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Market Overview

U.S. Stocks Break Even for August; Global Equities Record Tenth Month of Gains

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Wall Street and European stocks booked solid gains Thursday, with Asian markets following closely in their footsteps Friday. With the advance, U.S. stocks avoided monthly losses, while global equities notched their tenth consecutive monthly gain.

August Market Wrap

Before this week, the S&P 500 Index was on track for a monthly decline. But then a string of upbeat data bolstered confidence in the U.S. economy. The large-cap S&P 500 Index rose 0.6% on Thursday, closing at 2,471.65. That was the highest settlement in three weeks. The benchmark posted the narrowest of gains in August, edging up 0.1%.

The Dow Jones Industrial Average rose 0.3% on Thursday for a settlement of 21,948.10. For the month, it was down 0.1%.

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Meanwhile, the Nasdaq Composite Index climbed 1% to close at 6,428.66 on Thursday. It was up 1% for the month.

Globally, the FTSE All World Index has gained in four of the last five sessions, pulling the benchmark into positive territory for August. The August rally was the index’s tenth consecutive monthly advance.

 

Stronger Economic Signal from China

Chinese factory data came in better than expected this week, with a recent survey of small- and mid-sized manufacturers showing faster growth. The Caixin China manufacturing purchasing managers’ index (PMI) recorded 51.6 in August, up from 51.1 and confounding expectations of a slight drop.

On Thursday, the official manufacturing survey of large and state-run companies showed a PMI of 51.7.

The Chinese economy is coming off a solid first half, with GDP expanding at a faster than expected 6.9%. Policymakers are trying to engineer a consumer-driven recovery, but continue to rely on debt and traditional smokestack industries to fuel the expansion.

China’s expansion is part of a synchronized global recovery that extends to Japan, Eurozone and other advanced industrialized states.

September: A Difficult Month for Equities

The month of September is notoriously difficult for equities, especially Wall Street. Various studies have confirmed that September is the worst month for the benchmark indices.

Since 1950, the Dow Jones Industrial Average has declined by an average of 1.1% during the month, according to the Stock Trader’s Almanac. The S&P 500 has averaged a 0.7% drop over the 30-day period.

The downtrend has been confirmed by Bespoke, an independent research firm. The firm reported last year that September is the only month in which the Dow has been lower on average over the past 20, 50 and 100 years.

Market volumes are set to rise next week, as investors return from the Labor Day holiday. In North America, Labor Day marks the unofficial end to summer. It occurs on the first Monday of the month.

Monetary policy will be front and center in coming weeks. The Federal Reserve, European Central Bank, Bank of Japan and Bank of England are all scheduled to hold policy meetings.

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 101 rated postsSenior Market Analyst at Etoro.com.




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Market Overview

Market Update: Stocks Slide as U.S.-China Trade War Risks Reemerge

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U.S. stocks declined Friday, with the Dow briefly falling more than 200 points after the Trump administration moved ahead with planned duties on Chinese goods, reigniting fears of a global trade war.

Stock-Rally Falters

Risks of an all-out trade war dragged equity prices lower, with all of Wall Street’s major indexes posting declines. The Dow Jones Industrial Average fell 84.83 points, or 0.3%, to 25,090.48 with the likes of Caterpillar Inc. (CAT), and Chevron Corp (CVX) leading the declines.

The broader S&P 500 Index fell 0.1% to 2,779.42, with the majority of its primary sectors booking losses. Industries tied to primary goods were among the biggest decliners.

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The Nasdaq Composite Index fell from record levels, declining 0.2% to 7,746.38.

Implied volatility, as measured by the CBOE VIX, rose briefly on Friday before reversing gaind later in the session. The VIX fear index settled below 12 on a scale of 1-100 where 20 represents the historic average.

Trump Announces Tariffs

The Trump administration is moving forward with a plan to tax up to $50 billion in Chinese goods, sending a strong signal to Beijing that it will no longer tolerate theft of intellectual property.

A charge of 25% will be applied to Chinese goods that “contain industrially significant technologies,” President Trump announced Friday. The measures come “in light of China’s theft of intellectual property and its other unfair trade practices.”

Beijing responded swiftly by announcing it will implement import duties on the same scale as Washington. Neither country commented on the products that will be impacted.

China’s response was expected by President Trump, who said he would impose more tariffs if Beijing retaliates. Currently, the U.S. purchases far more from China than the other way around, which gives Washington some leeway in its tariff policy.

Investors are generally averse to any sign of protectionism in global markets, but this hasn’t stopped the Trump administration from recalling several of its current trade regimes in an effort to trim Washington’s deficit. Last  month, President Trump confirmed that Canada, Mexico and the European Union would be subject to import duties on steel and aluminum products.

Cryptocurrencies Stabilize After Tumultuous Week

The global cryptocurrency market stabilized Friday, as bitcoin rebounded from oversold levels and altcoins led by EOS reported gains.

All cryptocurrencies in circulation are collectively valued at $282.5 billion, according to CoinMarketCap. The market bottomed near $264 billion on Wednesday.

A top U.S. regulator delivered good news for cryptocurrency traders when he declared Ethereum not to be a security. Speaking at the Yahoo All Markets Summit event in San Francisco Thursday, SEC director William Hinman said Ethereum is too decentralized to be a security, which means it is in the same category as bitcoin.

The SEC has yet to issue a formal decree on Ethereum and it is not entirely clear whether a federal judge will agree with Hinman’s assertion. Advocates for Ethereum have rejoiced nevertheless given the ongoing debate over ether’s possible security status.

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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