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Market Overview

Time for a Troll Party!

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Hi Everyone,

It’s no secret that President Donald Trump enjoys tweeting. In fact, some might say that he’s built his political career on the micro-blogging platform.

One of the features that he seems to use quite often is the “block” button. Once blocked, users no longer have the option to respond to any of the President’s tweets.

Yesterday however, a federal judge has ruled that it is unconstitutional for the President to do so, stating that the Twitter account of a public official is considered a public forum and as such it must remain available to everyone to express their point of view.

Though it’s not clear whether the ruling means that Trump will now have to unblock everyone that he’s already blocked, what is clear is that the President will have a few new followers on his timeline.

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

  • FOMC Wow
  • Trying to Stop the Wave
  • Why are the Cryptos Falling?

Please note: All data, figures & graphs are valid as of May 24th. All trading carries risk. Only risk capital you can afford to lose.

Traditional Markets

Yesterday afternoon, the FOMC released the minutes from their previous meeting. This type of event is usually rather uneventful as people are more concerned with the bottom line. However, this release did make a few headlines

So now it seems Fed Chair Jerome Powell is weighing in on Trump’s trade war. The announcement does seem to have reversed the direction of the US Dollar as we can see here…

Zooming out a bit, it can be seen that this was the market highs and the pullback above is rather small in comparison, so no official change to the strong Dollar trend just yet.

As well, the Fed expressed concern over a recent poll that revealed 40% of American’s would not be able to cover an emergency expense of $400. A figure that may indicate the economy is not doing as well as many analysts would like to think.

TRY as they Might

The Central Bank of Turkey (TCMB) finally fought back yesterday.

We’ve been discussing the slide of the Turkish Lira a lot lately as people seem to lose confidence in President Erdogan and the Turkish economy.

Yesterday, the TCMB raised their main lending rate from 13.5% to 16.5% in an attempt to stop the slide. The market reaction was pronounced as the TRY gained almost 3000 pips in less than an hour.

However, the slide does seem to have continued this morning as the Lira has given back about half of those gains already.

(Remember: The chart is inverted so a downward movement indicates Lira strength and vice versa.)

Why are Cryptos Falling?

People keep asking me this. Even though I disagree with the premise, it’s still worth taking a good look.

First, it’s important to note that the crypto asset class as a whole has risen 330% over the last year. This is a massive growth for any market and should not be taken for granted.

The price of bitcoin on May 24th 2017 was $2,250 and at the time many thought it was a bubble and the price was too high. Today we’re seeing lows of $7,300, which isn’t as strong as the $20,000 peak but certainly still in a strong upward trend despite the sizable pullback.

If we really want to dive into the market movements, we need to take a good look at volumes. Here we can see that the total volumes have been dropping steadily over the last 3 months.

A year ago, a total volume of $250 million was extremely high, but today it’s considered really low. Especially when we consider that the December peak was above $250 billion.

Yesterday’s sell-off, which took bitcoin below $7,700 happened on rather large volume, as did the continuation of that sell-off this morning.

This sharp sell-off coinciding with a volume spike is not great news for the price action. As we stated several times this week, the support level to be watching is around $7,100. Let’s hope it holds.

 

Let’s have 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.

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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2 Comments

2 Comments

  1. Constantin

    May 24, 2018 at 4:05 pm

    This is long shot but .. can it be that somebody big is trying to enter the crypto market and it’s creating liquidity with this sell off?

  2. Mati Greenspan

    May 24, 2018 at 4:14 pm

    I suppose it’s possible but I wouldn’t say that it’s very likely. Any such allegation would need to come with a mountain of evidence, which I’ve not seen. The DoJ seems to be probing now though. 🙂

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Market Overview

Market Update: Dow Drops Nearly 300 Points on Trade War Threat

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U.S. stocks extended losses Tuesday, with Dow industrials registering their fifth consecutive decline after President Trump signaled to his administration that an additional round of Chinese tariffs could be on the way.

Stocks Tumble

All of Wall Street’s major indexes headed for losses as trade and political risks kept equity investors on the sidelines. The Dow Jones Industrial Average plunged 287.26 points, or 1.2%, to 24,700.21. Boeing Co (BA), Caterpillar Inc. (CAT) and DowDuPont (DWDP) were among the biggest decliners, falling at least 2.6%.

The broader S&P 500 Index headed for a loss of 0.4% to close at 2,762.57. Six of 11 primary sectors contributed to the declines, with industrials and materials each falling more than 1.8%.

The technology-driven Nasdaq Composite Index declined 0.3% to 7,725.58.

The CBOE Volatility Index, commonly known as the VIX, surged to its highest level in about three weeks. Wall Street’s preferred measure of investor anxiety jumped 8.5% to 13.35 on the scale of 1-100 where 20 represents the historic mean. The fear index touched a session high of 14.68.

Trade War Threat Escalates

U.S. President Donald Trump has warned China not to retaliate to Washington’s first round of export tariffs, which target up to $50 billion in Chinese goods.

Trump has asked his administration to prepare an additional list of $200 billion in Chinese goods that could be subject to tariffs should Beijing follow through with its threat to tax U.S. exports. This so-called second tranche of goods would be taxed at a rate of 10%. The first round of levies, which was confirmed Friday, will subject Chinese goods to a tax of 25%.

“Further action must be taken to encourage China to change its unfair practices, open its market to United States goods, and accept a more balanced trade relationship,” the U.S. president said in a statement.

China has vowed to implement a tariff policy of equal force and measure to the one Washington announced last week.

Earlier on Tuesday, the Senate passed a measure reinstating a ban on purchases of U.S. components by Chinese telecommunications giant ZTE Corp. that nearly shuts down the company. President Trump had sought to overturn the ban.

Cryptocurrencies Show Poise

Digital currencies continued to hold gains after prices jumped $13 billion in one hour of trading Monday afternoon. At the time of writing, the combined value of all crypto assets in circulation is $291.4 billion, according to CoinMarketCap.

Five of the top-ten coins by market cap are reporting gains over the last 24 hours, led by Tron’s more than 8% surge.

Bitcoin reached a high of $6,843.03, its best levels in a week. The largest cryptocurrency by market cap was last trading at $6,776.

Ethereum peaked at $542.35, its strongest showing in more than a week. Ether prices were last up 3.7% at $537.

The digital currency market has rebounded $27 billion from last week’s swing low. Much of the recent gain has been attributed to New York’s approval of a crypto trading app on Monday. The Department of Financial Services has granted Square’s Cash app a virtual currency license, which gives state residents the opportunity to buy and sell bitcoin on platform.

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 458 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

Pre-Market: Stocks Extend Losses on Next Round of US Tariffs

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The main European and Asian indices and US stock futures are all significantly lower just before the Wall Street session, as Donald Trump announced that the administration will seek to extend the trade tariffs targeted at China. The extension would affect another $200 billion of products, and it would be a major escalation of the, so far relatively limited trade skirmish.

Shanghai Composite, 4-Hour Chart Analysis

Asian markets are underperforming as Chinese equities have been smashed below key support in the wake of the announcement, but the previously outperforming US indices are also close to breaking their short-term uptrends. That said, the Nasdaq continues to be relatively strong, and the Russell 2000 is the best performing global benchmarks, as small-cap stocks are benefiting from the trade tariffs.

S&P 500, 4-Hour Chart Analysis

The housing market has been in focus with regards to economic releases, and while housing starts beat the consensus estimate, the more forward looking building permits unexpectedly declined in May. As the Fed is expected to continue with rate hikes, at least until the end of the year, further cooiling of the housing market is likely as mortgage rates are steadily rising.

Dollar and Yen Shine

Dollar Index (DXY), 4-Hour Chart Analysis

Forex markets are reflecting the risk off shift as well, with the US Dollar and especially the Japanese Yen performing well, and the Euro, the Aussie, and the Canadian Dollar lagging behind. Emerging Market currencies are still under heavy selling pressure, as trade war fears sparked flight to safety flows.

USD/TRY (Turkish Lira), 4-Hour Chart Analysis

While European markets are only hitting one-month lows, the Turkish Lira and the Brazilian Real are trading near all-time and multi-year lows respectively, as the Dollar’s strength continues to hut the fragile currencies.

Treasury yields are lower, but as safe haven flows are still concentrated on the longer end of the curve, short-term yield pressures haven’t eased much while the flattening of the yield curve continues in earnest.

Gold Futures, 4-Hour Chart Analysis

Commodities are in the red across the board, as the risk-off trade spread to the segment, with gold outperforming somewhat. The precious metal is still well below the $1300 level after last Friday’s steep drop, and it briefly spiked below the $1275 level as well. We still expect gold to resume it’s uptrend so the current levels could be good for accumulating investment positions in the metal. Crude oil is also lower, as volatile trading continued as expected, with the WTI contract trading near the $65 per barrel level before the OPEC meeting.

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 277 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

Escalation Overflow

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Hi Everyone,

Financial markets appear to be reacting to the latest escalation in the trade war between the U.S. and China.

It now appears that the United States may have the upper hand due to the wide trade imbalance between the two nations. Indeed, it would be very difficult for the Chinese to find $200 billion worth of US imports to curtail.

Under the circumstances, I guess you could say that markets are holding up pretty well, as we’ll see below. Even though the declines are sizeable, this doesn’t come close to the volatility we saw in February.

President Trump’s approval ratings are now as high as they’ve ever been despite outrage over recent hardline anti-immigration actions that saw authorities separating more than 2,300 children from their parents.

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

  • Stocks Minor Sell-off
  • What Brexit Negotiations?
  • Crypto Off the Lows (Focus on ETC)

Traditional Markets

Looking at the financial markets today it seems there is a bit of fear creeping in.

The Chinese stock market is down 3% and the Japanese market isn’t far behind with losses of 2.5%. Though these are quite substantial movements for any stock index, by putting things in context on the long-term chart we can see that it’s not the end of the world.

Please notice how in February, before the whole trade tensions began, the stocks experienced a much sharper sell-off.

On this chart of the VIX we can also see that even though volatility spiked yesterday, it’s still way below the levels seen in early February.

What is becoming more pronounced lately is the domination of the US Dollar.
The Greenback seems to be rising against just about everything over the last few months.

Here we can see the strength of the British Pound against the Buck since the Brexit referendum in 2016. We’re testing a critical level now at 1.3200

Please don’t make the mistake of thinking that this has anything do with the recent UK government uncertainty either. No matter the level of pressure Theresa May is under, the fate of the Pound may be more reliant on what happens with the US Dollar than on anything else.

As we can see above, the Euro and the Pound have both been pretty weak this quarter. To illustrate this further, take a look at the EURGBP, which hasn’t moved much over the last year.

Crypto Bounce

Digital assets pricing is up 2% to 4% across the board as the market shows exceptional resilience to the FUD.

Bitcoin itself has bounced noticeably above the support of $6,100 per coin and is trading above $6,700 this morning.

Outperforming the market by far is Ethereum Classic, which has seen some remarkable progressions lately in usability and liquidity. ETC is up 8% over the last 24 hours, which is more than any other widely circulating cryptocurrency.

For the first time ever, we can see that Google searches for Ethereum have surpassed those of Bitcoin Cash, the other famous hard fork coin.

Most interesting is the search trends in South Korea, where ETC now trumps BTC.

Looking at the long-term graph, we can see that at $15.33 per coin we’re well off the lows of $12.50, yet nowhere near the highs seen at the beginning of 2018.

Let’s have 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.

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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