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Market Overview

Swimming Against the Stream

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Tomorrow is a big day for European markets and for the Euro. The ECB has been walking a tight rope of monetary policy and has reached the end of the line.

We can expect the Euro to be extremely volatile over the next few days as Mario Draghi is expected to come to a decision. Will they start to reduce their extensive QE program and raise rates? Or will they keep the loose money flowing for longer?

After that, we’ll have a very important Fed meeting on September 20th where the United States faces a similar decision. The US is already much further down the path of monetary normalization but as we’ll discover below not everybody is very happy with that.

Then, September is in for a big finale as we once again reach the US debt ceiling. Over the past few years, investors have become accustomed to the bickering between the Democrats and Republicans and government shutdowns are not infrequent.

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With Donald Trump in the White House already threatening the US economy with a shutdown, the markets may start bracing for this option fairly soon.

@MatiGreenspan
eToro, Senior Market Analyst

 

Please note: All data, figures, and graphs are valid as of September 6th. All trading carries risk. Only risk capital you can afford to lose.

Market Overview

It seems that extreme politics may finally be catching up with the financial markets. Wall Street returning from their long weekend did in fact play a bit of catch up with the rest of the markets and sold a bit on the North Korean escalation.

The Dow Jones fell a bit more than 1% yesterday and the declines in Europe were about 1% since the start of the week. Asian equities are all over the place with some up and some down since the big nuclear test on Sunday.

So there isn’t any sort of global panic sell off as Kim Jong Un may have liked. It’s more of an orderly adjustment to risk as the possibility of a nuclear strike becomes less obscure.

Valuations in the stock markets are still very close to their all time highs in most major countries and even though volatility has ticked up, it’s still lower than it was three weeks ago.

Here’s a graph of the VIX volatility index since the Brexit Referendum (red circle) and Donald Trump’s election night (green circle).

The black circle is the all time lowest level for this index since it was created in 1990. Notice any trend?

Getting Loony

Bank of Canada tonight for those of you who like trading the Loony. Having been to Canada recently I can tell you that things felt very cheap there. Even though the Canadian Dollar is currently at 23% discount to the USD but the purchasing power seems to be about equal.

My travel recommendations aside, the weaker price of crude oil has had a devastating impact on the Canadia economy and many jobs were indeed lost. At this point the markets seem to have already priced this in and by the graph below we can see that the worst (yellow circle) may be behind us.

Now the question is does the price go back into the current range or fall back to normal levels last seen in 2013?

The answer to that question may very well come from the BoC and what they decide to do with their interest rates.

Turncoat

In fact, one of the members of the US Federal reserve went on record last night stating that the Fed may be at fault for the weak US economy at the moment.

It’s not very common for a big banker to swim against the stream but that’s what Niel Kashkari President of the Minneapolis Federal Reserve did by stating that the rate hikes that Yellen has been doing over the past year and a half were in fact premature and may have done some “real harm.”

At this point, many economists fully expect the Fed to take drastic action on September 20th to start the gradual process of selling off $4.5 Trillion worth of bonds and other assets that they’ve bought since the financial crisis. Will this be premature as well?

What ICO Lockdown?

Crypto markets have already fully recovered from the news that China will halt all ICO activity in the country. They’re not quite at their all time highs, but they weren’t when the news broke either.

A well known professor of economics at Yale University, who I’ve taken classes with before and really respect, named Robert Schiller has recently come out against the current valuations of Bitcoin and saying that this is the classic example of a bubble.

Well, he’s not the first to call it as such and though there are many skeptics to the digitalization and decentralization of modern money, I didn’t notice anybody shorting Bitcoin during the recent pullback.

Of course, Schiller’s point is not lost. All cryptos are still highly experimental and as with any good experiment results may vary based on location and timing. For example, Japan at the moment working hard to get bitcoin excepted in more and more physical locations and Australia about to make bitcoin easily tradable for AUDs.

Looking at the chart it’s easy to see that we’re still in an extremely strong bullish trend. A strong break of the all time high of $5000 would no doubt bring in fresh interest and fresh investors. On the other hand, if we do see a reversal the next major support line isn’t until $3000.

Wishing you an amazing day ahead!!

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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Market Overview

Market Update: Stocks Retreat as Trade Risks Linger; Oil Markets Turn to OPEC

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U.S. stocks drifted lower Monday, as lingering trade concerns between China and the United States curbed investor appetite for riskier assets.

Stocks Decline

Wall Street’s benchmark indexes headed lower in early-week trading, with the Dow Jones Industrial Average recording its fourth straight decline. Dow industrials settled down 102.94 points, or 0.4%, at 24,987.54.

The broader S&P 500 Index declined 0.2% to close at 2,773.86. Seven of 11 primary sectors contributed to the declines, led by a nearly 2% retreat for telecommunication services. Shares of healthcare companies and consumer staples fell more than 1% on average.

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Meanwhile, the technology-driven Nasdaq Composite Index consolidated at 7,747.02, where it was little changed compared with the previous close.

The CBOE Volatility Index, also known as the VIX, rose on Monday following back-to-back declines. The gauge of investor fear edged up 2.8% to 12.32.

OPEC in the Spotlight

The Organization of the Petroleum Exporting Countries (OPEC) will hold its biannual meeting in Vienna, Austria this week, where members are expected to boost production following the yearlong rally in crude prices.

The Saudi-led cartel is reportedly considering an output boost of between 300,000 and 600,000 barrels per day in an effort to maintain market share. However, Iran, Iraq and Venezuela are expected to veto any decision to raise production levels.

“If the Kingdom of Saudi Arabia and Russia want to increase production, this requires unanimity. If the two want to act alone, that’s a breach of the cooperation agreement,” Iran’s OPEC representative told Bloomberg over the weekend.

The Saudis and Russians last month declared their intent to boost output levels at a meeting of energy ministers in Saint Petersburg.

OPEC’s upcoming meeting is scheduled June 22.

Cryptocurrencies Recover Mildly in Afternoon Trade

After flat-lining for most of Monday, cryptocurrency prices edged higher in the afternoon with bitcoin and the ten major altcoins putting up gains.

The cryptocurrency market added roughly $13 billion in value in just over an hour as trading activity picked up across the major exchanges. At the time of writing, the total market for virtual currencies was valued at around $288 billion.

Trading volumes are back up to $12 billion after plummeting to $9.5 billion on Sunday. That marked the lowest turnover in more than two months.

Bitcoin clawed back above the $6,700 handle after falling to the low $6,300 range earlier in the day. Ethereum, the world’s second-largest cryptocurrency by market cap, was back around $520.

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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4.5 stars on average, based on 455 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Analysis

Europe Drags Stocks Lower while Trade War Fears Return

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The risk-off shift of Friday continued today throughout the major financial markets, with the German political standoff on migration weighing on investors sentiment as well, besides the emerging market troubles, and the trade skirmish between the US and China. All of the major US indices opened the week lower, with Europe clearly underperforming and Asian equities also being under pressure.

As Chinese announced retaliatory tariffs are after last week’s US steps the week could bring upon another round of measures by the Trump administration and with that, the escalation of the trade tensions is very much a possibility again.

S&P 500 Futures, 4-Hour Chart Analysis

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Despite today’s losses, the leading indices, especially the Nasdaq and the small-cap Russell 2000, are still just a tad below their all-time highs, while the relatively weak benchmarks are 5-10% below their yearly highs. The balanced S&P 500 is also shy of its all-time, but the short-term uptrend remains intact, and incredibly enough, the benchmark still didn’t leave the range of the early-February crash which unfolded in just 3 days.

Euros Stoxx 50, 4-Hour Chart Analysis

The divergence between the leaders and the rest of the global market, continues to point to the fragility of the rally, and as emerging market currencies are sill clearly in trouble, we don’t expect a broad march to new highs in the coming weeks and we remain defensive towards global risk assets.

Commodities Smacked Lower amid Risk-Off Shift

DXY (Dollar Index), 4-Hour Chart Analysis

Currencies settled down after their crazy central bank loaded week, with the Dollar pulling back slightly off its highs against the Euro and the Yen, while holding its ground compared to the other majors. The Dollar index broke out of the consolidation pattern as we expected and it is now challenging the multi-month highs set in May.

USD/CAD, 4-Hour Chart Analysis

The Dollar is now trading at a 12-month high against the Canadian Dollar, as the pair left behind the 1.30 level as we expected, while the Aussie is also close to hitting levels not seen since last summer, as Friday’s drop in commodities put pressure on the already weak AUD.

WTI Crude Oil, 4-Hour Chart Analysis

Commodity traders are licking their wounds after Friday’s rout, although crude oil staged an impressive rebound off the two-month low hit in early trading below $64 per barrel with regards to the WTI contract.

That said, the short-term trend is clearly negative, and     new lows are likely in the coming days, although the much-awaited OPEC meeting later on this week could cause wild swings in the key commodity, with speculation already being rampant about the possible output change by the cartel.

Featured iamage 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 276 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

Let’s Break the Internet

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Hi Everyone,

Cardano is by far the most philosophical of all the blockchains in the crypto-space. Its protocol has been described as more of a batch of computer science principles, than a product with a roadmap.

Like Ethereum, NEO, and EOS, Cardano is a platform for creating decentralized applications. It has some really smart people backing its development too, which is one of the reasons this brand new product was able to find it’s way into the top 10 cryptos by market cap.

As such, eToro has now opened up real-time trading on Cardano’s ADA token. After reaching a high of $0.96 at the peak in January, the tokens are now trading just under $0.17.

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To add ADA to your investment profile, please click here: https://www.etoro.com/markets/ada

Remember, cryptocurrencies are very risky so please trade responsibly and diversify yourself with other markets as well.

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

  • Trade War Continues
  • Sudden Dollar Surge
  • The BS Report on Cryptocurrencies

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

Traditional Markets

Want to wish a very happy Dragon Boat Festival to all our clients and colleagues in China.

On Friday, the USA and China added to market tensions with additional tit-for-tat trade tariffs. President Trump struck first by announcing $50 billion worth of new tariff’s on imports from China.

The response from China was swift, immediately matching the US measure-for-measure. The response came within just a couple of hours as the Chinese finance ministry barely allowed the news of the initial tariff’s to penetrate before announcing their retaliation.

Thus, the Chinese counter-measures dominated the news cycle, which will no doubt be viewed as a successful show of strength. In fact, the original Email that came to my inbox from the Financial Times with the headline…

…actually now leads to an article about the retaliatory tariffs.

The Chinese playbook has become quite clear in this case. Perhaps too clear.

An escalation of $50 billion on either side isn’t much, but the speed and scale of the Chinese response may have just tipped Beijing’s hand.

In any case, the measures didn’t seem to have had much effect on the stock markets. In this short-term graph of the Dow Jones, we can see that stocks were already on their way down before the 3.5 hour spat (purple circle).

If we zoom out to the long-term graph, we can see how insignificant the latest progression has actually been. Same purple circle.

As far as markets are concerned, the entire trade war saga is rather like the turbulence on an airplane. It might scare off a few of the newbies but for any seasoned flyer, it’s just time to sip a drink and go back to sleep.

They will, of course, wake up rather suddenly, only if captain Trump decides to do any drastic evasive maneuvers.

What Happened to Gold?

Though the stock markets were rather unaffected by the new trade war progressions, the news may have had some effect on the commodities.

Here we can see gold and crude oil reacting to the updates and plunging rather noticeably from the initial announcement and until well after China’s retaliation.

Oil is also reacting to updates from OPEC and Russia who are supposed to meet this Friday. The expected results of that meeting seemed to be rather clear at the end of last week but this morning there’s a bit of contention as several OPEC members are now opposing the idea of increasing production.

Gold on the other hand, is really confusing. Increased geopolitical uncertainty usually makes gold go up, so it’s kind of strange to see the opposite reaction from Friday’s news.

So if anyone can help me understand why it went down, I’d sure appreciate it.

The Crypto BS Report

Last week we spoke about the incredible update from the SEC where they finally clarified that Ethereum is in fact not considered a security. Though some in the community pointed out that there’s still a lot of uncertainty in the space, with the exception of Bitcoin maximalists, most people seem very happy about the recent update.

This morning there’s a fresh report out, this time from the Bank of International Settlements (BIS). This institution has never been very crypto-friendly and thought the report does highlight some of the positive qualities of cryptocurrencies, the key takeaways seem rather negative.

It pays to point out in this case that the BIS is a key player in the fiat ecosystem and as we saw with Jamie Dimon, Warren Buffet, and Bill Gates would have the most to lose should Bitcoin gain more prominence.

Their concerns over the consumption of electricity used by Bitcoin have been long ago debunked, while the claim that blockchain technology could overload and “bring the internet to a halt” feels sensationalist.

The analysis used to support this hypothesis assumes exponential growth in usage and zero infrastructure growth. It would be like saying in the 90’s that if all data were transferred over the internet, it would not be able to handle the traffic.

Of course, we know that by the time Kim Kardashian published her famous pics on PaperMag, there was more than enough bandwidth to handle all the likes and shares.

Not only is the infrastructure of blockchain technology now being built at a rapid pace, but the groundwork for the next level of innovation is already well underway as…

Let’s have an awesome day!

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

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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4.7 stars on average, based on 102 rated postsSenior Market Analyst at Etoro.com.




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