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Analysis

Treasury Yields Up, Stocks Slightly Lower After Fed Rate Hike

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The crucial part of the busy week in financial markets started today in late trading, as the aftermath of the Federal Reserve’s rate decision saw the usual elevated trading activity. The central bank raised its benchmark rate by 0.25% (to a 1.75-2% range) as expected, and gave a slightly more hawkish than expected guidance causing some turbulence across the board. The bank hinted on two more rate hikes this year while the consensus was closer to only one more tightening step before the announcement.

US 2-Year Treasury Yield, 4-Hour Chart Analysis

Short-dated Treasury yields surged to higher in the US, with the longer end of the yield curve also shifting higher briefly, but as the dust settled, long-term rates pulled back. This further flattening of the yield curve reiterates fears that the Fed’s tightening cycle could push global growth lower, and the reflected in a slight dip in equities, and volatility in the recently weak emerging markets currencies.

S&P 500 Futures, Daily Chart Analysis

The renewed US-Chinese trade war fears also weighed on sentiment, but the leading global indices, the NASDAQ and the Russell 2000 are still just a hair off their all-time highs. The strong divergences are still present though, with the S&P 500 and the Dow still several percents off even their January highs, and the European and most of the Asian benchmarks being in even worse shape.

Dollar Drifts Lower as ECB Enters Spotlight

EUR/USD, 4-Hour Chart Analysis

The EUR/USD pair was in the center of attention around the Fed’s announcement, with the ECB’s meeting scheduled for tomorrow, but despite a brief selloff, the Euro finished the day in the green, back near the 1.18 level.

The market expects a hawkish turn by the ECB too, with several analysts awaiting the announcement of the end of the bank’s quantitative easing program, which could lead to a surge in the common currency.

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

While the USD pulled back against its largest peers today, despite the rate hike and the higher than expected US PPI (Producer Price Index), emerging market currencies remained under pressure. The Turkish Lira is now lower than the levels before the second rate hike of the Turkish Central bank, and it’s also close to erasing the gains since the first, emergency rate hike.

The Argentinean and Brazilian currencies are also near their lows, despite the IMF bailout and central banks interventions, so risks remain elevated in interest rate sensitive assets, especially after the hawkish Fed release.

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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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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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Analysis

Crypto Update: Coins Lower in Choppy Trading

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Summer conditions have been dominating the cryptocurrency segment in recent days as the majors failed to gather bullish momentum after the oversold bounce of the second half of last week. The technical setup didn’t change much in the top coins, although the consolidation cleared the short-term oversold momentum readings.

Ripple remains the strongest altcoin from a short-term perspective after its strong oversold rally, while Bitcoin is the most stable in the whole segment. That said, as Ripple is still in a declining broader trend, well below the structural break-down level from two weeks ago, traders should be cautious with new positions. Also, Bitcoin failed to move above the $6500 level, so the largest coin didn’t trigger a short-term buy signal, leaving the overall picture overwhelmingly bearish.

ETH/USDT, 4-Hour Chart Analysis

Ethereum is still among the weakest majors, and as it failed to stay above $300, and spiked below $275, a renewed short-term sell signal is very close, while the long-term sell signal is clearly in place. ETH cleared the short-term oversold momentum readings, and now a test of the lows near seems likely even as from a longer-term perspective the coin is still stretched on the downside. Above $300 strong resistance is at $335, while the next level of support is near $235.

BTC/USD, 4-Hour Chart Analysis

Bitcoin has been trading in a narrow range in the last few days, as the market settled down near the $6500 level. The coin spiked below the short-term resistance near $6275 in late trading, but with no clear momentum in the market, BTC remains neutral from a short-term standpoint. As the long-term support level near $5850 is still standing, Bitcoin also avoided a long-term sell signal so far, but traders still shouldn’t enter new positions.

Still No Leadership Present as Coins Fail to Join Rally

LTC/USD, 4-Hour Chart Analysis

While correlations broke down somewhat during the bounce, the conditions for a broader trend change are still not met, as despite Ripple’s strength and Bitcoin’ stability there is no strong evidence of accumulation among the majors. Litecoin and Monero failed to build on the early signs of strength that they showed during the latest leg lower, and the other relatively weak coin, like NEO, Dash, and IOTA continue to show vulnerability.

XRP/USDT, 4-Hour Chart Analysis

With all those in mind, the rally in Ripple remains suspicious, despite the spike up to $0.375. The coin is currently trading in a choppy consolidation pattern, stuck between the $0.30-$0.32 zone and the $0.35 resistance level. While the short-term buy signal remains intact for now, a dip below $0.30 would warn of a test of the lows near $0.26.

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 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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Analysis

Crypto Update: Ethereum Classic on Track for a Bullish Reversal

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Ethereum Classic (ETC/USD) is among the many altcoins that suffered a massive beating this year. While the pair managed to go as high as $47.296 on January 14, 2018, it has been on a downward spiral ever since. On August 14, it registered a low of $10.10 and at that price point, Ethereum Classic has shed close to 80% of its value from this year’s high.

Just as gloom and doom articles started to circulate on the internet, Ethereum Classic came back from the dead. The market is still weak but it is gaining strength. In this article, we reveal three reasons why we believe ETC is on track for a bullish reversal.

Successful Backtest of a Breakout

Many investors believed that Ethereum Classic was headed into even deeper bear territory. It breached support of $12.00 on August 13 and generated another lower low. After all, lower highs and lower lows are the hallmarks of a downtrend. ETC seems consistent in following the textbook definition of a downtrend.

With these developments, it’s difficult to imagine that Ethereum Classic has already broken out of a reversal pattern. However, it did break out of the large falling wedge on the daily and weekly charts. What we’re seeing right now is the backtesting of the breakout.

Daily chart of ETC/USD

In technical analysis, a resistance becomes a support level once breached. The chart above shows the clear breach of the resistance, hence the breakout. Even with the breakout, Ethereum Classic still dropped. This may seem counterintuitive that’s why many are still saying that the market is bearish.

However, the chart clearly depicts that ETC bounced from the support. It is respecting the new support, which means the breakout is still valid. The backtesting was a resounding success.  

Ethereum Classic Indicators Look Strong

We’re bullish on Ethereum Classic because technical indicators are glowing. Ignore the price drop and you’ll see that the market is gaining strength.

A quick look at the weekly chart reveals that bulls are returning in massive numbers. The extreme volume surge over the last two weeks tells us that bulls are buying the market. The last time ETC printed the same volume level was back in February 2018. However, this is the first time the market is printing such heavy volume for two consecutive weeks.

Weekly chart of ETC/USD

On top of that, a long bullish divergence can be spotted on the daily MACD. Also, ETC has bounced from historic daily Stochastic support of 7.00. These indicators tell us that bulls are wrestling the momentum away from bears.

Daily chart of ETC/USD with indicators

Projected Move

ETC/USD may be looking bullish, but that doesn’t mean that the market will skyrocket anytime soon. On the contrary, it would be better for the long-term health of the market for the price to consolidate between $12 – $20 before making a major move up. If a massive rally occurs that works, too. Whatever happens, we believe that the future looks rosy for ETC.

ETC/USD may have bottomed out

The main reason for the optimism is because the market just bounced from its historic support. This tells us that a bottom may be in place and it’s highly likely that ETC will not go anywhere but up.

Bottom Line

ETC may look extremely bearish but a closer look tells us the exact opposite. The successful backtest of the breakout and the flashing of bullish signals from multiple technical indicators tell us that Ethereum Classic is on track for a bullish reversal.

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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3.6 stars on average, based on 225 rated postsKiril is a financial professional with 4+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and ETFs, as he does his own crypto research and is the subject matter expert at ETFdb.com. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.




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Analysis

Ethereum’s Tumble:  ICOs Aren’t The Problem

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Trying to come up with a rational explanation for crypto price movements is a thankless task. Sure, there are several attempts being made by quant jocks to develop a model for valuing coins and tokens.  Most of these that I have reviewed suggest that prices undervalue both the underlying asset or the eventual demand.

In other words, crypto prices are cheap: what a surprise.

This bit of wisdom may be of some comfort to committed long term investors, but it hasn’t translated into higher market prices. A good example of this is Ether. Over the past six months, while Bitcoin has been treading water (down 7%), the price of Ether has been cut in half.  This altcoin was the topic of one of my recent articles called: Has Ethereum Lost It’s Cache?

The essence of this article was to point out how Ethereum, the platform preferred by 75%-80% of all ICOs, was suffering from investor indifference.  When you measure the activity of the top 100 tokens according to CoinMarketCap.com, the US dollar value of 9 of the top 10 most actively traded amounted to an average of $14,000 over the previous 24 hours.  Please keep in mind, trading activity in ETH over the same 24 hour period amounted to $1.8 billion USD.

Bloomberg Speak

One of the more interesting contradictions to my research into Ethereum’s plight comes from an article originating from a highly respected source: Bloomberg News.  The headline reads: “Ether Tumbles as Concern Increases That ICOs Are Cashing Out”.  It is totally defies the data to believe that every ICO cashing out when there is almost no volume to confirm this claim.

Quoting from an August 13th article:

Initial coin offerings using the Ethereum blockchain are seen as one of the main catalysts for sending Ether’s price surging last year. Now they’re being blamed for its decline.

It is quite true that initial coin offerings using the Ethereum blockchain was a catalyst for sending Ether’s price surging last year. It gave investors a reason to buy Ether even if they didn’t tell an ICO from a UFO. But are ICOs the real blame for both the good and the bad of Ethereum price?  I will step aside and let you be the judge.

For starters it is important to remember that ICOs raised $2.4 billion last year while ETH value appreciated almost $70 billion. The concept of ICOs may have fueled blind speculation but the math tells us that real demand was much less.

As for taking the blame for falling ETH prices, consider this notion. At its peak in January ETH was valued at $133 billion.  Currently that value is $100 billion+ lower than just eights months ago.

Using the data from ICOWatchList.com, since the beginning of 2017 ICOs have raised a total of $8.5 billion.  The statistical experts claim the Ethereum platform was used by between 80%-83% of all ICOs, thus reducing the $8.5 billion number to $5.7 billion.  

There is no question that ICOs influenced ETH speculators but that doesn’t begin to explain the more than $600 billion in aggregate losses for all crypto assets.   

Criticism Of Startup Managements

Critics claim that ICOs give startups the ability to raise lots of capital but they are proving weak in management on the funds once they are in their crypto wallet.  There is a certain validity to this since the number of founders with deep experience as CEOs and CFOs is pretty limited. But how can anyone separate insider selling activity from all other volume?

Research website Santiment, which compiles a selection of Ethereum-based projects, estimates startups have spent over 110,000 Ether in the past 30 days. At current prices that amounts to about $33 million.  For sake of discussion, let’s assume this high rate of token liquidation took place each and every month this year. Then use and average ETH price of $700 and that brings the total to $616 million.

There is no question that ICO sellers have contributed to the decline in ETH.  It would even be fair to call it a catalyst that created fear of losing all (FOLA).  Now if we could only quantify fear with an index like the VIX used by stock investors, we would see the major cause of the decline.

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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4.4 stars on average, based on 97 rated postsJames Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.




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