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Market Overview

US Dollar Unhinged

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Hi Everybody,

One of the trickiest questions I’ve ever been asked by a journalist was: Aren’t cryptocurrencies just an easy way for rogue governments to skirt international sanctions?

I was stumped. Certainly, we can all see the value in a currency that operates independently of governments and banks, but does that mean that adherence to globally recognized standards is history?

For the ICO market, we’ve seen that many of the more obvious scams were called out rather quickly by the community. Unfortunately, some may have fallen foul of these scams, not nearly as much money has been lost as it has in other types of scams.

After some consideration, the above argument bears similarities to that around free speech. Should we allow people to voice harmful opinions? The classic answer to that is “yes.” For fear of repressing the oppressed, we should allow all to speak and let the validity of their arguments carry, or drown.

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

  • Higher Yields
  • Italian Exposure
  • Unhinged Crypto

Please note: All data, figures & graphs are valid as of May 17th. All trading carries risk. Only risk capital you can afford to lose.

Traditional Markets

Bond Yields are tracking higher today, which does seem to be weighing down on the stock market at the moment.

Here’s a snapshot of the 10 year yield…

…and here are the stock markets over the last two weeks….

As you can see, the rally is having a difficult time climbing higher in the face of higher borrowing costs. Of course, the bond moves in the US are rather small compared to what’s happening in Italy right now.

The Italian 10-year has gone from 1.71 to 2.11 in the last month. For cryptotraders this may not seem like much but for the bond market that currently houses much of the world’s investments, this is a massive movement.

Within Italy itself, the situation is potentially explosive. Here we can see overall exposure that various banks have to Italian bonds. Notice the overwhelming presence of triple digit numbers here?

The silver lining here is that the fear of contagion is now far less than it was a few years back as it seems that most of the debt is confined to domestic banks.

Many thanks to one of our Italian traders on eToro for tagging me in this post

We’ve also recently highlighted the Turkish Lira, so here’s a current look at that. As you can see, it’s still falling sharply.

(Reminder: Inverted graph)

Crypto Unhinged

Though the possibility of the US Dollar losing its status as the global reserve currency is extremely low, over the course of history these types of things have happened before.

In the crypto market however, anomalies are far more commonplace. Stable coins are designed to allow people to transact using cryptocurrencies while reducing the risk that lies in the extreme volatility prevalent in this particular market.

Sometimes, things don’t exactly go according to plan though. Even though the TrueUSD coin seems to be more decentralized and transparent than previous versions of this concept, market forces can sometimes be stronger than economic theories.

In this case, the coin was introduced to a new platform, one of the largest in the industry, rather suddenly. This surge in volume caused the price to spike by 35% in the span of three hours, and it took the market an additional 10 hours to bring it back it’s intended level and even out.

The moral of the story is that though we can’t ever tell the future, we can make decisions on our investments to take advantage of both short term and long term shifts in valuation.

If your risk is all in one place than you’re either going to have a very good or a very bad time, probably both depending on the day. However, the more you diversify your portfolio into many different types of investments, the more you reduce your risk and in the end, you’ll likely be able to sleep a lot better at night.

As always, please continue sending me your excellent questions and comments. Let’s have an amazing 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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4.6 stars on average, based on 133 rated postsSenior Market Analyst at Etoro.com.




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Market Overview

Market Update: U.S. Stocks Dragged Lower by Financials, Energy Companies; China Rebounds

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U.S. stocks finished mostly lower on Monday, as brisk selloffs of financials and energy shares offset modest gains in the technology and communication sectors. A large relief rally in China failed to ignite a similar revival in Europe and North America as concerns over global growth dampened investors’ appetite.

U.S. Stocks Sputter

The S&P 500 Index opened in positive territory before wobbling during the morning session and eventually turning lower in in afternoon trade. The broad index settled down 0.4% at 2,755.88, with a majority of sectors finishing in the red. Energy and financials were the biggest decliners, each falling more than 1% as a sector.

Modest gains in tech pushed the Nasdaq Composite Index to higher ground. The benchmark rose 0.3% to close at 7,468.63.

Dow industrials declined 126.86 points, or 0.5%, to 25,317.48. DowDupont Inc. (DD), American Express Co (AMX) and Goldman Sachs Group Inc (GS) were among the biggest decliners.

European markets also headed for losses on Monday, with all major continental bourses finishing in the red. The Euro Stoxx 50 Pr index closed down 0.7%,

China’s Biggest Rally in Three Years

Chinese markets exploded higher on Monday, with the mainland indexes posting their biggest single-day advance in almost three years following reassuring comments from government officials last week.

The benchmark Shanghai Composite Index surged 4.1% while the CSI 300 Index closed 4.3% higher, its largest advance since November 2015. Hong Kong’s Heng Seng Index rose 2.3%.

Government officials ranging from the Vice Premier to the heads of the People’s Bank of China talked up the domestic economy last week, reassuring investors that the ongoing trade war with the United States would not have a material effect on the nation. President Trump has implemented tariffs on more than $250 billion worth of Chinese imports, making whole on a campaign promise to hold Beijing to account for its unfair trade practices. According to the International Monetary Fund, the trade spat will result in both economies growing 0.2 percentage point slower next year. This will also lead to a downshift in global growth.

Last week, China reported annual GDP growth of 6.5% during the third quarter, the slowest since 2009. On Friday, the U.S. Department of Labor is expected to release preliminary Q3 GDP figures.

Lackluster Session for Cryptocurrencies

Risk-off sentiment in global equity markets in hasn’t translated into higher demand for bitcoin and other digital assets. On Monday, cryptocurrency prices traded slightly to the downside, erasing minor gains made during the previous session. At the time of writing, the total market capitalization of all coins was just over $209 billion, according to CoinMarketCap.

The bitcoin price swung back below $6,500, though losses were generally well contained. Ethereum, XRP and bitcoin cash all traded slightly lower on a 24-hour basis.

Digital currencies are experiencing a downshift in volatility as well as in trade volumes, with investors unwilling to commit to either direction. Recent history has taught us that prolonged periods of lateral moves are usually followed by sharp declines in subsequent sessions.

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 649 rated postsSam Bourgi is Chief Editor to Hacked.com, where he leads content development for one of the world's foremost cryptocurrency resources. Over the past eight years Sam has authored more than 10,000 articles and over 40 whitepapers in the fields of labor market economics, emerging technologies, cryptocurrency and traditional finance. Sam's work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Contact: sam@hacked.com Twitter: @hsbourgi




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Market Overview

Cautiously Flying

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Hi Everyone,

It’s only Monday and already it seems to be one of the most exciting weeks of the year for the financial markets. Asian stocks are flying this morning (the reason for this below) despite some clear signs that investors are still cautious.

One of these signs is the price of gold, which has spiked during the sell-off two weeks ago (purple circle) but is now showing signs that it may be ready to stretch higher (yellow rising support line).

The fact that gold is trading near its highs is not necessarily any indication in and of itself. The upcoming Diwali Festival in India is traditionally a time when gold prices tend to rise.

As we’ll see below, investors are still happy to pour money into this market but they are doing so very carefully right now.

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

  • Chinese Support
  • Mark’s Market
  • Even more stable crypto

Please note: All data, figures & graphs are valid as of October 22nd. All trading carries risk. Only risk capital you can afford to lose.

Traditional Markets

As we mentioned above, Chinese stocks are flying. The China 50 index is up an astonishing 5.3% as of this writing. This is largely due to strong support from President Xi Xinping…

We’ve seen these type of stunts before from President Trump but this behaviour does seem to be new for the Chinese leader.

The timing is impeccable here too. As we’ve been watching, the Chinese stock markets have been on the ropes after retreating more than 30% since the year’s highs. However, the Xi’s gambit may have fallen short of the mark.

As we can see below, the red line being defended on the China50 is just above 10,500 points. Whereas, to break out of the current range to the upside we’d need to see levels above 12,000.

Cautious Like an Oak Tree

For legendary investor Howard Marks, the markets are not so binary. The co-founder of Oaktree Capital does see the current markets as expensive but adds that this doesn’t mean we’re about to see a crash. The economy is doing well and therefore it pays to be in the market, but defensively.

We all know that markets are cyclical. They go through bull times and bear. However, not every rise is a bubble and not every decline is a crash. In fact, most market moves are a lot more moderate.

Marks’ theories are always fascinating even if they sometimes differ from my own, especially when it comes to bitcoin. I’ve been enjoying his email alerts for a while now, but this interview on Bloomberg opened my eyes in a new way.

Crypto Markets

Crypto markets remain steady and are showing even more signs of stability. Tether seems to have regained most of its composure and is now trading within 2 cents of the $1 mark, right where it should be.

In the meantime, volumes on other stable coins have stepped up to further stabilize the market. In this graph from theblockcrypto.com we can see USDT’s dominance of the stablecoin market dropping sharply since the incident on October 15th.

As we see more stable coins join the market, the safer the market will become. According to CCN there are more than 50 active stablecoins at the moment with more coming out all the time. At the moment, it seems that the one eating into Tether’s market share is Paxos, which is both regulated and rising quickly in volumes.

Wishing you an amazing week 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

Connect with me on….

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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4.6 stars on average, based on 133 rated postsSenior Market Analyst at Etoro.com.




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Analysis

Pre-Market Analysis And Chartbook: Chinese Stocks Extend Rally

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Monday Market Snapshot

Asset Current Value Daily Change
S&P 500 2,773 0.22
DAX 30 11,629 0.65%
WTI Crude Oil 69.42 0.07%
GOLD 1,226 -0.28%
Bitcoin 6,406 -0.10%
EUR/USD 1.1513 0.01%

Global stock markets started out the week on a positive note, with Chinese equities surging higher, extending their late-day gains from Friday. European and US indices are not that enthusiastic though, and from a technical standpoint, today’s early rally didn’t change anything yet, with the declining trends in the majority of risk assets being intact. With the economic calendar being empty today, technicals, the EU-Italy debate, and the Khashoggi-assassination will likely be in focus.

Shanghai Composite Index CFD, 4-Hour Chart Analysis

The Shanghai Composite gained the most in two days in over 2 years, with the active help of PBOC, and the benchmark is now testing the previous support that held up Chinese stocks during the bear market. The index broke above one declining trendline and that could open up the way for a larger correction, even if the broader trend is still clearly bearish. The 2700 level could be in the center of attention this week, especially if global markets can also rally following two weeks of turmoil.

S&P 500 Futures, 4-Hour Chart Analysis

US stock futures are broadly higher in European trading, but the momentum of the move is very weak, and the gains of the Asian session are already eroding. From a technical standpoint, the short-term picture is clearly bearish and the charts suggest a test of the lows this week, especially as small-caps continue to underperform and market internals are negative.

Treasury yields are unchanged so far, as Italian assets are up today, and safe haven flows slightly reversed in early trading. The short-end of the yield curve is still very close to its recent highs, and with the European Central Bank’s rate decision on tap this week, we expect further fireworks in bonds, and in turn equities.

Currencies Already Active as Emerging Markets Still in Trouble

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

While the Chinese rally helped equities across the board, other emerging markets lagged on Friday, and despite today’s bounce their technical position still suggests troubles ahead. The EEM ETF is set to open well below the break-out level near 41, and with that, the segment is among the weakest parts of the global market. While the most vulnerable currencies are still performing very well, stocks are seemingly sinking into a grueling bear market.

Elsewhere in currencies, we already saw relatively large moves to start the week, as the EUR/USD rallied up to 1.1550 thanks to the optimism regarding the Italian budget. The most traded pair already sunk back in the red, and the Dollar is higher against most of its peers, reversing some of Friday’s pullback. The Japanese Yen is the weakest so far, due to the Asian risk-on shift, and gold is also lower today as safe-haven assets are struggling.

Copper Futures, 4-Hour Chart Analysis

Besides gold, the key commodities are higher thanks to the Chinese rally, but both crude oil and copper are still below key resistance levels, as technicals are unchanged, so far today. The WTI crude contract is trading below the $70 per barrel level, while copper advanced up to the declining trendline of the consolidation pattern that has been dominating trading in the metal for almost a month.

ChartBook

Major Stock Indices

Nasdaq 100 Futures, 4-Hour Chart Analysis

Dow 30 Futures, 4-Hour Chart Analysis

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

DAX 30 Index CFD, 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

Forex

EUR/USD, 4-Hour Chart Analysis

USD/JPY, 4-Hour Chart Analysis

GBP/USD, 4-Hour Chart Analysis

EUR/GBP, 4-Hour Chart Analysis

AUD/USD, 4-Hour Chart Analysis

Commodities

WTI Crude Oil, 4-Hour Chart Analysis

Gold 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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4.6 stars on average, based on 380 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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Hacked.com and its team members have pledged to reject any form of advertisement or sponsorships from 3rd parties. We will always be neutral and we strive towards a fully unbiased view on all topics. Whenever an author has a conflicting interest, that should be clearly stated in the post itself with a disclaimer. If you suspect that one of our team members are biased, please notify me immediately at jonas.borchgrevink(at)hacked.com.

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