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Analysis

Stocks in Summer Limbo Amid Crypto-Recovery

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Monday Market Recap

Asset Current Value Daily Change
S&P 500 2458 0.11%
DAX 12592 -0.32
WTI Crude Oil 46.44 -0.19%
GOLD 1224.00 0.50%
Bitcoin 2075 3.15%
EUR/USD 1.1465 -0.03%

Global financial markets are very quiet this Monday, with no major catalyst from the economic and political fronts. Last week’s rally in US stocks remains intact, as the NASDAQ 100 is holding up above the crucial 5800 level, while the S&P 500 and the DOW are close to their all-time highs. European and Asian stocks are also little changed, although the Chinese market turned lower in late trading, hitting a one-month low in the process and exiting the rising wedge pattern that we have been following recently. Chinese Industrial Production number came in above expectations, while GDP growth also beat the consensus according to the official data, although the market is not convinced, it seems.

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Shanghai Composite, 4-Hour Chart Analysis

Currency markets are also in summer-mode, with no major moves after last week’s Dollar sell-off and, as the Aussie, the Loonie and the New Zealand Dollar are holding on to their gains, while the Euro is hovering around its 12-month highs. The Great British Pound is the weakest major today, thanks to the renewed uncertainty regarding the beginning of the Brexit talks, while the Yen is also trading slightly lower once again. Commodities turned broadly higher today, with both industrial and precious metals rallying, despite the pull back in Chinese stock, while oil is unchanged after the rally of the second half of last week.

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Cryptocurrencies

The major coins are rallying off their weekend lows, as Ethereum recovered all of its steep losses which were likely caused by series of margin call and forced selling, following the steep one-month long correction. Bitcoin is back above the key $2000 level, and the developing base pattern seems to be holding up the currency, in line with the “normal correction” theory. Should the majors break-out from their short-term declining trends in the coming period, long-term buy signals could be triggered across the board as the daily charts already show oversold readings.

Bitcoin, Daily Chart Analysis

Technical Picture

The DAX remains in a short-term downtrend after last week’s rally stalled out near a strong resistance level. The index is pushed lower by the strength of the Euro, as the common currency is still gaining ground on the Dollar, although the momentum of the rise is weak. As the NASDAQ outperformed the DAX the slight global correction might be over, but new long-positions should only be opened above last week’s highs, while shorts can jump in at the current levels with a stop above the recent high.

DAX, 4-Hour Chart Analysis

Key Economic Releases on Monday

Time, CET Country Release Actual Expected Previous
4:00 CHINA GDP 6.9% 6.8% 6.9%
4:00 CHINA Industrial Production 7.6% 6.5% 6.5%
4:00 CHINA Retail Sales 11.0% 10.6% 10.7%
14:30 US Empire Manufacturing Index 9.8 15.2 19.8

Key Economic Releases on Tuesday

Time, CET Country Release Expected Previous
3:30 AUSTRALIA Monetary Meeting Minutes
10:30 UK CPI 2.9% 2.9%
10:30 UK PPI -0.8% -1.3%
11:00 GERMANY ZEW Economic Sentiment 17.6 18.6
14:30 US Import Prices -0.2% -0.3%

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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.

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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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