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Technical Analysis: Futures Approval Fuels Volatile Crypto-Bounce

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Trading ranges remained extremely wide in the cryptocurrency segment today, as the correction of the past two days concluded in a strong rebound. The CFTC’s approval of Bitcoin futures trading was the major catalyst that drove the relief rally after the initial plunge, which signals a crucial step for the cryptocurrency towards the mainstream financial world.

That said, the long-term charts still look hostile from a momentum perspective, and we expect a durable and deeper correction in the segment in the coming weeks. BTC bounced as high as $10,700, not far off the all-time highs from Tuesday. With the short-term picture being close to neutral again, a less volatile weekend could be in the cards. Significant support levels are still found at $8200, $7700, $7000, and $6700.

BTC/USD, 4-Hour Chart Analysis

Dash continues to be the strongest major regarding price action as the coin quickly recovered almost all of its losses and it’s holding on in its short-term uptrend despite the stretched long-term picture. The currency will likely face a deep correction in the coming weeks and we advise investors to wait with opening new positions until a more neutral setup. Key support levels are still found at just above $600, at $500, $470, and near $410.

DASH/USD, 4-Hour Chart Analysis

With all of the most established coins gaining significant ground today, a re-test of the record highs is possible in the coming days despite the segment-wide 20% correction. That said, after the stellar run and the given the overly bullish sentiment, risks of a deep correction are high and investors should remain defensive. Let’s see the short-term altcoin charts before the weekend.

Ethereum

ETH/USD, 4-Hour Chart Analysis

Ethereum followed the broader market higher today and it remains in a much less overbought condition than some of the other majors. For that reason, and the promising long-term technical setup, we expect ETH to outperform Bitcoin in a coming correction, with support levels at $400, $$380, and $350.

Litecoin

LTC/USD, Daily Chart Analysis

Litecoin is almost back at its all-time high near the $100 level following the meaningful bounce that we expected after the test of the $75 support. The short-term MACD is now neutral, but the long-term picture remains overbought, and investors shouldn’t open new positions here, although traders could still play the trend. Further support below $75 is found at $64 and $56.

Ripple

XRP/USD, 4-Hour Chart Analysis

Ripple is trading between the key $0.2250 and $0.26 levels yet again thanks to the rebound, while remaining relatively weak from a long-term technical perspective. The currency is still the most neutral major regarding momentum, and although further volatile trading is expected, it remains on a long-term buy signal. XRP faces strong resistance around $0.30, while support levels are at $18 and $16.

Ethereum Classic

ETC/USD, 4-Hour Chart Analysis

Ethereum Classic found support near the previous all-time high at $23, and it spiked higher together with Bitcoin after clearing the short-term overbought momentum readings. The coin is likely to continue the correction, given the extremely overbought long-term picture, and a dip below $23 is likely in the coming weeks. Strong support levels are found at $18, and $16, while the $30 and $34 levels provide resistance.

Monero

XMR/USD, 4-Hour Chart Analysis

Monero also bounced off the previous record high, and it remains inside the short-term rising trend too. The coin already hit our final target for the current cycle near $200, but another test of the highs is possible before a deeper correction. Support levels are still found at $160, $150, and $125, with the $180 level likely being in the spotlight during the weekend.

NEO

NEO/USDT, 4-Hour Chart Analysis

NEO continues to be the least correlated to Bitcoin among the majors as it trades in a volatile consolidation pattern since nearing the $50 level last week. The $34 level is in the center of attention, with the $30 price level providing major support, and the $40 level being the primary target ahead. The long-term picture is still encouraging, and we expect a move towards $50 and the all-time high after the correction in the segment.

IOTA

IOTA/USD, 4-Hour Chart Analysis

IOTA continued to show relative strength today despite the extremely overbought long-term momentum readings, and the coin might be ready to re-test the highs near $1.50. That said, we still urge investors and traders to remain defensive and wait for a deeper correction before entering new positions. Support levels are found at $1.1, $1, and $0.75.

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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Bank Sector Likely to Show Steadiness as 2020 Presidential Election Cycle Looms

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About a month ago, we analyzed the financial sector where individual banks were considered for investment. This time, we are back to this sector again, since in the current conditions it cannot be ignored. This time, however, we are going to analyze ETFs that include financial sector papers.

When analyzing the S&P 500, there are doubts about its further growth, unless there’s a correction towards 2,400. But in order for such a correction to take place, some significant event must occur that will scare off investors and force them close their positions for a while, locking in profits. The S&P 500 reacts sensitively to the presidential elections and programs adopted by new US leaders.

For example, Barack Obama took over as president during the mortgage crisis, and he had to solve the problems of growing debt, which later exceeded 100% of GDP, and look for new ways to develop the economy after massive bankruptcies of companies. At that time, the S&P 500 lost 67% in 18 months and reached its 2002 lows, which was the result of the dotcom crisis. Later, however, Obama’s administration managed to find a solution by quantitative easing stimulus. The conditions for regulating the financial market, the crisis driver, were tightened, the financial service users protection was strengthened, and measures to reduce taxes, taken under Bush Jr., were prolonged.

As a result, investors calmed down, unemployment began to gradually decline, and the S&P 500 went up to conquer new highs, which continued throughout the 8 years of Barack Obama’s leadership. The only significant correction occurred a year before the start of Obama’s second term, as investors might have decided to hedge and cash off. Nevertheless, once it became clear that Barack Obama would step in for a second term, the S&P 500 rally continued. Thus, during Obama’s administration, the index went up by 314%.

In early 2015, however, the rise ended with a strong resistance at 2,130, which the S&P 500 was able to overcome only after the presidential elections won by Donald Trump. One of Trump’s campaign promises was a substantial tax cut that would allow the US economy to grow more rapidly. Such a strategy means an increase in companies’ profits through tax cuts in order to ensure the release of money for investment in new developments that make the US businesses more efficient and competitive in the global market. At the moment, we can see its positive results: the unemployment rate in the US has fallen to its 10-year low, the S&P 500 is at its historic highs, while the company earnings reports are breaking their own records.

In 2020, the next presidential elections will be held and, as history shows, a year before the market is usually uncertain until it receives confirmation that everything will stay the same. Thus, it will be difficult for the S&P 500 to break out 3,000 at once without a significant correction. There is a very big temptation to take a long position at current prices, as fundamental analysis does not show any negative sentiment in the markets. The companies’ reports, however, have been issued adjusted since Q2 2018, and, besides, as told above, tax cuts are a great contribution to an increase in profits. In this situation, it is important to pay attention to the rise in sales, and not to profits as such, since the earnings do not show how the companies are truly doing. Earnings and profits are worth taking into account only after Q2 2019 when it will be a year after the new accounting system has been implemented.

Take Facebook for example: the stock price has been down since the Q2 report, while the earnings hit the record high. In the Q3 report, the revenue was even higher, but the stock is still down, just because high profits are no longer a positive indicator. The investors want to see many more new users, while the number is actually decreasing.

Thus, over the next 6 months, the S&P is likely to trade rangebound. Then, the presidential elections will be drawing nearer, adding more pressure to the market because of the uncertainty.

Overall, the financial sector looks less risky, as, with good earnings, it will feel great, but even in case the earnings are not so good, companies will still have to pay their debts to the banks. In addition, the Fed is very likely to continue rate hikes, which will lead to an additional profit flow.

An unexpected crisis may be the only negative factor here, but in this case any investment will be in the red.

Among financial ETFs, one may consider a few funds with over $1M managed money.

iShares US Financial Services ETF (IYF), $1.77B managed, 35% in the banking services sector, 12% in the investment banking sector.

If we break down the banking sector, the top three are JPMorgan Chase (7.13%), Bank of America (5.00%), and Wells Fargo (4.47%).

In the investment banking, 8.32% accounts for the Warren Edward Buffett Berkshire Hathaway Fund.

The next one is iShares US Financial Services ETF (IYG), with $1.7B managed. The banking sector accounts for 52.83% of the fund’s portfolio. The top three are JPMorgan Chase (12.36%), Bank of America (8.66%), and Wells Fargo (7.75%).

Yet another fund one may pay attention to is Fidelity MSCI Financials Index ETF (FNCL), with $1.27B managed. The banking sector accounts for 51.71% of the fund’s portfolio. The top three are again JPMorgan Chase (9.84%), Bank of America (7.05%), and Wells Fargo (6.42%). This fund, as well as the iShares US Financial Services ETF (IYF) has a Berkshire Hathaway investment in its portfolio (7.30%).

By Dmitriy Gurkovsky, Chief Analyst at RoboMarkets

Disclaimer
Any predictions contained herein are based on the authors’ particular opinion. This analysis shall not be treated as trading advice. RoboMarkets 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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4.7 stars on average, based on 18 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 Analysis And Chartbook: Risk-Off Trade Still On as Stocks Plunge Globally

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Tuesday Market Snapshot

Asset Current Value Daily Change
S&P 500 2,640 -2.17%
DAX 30 11,054 -1.68%
WTI Crude Oil 54.04 -4.81%
GOLD 1,223 -0.15%
Bitcoin 4,604 -2.75%
EUR/USD 1.1392 -0.52%

The broad risk-off shift that we have been following in recent months continues to be the dominant force in global financial markets, and today, global stock markets and the majority of risk assets are deep in the red again.

With no progress in the main issues, such as the Brexit process, the US-China trade talks, and the Italian budget debate, the major benchmarks are near or at their October lows, while currencies continue to trade in corrective patterns, due mainly to the dip in US Treasury yields.

DAX 30 Index CFD, 4-Hour Chart Analysis

The German DAX index and the Nasdaq are still in the center of attention, being among the weakest major benchmarks, and the prior leaders of the US bull are all under heavy selling pressure. The DAX is testing its October lows as we speak following the release of the strong German Producer Price Index (+0.3% on a monthly basis), with the all-time low in the shares of Deutsche Bank (DB) weighing heavily on the index.

A sustained new low, with a move towards 10,000 would cement the bear market in the key benchmark, and it would be another warning sign for bulls globally, even if a year-end feel good rally materializes in equities.

XHB, 4-Hour Chart Analysis

US stock futures suffered heavy losses overnight, extending yesterday’s intraday trend and in the case of the Nasdaq and the Dow, violating key support levels in the process. The homebuilder sector was once again in the center of attention in pre-market trading, with Building Permits and Housing Starts both coming out before the opening bell, the two measures ticked higher, in line with expectations, and that’s already something to cheer about in the sector following yesterday’s dismal NAHB Index.

The sector’s main ETF fell sharply this year, but thanks to the recent dip in Treasury yields, it started to show early signs of stability, and now, a period of relative strength could be ahead, which could reset the bearish sentiment, even as the long-term outlook is still plagued by the decade-long highs in mortgage yields.

Dollar Attempts Rally of Key Levels as Pound Continues to Struggle

GBP/USD, 4-Hour Chart Analysis

The US Dollar bounced off yesterday’s lows amid the deepening risk selloff, but for now, it remains well below its recent highs against the Euro and especially compared to the safe-haven assets such as the Yen and gold. The Pound, which has seen heightened volatility in recent weeks is hovering above last week’s lows near 1.27 against the Greenback.

The pair looks ready to test that level in the coming days, with the Pound, and British assets in general showing weakness due to the uncertainty surrounding the Brexit process.

WTI Crude Oil, 4-Hour Chart Analysis

The risk-off shift has also been hurting crude oil today, and the weak bounce following last week’s crash is fading away, despite the still deeply oversold momentum readings.

We continue to expect a larger scale bounce in the commodity, even as the WTI contract is already testing the lows from last week due to today’s sharp selloff. With that in mind, opening short positions is not advised here, although until a short-term trend change bulls should also stay on the sidelines.

ChartBook

Major Stock Indices

S&P 500 Futures, 4-Hour Chart Analysis

Nasdaq 100 Futures, 4-Hour Chart Analysis

Dow 30 Futures, 4-Hour Chart Analysis

VIX (US Volatility Index), 4-Hour Chart Analysis

FTSE 100 Index CFD, 4-Hour Chart Analysis

EuroStoxx50 Index CFD, 4-Hour Chart Analysis

Nikkei 225 Futures, 4-Hour Chart Analysis

Shanghai Composite Index CFD, 4-Hour Chart Analysis

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

Forex

EUR/USD, 4-Hour Chart Analysis

USD/JPY, 4-Hour Chart Analysis

EUR/GBP, 4-Hour Chart Analysis

AUD/USD, 4-Hour Chart Analysis

Commodities

Gold Futures, 4-Hour Chart Analysis

Copper Futures, 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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Analysis

Crypto Update: Damaging Crash Continues, Bounce Likely Ahead

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The cryptocurrency segment continues to trade under heavy selling pressure, and yesterday’s lows weren’t able to hold up the top coins, and the market entered another waterfall decline today. Bitcoin and Ethereum both fell below their next major support zones today in early trading amid a spike in trading volume, and given the deeply oversold momentum readings in their markets, together with the panicky sentiment, a stronger counter-trend move seems likely in the coming days.

That said, the long-term picture is overwhelmingly bearish, with the exception of the still very strong Ripple and Stellar, and traders should only consider very short-term trades with active risk management against the dominant trend. Until at least a confirmed short-term trend change, new lows remain likely in the coming weeks, but given the extent of the plunge, a violent short-covering rally is in the cards.

BTC/USD, 4-Hour Chart Analysis

Bitcoin fell as low as $4250 today, overshooting below the $4450-$4500 support zone in the process, possibly forming a short-term panic bottom after the sharp two-day selloff. Now, holding short positions is risky, from a short-term perspective, and a rally up to the $5000-$5100 zone is possible in the coming days.

Despite that, traders and investors shouldn’t enter new positions here, with the exception of ultra-short-term traders, as volatility is expected to remain very high, and odds favor further new lows in the coming weeks. Further short-term resistance is ahead at $4700, $5350, and $5600 while primary support is found between$4000 and $4050.

ETH/USD, 4-Hour Chart Analysis

Ethereum also spiked below the next major support level near $130 in Asian trading amid the selling panic, and now the third largest coin is hovering near that level, trying to form a swing low similarly to Bitcoin. Given the current sentiment, a bounce towards the $150 is likely, and a choppy consolidation phase could follow the strong momentum move and the initial bounce.

The bearish long- and short-term trends are intact, and despite a likely bounce traders and investors should still stay away from the coin, with the next support zone found near $118 and with further resistance ahead at $160.

Ripple Turns Volatile Amid Crash, but Support Zone Still Holds

XRP/USDT, 4-Hour Chart Analysis

Ripple has been dragged lower by the latest round of the segment-wide crash, and the now clearly second largest coin briefly spiked below the key $0.42-$0.46 long-term support zone. The fact that XRP managed to stay above the lower boundary of the zone is a plus for bulls here, but the short-term picture remains bearish, and it is far from being safe to enter new positions here.

That said, long-term investors should hold on to their positions, with further support levels found near $0.375 and $0.355, and with resistance ahead at $0.51, $0.54, and $0.57.

LTC/USD, 4-Hour Chart Analysis

Litecoin not just hit the $34.50 level as we expected, but it spiked down to $30 amid the rout and now, the coin is deeply oversold from a short-term perspective. A counter-trend move is now likely in the coming days, but again, only very short-term trades should be considered in the coin with strict risk management in the extremely volatile environment. Further resistance is ahead at $38 and $44, while support is found near $28 and $23.50.

EOS/USD, 4-Hour Chart Analysis

EOS entered a freefall in Asian trading, plunging as low as the support zone near the $3.50 level which has been a crucial level for the coin in the past. The coin is now deeply oversold from a short-term perspective, similarly to the majority of the top coins, and a larger bounce is in the cards in the coming days, with resistance levels ahead near $4 and $4.55.

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 398 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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