forex Update: Trump Pressures Fed Ahead of Rate Decision

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Forex Market Snapshot

Asset Current Value Daily Change
EUR/USD 1.1355 0.46%
GBP/USD 1.2629 0.36%
USD/JPY 112.72 -0.57%
AUD/USD 0.7177 0.03%
GOLD 1,250 0.64%
WTI Crude Oil 49.99 -2.38%
BTC/USD 3,543 10.91%

The US Dollar has been at the center of attention again, as the last full trading week of the year started off in a bearish fashion for risk assets. Although we saw a bounce following Theresa May’s statement on the Brexit process regarding a possible vote on the draft plan in January, risk-on currencies and other risk-on assets are clearly under pressure, with the US stock markets challenging their correction lows again, completing the bearish global shift.

The Dollar’s slight dip, which was triggered by another attack by Donald Trump on the Fed’s tightening schedule provided the most action in the otherwise quiet forex segment, with a lot of traders taking a step back before the Fed’s rate decision on Wednesday. The consensus estimate is still a rate hike on the central bank’s meeting, which would be the fourth tightening step this year, but now, the bond market signals no rate hikes next year and in the current cycle.

Technical Analysis

EUR/USD, 4-Hour Chart Analysis

The EUR/USD pair bounced higher in its broader trading range after last week’s bearish close, but it remains well below the key 1.1440 level, and the bearish long-term technical setup is unchanged, eve as the pair held up above the support zone between 1.1275-1.13.

The breakdown from the consolidation pattern has been aborted, and we will likely have to wait until Wednesday for the next meaningful move, but with the period of positive seasonality soon ending for the Euro, odds still favor new lows in January, barring a sharp dovish shift by the Federal Reserve.

USD/JPY, 4-Hour Chart Analysis

The Dollar also lost ground compared to the Japanese Yen, and the safe-haven currency was among the strongest majors especially in the second half of the day, as risk assets decisively turned lower. The USD/JPY pair continues to trade in a broad consolidation pattern, but today’s drop off the 113.50 level could be the start of a broader trend change, with all eyes on the October low near 111.50. Gold’s strength confirms the strong safe-haven flows, which could propel the Yen higher against all of the majors, even the Dollar.

AUD/USD, 4-Hour Chart Analysis

The AUD/USD pair continues to be in an interesting technical setup with a likely move towards the October lows being likely underway. Today, the Aussie has been showing relative weakness due to the risk-off flows, and it’s virtually unchanged against the Greenback, despite the broad dip in the reserve currency.

Wednesday’s Fed decision and Thursday’s Australian Employment Report will likely cause volatile moves in the pair before the holidays, but bears are still clearly in control of the market both short- and long-term, especially given the weakness in Chinese assets.

Gold Futures, 4-Hour Chart Analysis

We have been following the key break-out attempt in gold, and today, the precious metal likely formed a crucial swing low that could propel it to a new swing high, which would signal a likely rally towards the resistance zone near the $1300 level. While a failed break-out attempt is still in the cards, given the bullish fundamentals, and the recent relative strength of gold, odds favor a confirmed trend change and the start of a bullish cycle here.

Key Economic Events Tomorrow

ChartBook

Forex

GBP/USD, 4-Hour Chart Analysis

EUR/GBP, 4-Hour Chart Analysis

EUR/JPY, 4-Hour Chart Analysis

AUD/JPY, 4-Hour Chart Analysis

GBP/JPY, 4-Hour Chart Analysis

USD/CHF, 4-Hour Chart Analysis

USD/CNH, 4-Hour Chart Analysis

Commodities

WTI Crude Oil, 4-Hour Chart Analysis

Copper Futures, 4-Hour Chart Analysis

Major Stock Indices

S&P 500 Futures, 4-Hour Chart Analysis

DAX 30 Index CFD, 4-Hour Chart Analysis

Nikkei 225 Futures, 4-Hour Chart Analysis

Shanghai Composite Index CFD, 4-Hour Chart Analysis

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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4.7 stars on average, based on 420 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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Market Overview

U.S. Stocks Resume Selloff Ahead of Fed; Cryptocurrencies Stage Convincing Rally

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U.S. stocks extended their slide on Monday, with the Nasdaq joining its peers in negative territory for the year as investors turned their attention to the Federal Reserve’s upcoming policy meeting. Cryptocurrency prices rebounded $15 billion from their weekend lows, with bitcoin gaining nearly 10%.

Stock Rout Intensifies

All of Wall Street’s major indexes posted big losses at the start of the week. The Dow Jones Industrial Average, which officially entered correction territory on Friday, fell 507.73 points, or 2.1%, to 23,592.78. The blue-chip index last traded below 24,000 in May.

The much broader S&P 500 Index plunged 2.1% to 2,545.94, its lowest of the year. After a record-setting run in the third quarter, the large-cap index is down more than 12% from its peak and has returned -4.6% in all of 2018.

All 11 primary sectors registered losses, led by real estate, utilities and consumer discretionary shares. Ten of 11 sectors registered losses of 1% or more.

The technology-heavy Nasdaq Composite Index declined 2.3% to 6,753.73, where it joined the Dow and S&P 500 in negative territory for the year.

Small-cap stocks also fell hard on Monday, with the Russell 2000 index approaching bear-market territory. The index fell 2.6% to 1,374.80.

Fed Watch

The Federal Reserve will begin its final policy meeting of the year on Tuesday, with an official interest rate announcement scheduled for the following day. Nearly three-quarters of traders expect the Fed to hike interest rates on Wednesday for the fourth time this year, according to the Fed Fund futures prices.

However, for most traders, the focus is on the official rate statement and quarterly summary of interest-rate expectations. Rising borrowing costs, plunging oil prices and softer economic data have raised concerns that the central bank is raising rates too aggressively. U.S. President Donald Trump has been a vocal opponent of the Fed’s tightening schedule and on Monday tweeted that it was “incredible” policymakers were considering hiking rates again.

The quarterly summary of economic projections on Wednesday will showcase policymakers’ outlook on GDP, inflation and unemployment in 2019 and beyond.

Cryptos Stage Convincing Rally

Cryptocurrency prices rebounded sharply on Monday, as bargain hunters re-entered the market following the latest brush with yearly lows.

The combined cryptocurrency market capitalization reached a high of $115.4 billion, having gained $15 billion from the bear-market low on Saturday. As Hacked reported earlier, EOS was by far the best performer, gaining 23% to $2.40. Stellar XLM, Litecoin, bitcoin cash and XRP each recorded double-digit gains.

Bitcoin, the leading digital currency by market cap, surged 9.9% to $3,597. The bitcoin price briefly traded below $3,200 over the weekend, forming a new bottom with the rest of the market.

It’s not yet clear whether the latest recovery effort represents the end of the downtrend or a period of consolidation before the bears reassert their control. If recent history is any indication, the latter trend is to be likely to prevail for now.

Disclaimer: The author 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 (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 703 rated postsSam Bourgi is Chief Editor to Hacked.com, where he leads content development for one of the world's foremost cryptocurrency resources. Over the past eight years Sam has authored more than 10,000 articles and over 40 whitepapers in the fields of labor market economics, emerging technologies, cryptocurrency and traditional finance. Sam's work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Contact: sam@hacked.com Twitter: @hsbourgi




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