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Market Overview

A Surprise Turn to the Right

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One of the most common questions asked about the 2008 financial crisis is “didn’t people know that the housing market was in a bubble?”

Well, yes. Some did but most people who were paying attention at the time were making enough money to keep their opinions to themselves.

At this point in the cycle, with the price to earnings reaching record levels, just about every economist out there is sure that we’re in a bubble and they’re not keeping quiet about it this time.

Even the infamous investing firm Goldman Sachs has now chimed in saying that there is an 88% chance of a bear market within the next 2 years.

Of course, predicting a market crash is kind of like predicting an earthquake. You never really know when one will happen or why. So, we must continue as if everything will go on as planned but at the same time be prepared for the worst.

@MatiGreenspan
eToro, Senior Market Analyst

 

Please note: All data, figures & graphs are valid as of October 16th. All trading carries risk. Only risk capital you can afford to lose.

Market Overview

Just moments ago we had a critical update from the Catalan Republic. After being backed into a corner Catalan President Puigdemont has upheld the claim to independence.

Puigdemont has been dancing between the election results that showed a 92% mandate to leave Spain, the Spanish government who is pledging to bring down the hammer, and Catalonian businesses who are threatening to leave rather than face a Catalexit.

The Spanish Index ESP35 is falling fast with declines of 0.75% since the market opened a few moments ago.

Elsewhere in Europe, the shift towards populist politics continues. The central country of Austria saw some rather shocking results in their elections over the weekend with 27% of the electorate voting for the far-right Freedom Party.

31 year old Sebastian Kurz, the former foreign secretary and head of the conservative party is now expected to form a coalition with the Freedom Party to become the countries youngest ever Chancellor and the world’s current youngest leader.

…and here we thought populism in Europe had been squashed with Marine Le Pen’s loss.

The EURUSD is losing ground this morning on both of the above issues breaking below 1.18…

A Pox on a Proxy

If things are looking sour in Europe, they’re really heating up in Kurdistan. In the early hours of the morning, Iraqi forces made a move on the oil-rich region of Kirkuk.

Kirkuk has been a contested area for a while now and their inclusion in the recent Kurdish referendum was a sore spot for Iraq.

Kurdish forces were able to destroy a few armored vehicles before retreating. This morning’s action was just a skirmish but does have the potential to turn into something bigger as the Kurdish public is being asked to join the fight.

The vehicles that were destroyed were actually USA supplied Abrahms Tanks, which were provided to the Iraqi Popular Mobilization Forces known as Hashd Al Shaabi, which means that both sides in this fight are actually armed and funded by the good old US of A.

Though it seems many analysts feel the tensions in Iraq will not harm oil supply lines, prices are up sharply this morning as traders react to the news.

Close to a New High

After a shaky September, the Crypto markets are putting on a very strong show so far in October. Bitcoin itself is up 30% since the beginning of the month and the Crypto Copyfund, which tracks the six strongest cryptocurrencies has gained 22%.

In this chart, we can see a simulation of the results for investing in the Crypto Copyfund over the last 3 months if you would have started with an amount of $10,000.

As you can see, the investment would have started with a scary drawdown but for those who have a high tolerance for risk and stuck with it, the investment would now be worth $16,000.

That’s it for today. The week ahead will likely be very busy for all markets. Let’s make it a good one. 🙂

This content is provided for information and educational purposes only and should not be considered to be investment advice or recommendation.
The outlook presented is a personal opinion of the analyst and does not represent an official position of eToro.

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

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 122 rated postsSenior Market Analyst at Etoro.com.




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2 Comments

  1. arnosv

    October 18, 2017 at 3:24 pm

    “Even the infamous investing firm Goldman Sachs has now chimed in saying that there is an 88% chance of a bear market within the next 2 years.”

    If/when this happens, do you think this has an effect on the crypto market? If so, in what way?

    • Mati Greenspan

      October 18, 2017 at 4:11 pm

      Excellent question arnosv!

      The correlation between traditional and alternative markets is still a question that is highly debated. At this point, I’m in the camp that they are not very highly correlated.

      Though, I do believe that in the future crypto trading will become more and more common until eventually, it replaces the current forex markets completely.

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Market Overview

Brand New Crypto Economy

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Hi Everybody,

It’s not the first time that Venezuelan President Nicolas Maduro is restructuring the Venezuelan economy but it might be the most significant update so far.

With the economic crisis in Venezuela reaching levels that some are calling a humanitarian disaster, and inflation projected to reach 1,000,000% by the end of the year, President Nicolas Maduro is now turning to crypto to try and stabilize the situation.

This announcement might not be getting enough attention in the mainstream media but it certainly is turning a few heads in the crypto space.

Because the Venezuelan national cryptocurrency known as the Petro is pegged to the price of oil, the government’s hope is that it will provide a backstop to the new version of their currency, the Sovereign Bolivar.

The old Bolivar was a bit of a mess because it carried an official exchange rate of 10 Bolivar’s to the Dollar, whereas the actual rate on the street was more like six to eight million Bolivars to the Dollar.

Several reports have indicated that the new structure represents a massive devaluation of the Bolivar. However, those headlines might be misleading.

As each Petro is supposed to be pegged to a barrel of oil, one Petro should be worth about $60, so the new minimum wage of half a Petro a month is about 3000 times the current minimum wage, which is about $1 per month.

The main problem with this plan is that we still have no way of verifying that each Petro represents one barrel of oil. Should the Venezuelan Government wish to provide this level of transparency, it would be rather simple using the Ethereum blockchain. But alas, Maduro chose to use the less transparent NEM network for the Petro and therefore we have no choice but to hang on his two words that were prevalent in his Friday night announcement…

“Trust Me”

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

  • Don’t Skip This Part
  • Fed Meeting Incoming
  • Brand new Crypto

Please note: All data, figures & graphs are valid as of August 20th. All trading carries risk. Only risk capital you can afford to lose.

Traditional Markets (Don’t Skip this Part)

Sure, most of you are probably reading these daily market updates strictly for the crypto part. However, it is my strict belief that it is impossible to understand the economics of cryptocurrencies without understanding the traditional markets that provide the backdrop.

For example, last week we saw some rather unusual drama surrounding Turkey, which did seem to spill over into other markets, including cryptocurrencies.

In this graph below we can see the Turkish Lira (red) starting to slide on August 9th. If was soon followed by the Dow Jones (Green), which opened with a gap down on Friday the 10th. Then you can see Ethereum (purple) plunging on Saturday and gold (yellow) marking new lows by Wednesday the 15th.

Now, normally a crisis in Turkey shouldn’t have much of an effect on any of these other markets. However, due to the severity of the slide and the sudden nature, it seems that it did catch many traders off-guard.

However, we can see that on Friday the 17th, the Lira took another sudden dive, this time the other markets were more prepared and therefore unaffected.

This morning, the stocks seem to be doing well and yet crypto-assets are struggling, and emerging market currencies still haven’t taken much of a direction. This as the US Dollar has begun the week on a stronger foot ahead of an important Fed meeting that will take place on Thursday and Friday.

Brand New Crypto

eToro is pleased to announce that we’ve added our 12th digital asset to the number one social investment app.

You can now find IOTA among the 2000+ markets that you can easily add to your eToro investment account. (This is not investment advice)

As always, let me know if you have any questions, feedback, or further insight. I’m always happy to hear it.

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

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

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

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,

Best regards,
Mati Greenspan
Senior Market Analyst

Connect with me on….

eToro: @MatiGreenspan | Twitter: @MatiGreenspan | LinkedIn: MatiGreenspan | Facebook:MatiGreenspan

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

Pre-Market: Turkey Back in the Crosshairs Amid Sanction Threats

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The “red-bar-green-bar-madness” continues in global stock markets, as after yesterday’s rally, today the major markets are all in the red once again. Emerging market woes are still feeding the bearish narrative, with the Turkish Lira being back in the center of attention. The currency which enjoyed a three-day relief rally slid lower following threats regarding further retaliatory US sanctions, should turkey keep Pastor Brunson in custody.

USD/TRY, 4-Hour Chart Analysis

The diplomatic troubles only add to the problems of the country, while also helping the rhetoric of the Turkish leadership that focuses on a western “attack” on the nation. With the vague budget plans in mind, the endgame for the Lira still seems ugly, even as at the current levels, strong Turkish companies can offer great bargains for a long-term investment portfolio.

DAX Index, 4-Hour Chart Analysis

The divergence between the US and the rest of the world seems to be getting wider by the day, as the Shanghai Composite closed on a fresh bear market low, while most of Asia is also stuck in short-term downtrends, while Europe is looking wounded too from a technical perspective. The main US indices, on the other hand, are still near their all-time highs, and today’s selloff is also just a small blip in the ongoing uptrend.

S&P 500, 4-Hour Chart Analysis

On a slightly negative note, the Nasdaq has been underperforming the broader market ever since Tencent’s earnings miss on Wednesday, and today, it’s also the worst performing benchmark on Wall Street in the wake of Nvidia’s (NVDA) lackluster guidance that came out yesterday after the closing bell.

Today’ session could still go either way in the US, as the overnight losses are moderate, and yesterday’s trade war optimism could still fuel a recovery in the worlds strongest stock market, even amid the deepening emerging market crisis.

Forex Markets Stable As Dollar Consolidates

Dollar Index (DXY), 4-Hour Chart Analysis

The Dollar is consolidating just below its recent 13-month highs, with the EUR/USD pair rebounding to 1.14, and the broader Dollar index settling down near 96.5. The reserve currency is still clearly in a rising trend, and as the short-term overbought momentum readings are almost cleared, the rally could soon continue, especially if risk-off sentiment remains dominant outside of the US.

Copper Futures, 4-Hour Chart Analysis

Commodities are virtually unchanged before the US open, with gold still hovering just above its 17-month low near the $1185 level, crude oil being stuck near $65 per barrel regarding the WTI contract, while copper trying to hold its ground after the recent key breakdown.

Dr. Copper is still signaling troubles ahead for China and the global economy, as although the commodity outperformed today, it’s clearly below the break-down level near $2.7, and the downtrend will likely continue in the coming weeks.

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 321 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

Say No to Currency Contagion

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Hi Everyone,

Once again the deteriorating relationship between the United States and Turkey is leading the news. The Lira is sliding again and it does seem to be bringing some of the other emerging market currencies with it.

As we’ve been saying throughout the week, it’s very possible that the declines in the crypto market earlier this week are due to a stronger US Dollar more than anything else.

As I’ve said before, in order to understand what’s happening in crypto, we must look at what’s happening in the rest of the economy as well. In this case, the US Dollar strength isn’t coming from Turkey, that’s just the catalyst.

The Greenback has been gaining ground since early April on the promise of higher interest rates in a strong economy. So far today, it doesn’t seem that the Lira’s slide is affecting the other major currencies though, nor has it touched crypto for the time being.

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

  • Currency Contagion
  • Looking at Metals
  • ETC Backwards

Please note: All data, figures & graphs are valid as of August 17th. All trading carries risk. Only risk capital you can afford to lose.

Traditional Markets

Now that we’ve established the underlying theme and why the Dollar’s been surging, it seems that the situation has largely been contained. At the beginning of the week, the strong Dollar was taking out everything in its path. Today, the declines seem to be limited to the emerging markets.

In fact, of the major currencies, the USD is the worst performer today.

So even though the Dollar is rising against the Lira, Peso, and Rand…

… it doesn’t seem to be spilling over into other markets today.

Looking at Metals

Now that we’ve seen one of the biggest declines in the metals markets in recent history, it’s time to examine the long-term charts again.

Frankly, the weakness in metals still doesn’t make much sense to me. As we saw the Dollar strength earlier in the week, it did decline further but the declines seem disproportionate to the gains of the Buck.

Actually, what we’re seeing since 2011 is a precious metals market that’s been trending down.

The question is, has that dynamic come to a head?

The fun thing about the way down is that eventually, you run into a lower barrier at the production cost. Meaning, if the price to mine a metal is higher than the price to sell it, miners will stop mining, which generally tends to drive up the price.

A quick look at the mining costs of all three of the above does seem to indicate that those prices are quite close or even already passed.

A Crypto of its own

It’s good to see the rebound taking hold in the crypto markets despite the emerging currencies continuing to sell-off today. This is a positive indication that crypto is less sensitive to the moves of the Dollar but under extreme circumstances still is susceptible.

One thing that seems to be sticking out like a sore thumb is Ethereum Classic. In this graph, we can see that ETC (white line) has been acting out since mid-June and simply hasn’t been following the rest of the market.

This type of go-it-alone price action is typical when prices are moving up, but we almost never see it when prices are declining.

One of the reasons might be due to the listing of ETC on Coinbase. A new door to this crypto could mean new money flowing in. This could be worth keeping an eye on in the next few days. I’m eager to see how long it will take to fall back in line with the other cryptos or if it increases in market share following the listing.

Wishing you a fantastic weekend!

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

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

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

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 | LinkedIn: MatiGreenspan | Facebook:MatiGreenspan

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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