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Analysis

Wall Street’s Fear Index Falls to Record Low as Stocks Rally, Dollar Slide Continues

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U.S. stocks powered to new highs on Wednesday, as volatility fell to its lowest level on record and investors continued to disavow the dollar after the Federal Reserve decided to stand pat on interest rates.

Fear? What Fear?

A measure of implied volatility known as the CBOE VIX declined Wednesday to its lowest level on record. At 2:01 p.m. ET, the VIX fell to 8.84 – three basis points below the Dec. 27, 1993 low. The index would later close at 9.60, or less than half of its historic mean.

Wednesday marked the tenth straight session Vol closed below 10.00, a remarkable feat for the seemingly never-ending bull market.

Stocks Show No Sign of Abating

A low volatility reading normally implies bullish conditions on Wall Street. That was certainly the case Wednesday when all three major indexes finished at record highs. The Dow Jones Industrial Average was the most notable gainer, adding 97.58 points, or 0.5%, to 21,711.01.

U.S. stocks were trading positively in the overnight futures market, with European futures also benefiting from the tailwind. If recent history is any indication, European equities will follow Wall Street’s lead on Thursday.

Dollar Plumbs 15-Month Lows

The U.S. dollar was back on the defensive Thursday, falling to its lowest level since April 2016. The dollar index (DXY), which tracks the performance of the greenback against a basket of six currencies, fell 0.4% during overnight trade.

Much of the dollar’s decline Thursday came at the hands of the yen and British pound, which have the second and third highest weighting in the DXY basket. The euro led the rally against the dollar on Wednesday, with the EUR/USD reaching fresh multi-year highs.

Dollar Discount Lifts Precious Metals

A weaker dollar spurred fresh gains for precious metals, with gold returning to its long-established inverse relationship with the greenback. December gold futures traded at six-week highs Thursday, having gained more than 1%. Silver also popped, gaining 1.5% to reach its highest level of the month.

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 661 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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Analysis

Pre-Market Analysis And Chartbook: Trade Deal Hope Boost Risk Assets as Pound Surges

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Tuesday Market Snapshot

Asset Current Value Daily Change
S&P 500 2,737 0.27%
DAX 30 11,381 0.49%
WTI Crude Oil 59.10 0.41%
GOLD 1,203 0.20%
Bitcoin 6,291 -0.42%
EUR/USD 1.1265 0.42%

After yesterday’s equity selloff and Dollar rally today we are seeing a counter-trend move in most asset classes thanks to the reports regarding some progress in the US-China trade talks. The optimism has been sparked by the planned US visit by the main Chinese negotiator which points to a renewed interest on the Chinese side that withdrew from the talks.

Stocks are slightly higher before the US open, but the short-term uptrend that carried the major indices significantly above the October lows seems to be broken, with especially the Nasdaq being set for a re-test as soon as this week. Currencies and commodities are also very active today, and as volatility is increasing across asset classes, a busy US session is likely.

GBP/USD, 4-Hour Chart Analysis

The Pound continues to be the most volatile major currency, even as the Dollar has been in the center of attention since the Fed meeting, with the looming Brexit deadlines increasing the tension in the market of the GBP. Interestingly, the Euro has been underperforming the Pound lately, due to the Italy related worries, and today the Pound is significantly higher against all of its major peers.

The Pound was also boosted by the British Employment Report, as the healthy wage growth figure outweighed the weaker than expected Unemployment Rate, at least as far as the forex markets are concerned. The GBP/USD pair jumped higher off the key 1.2850 support/resistance level that has been “in play” several times in the last few months, but the broader downtrend remains unharmed by today’s move.

S&P 500 Futures, 4-Hour Chart Analysis

The technical troubles are mounting on Wall Street, with the key benchmarks all turning sharply lower off last week’s highs. The Dow, which has been the strongest index this month also broke its rising trendline and dipped below several short-term support levels, similarly to the slightly weaker S&P 500 and the lagging Nasdaq.

The S&P 500 is now testing the key support zone near 2750, and given the broader bearish setup, we expect the large-cap index to revisit the October low in the coming weeks, with even an accelerating selloff being in the cards. The weak market internals are also pointing to further troubles for stock bulls, and we still wouldn’t buy the dip here.

Emerging Market Weakness Casts a Shadow on Risk Assets

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

While the main risk on currencies is higher today, looking at the weakest links of the October risk-rout, emerging market and European stocks, the picture is not pretty. We looked at the DAX’s wounded chart yesterday, and the most important emerging market ETF also shows signs of distress, with a test of the bear market low being seemingly inevitable in the near future, especially given the broad weakness across the developed markets as well.

Copper Futures, 4-Hour Chart Analysis

Commodities are mixed today amid the Chinese optimism, with the increasing volatility in oil still being the most interesting trend in the segment. The WTI contract fell back below the $60 level after yesterday’s initial bounce, and although it only hit a marginal new low today, and we still expect a larger bounce in the coming days in oil, sellers are still in control of the market.

Gold dipped below $1200 for the first time in a month, as the precious metal failed to reverse last week’s breakdown, threatening with a test of the $1180 support level. Copper avoided a new swing low below the $2.65 level, for now, and the metal is still within its broad consolidation pattern, thanks to the renewed trade-deal optimism, with the broader downtrend clearly being intact.

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

Shanghai Composite Index CFD, 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

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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4.7 stars on average, based on 392 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

Brent Crude Updating Lows

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Author: Dmitriy Gurkovskiy, Chief Analyst at RoboForex

Brent crude prices continue updating their multi-month lows. On Tuesday, November 13th, a barrel of Brent costs $68.51 USD, having lost more than 2%. As a result, “black gold” is currently trading near the levels it reached on April 9th this year.

The main reason why the oil prices are falling right now is a quick strengthening of the US currency. At the moment, EURUSD is trading close to the lowest levels over the last 18 months due to the liquidity absorption processes in the US financial system. The Federal Reserve continues to retire treasury bonds. Refinancing is not the case here, as the FRS just withdraws huge amounts of money from the monetary system, thus making the USD stronger and influencing costs of other assets.

Apart from the pressure that comes from the USD, the oil market is filled with other “bearish” news. The Baker Hughes Oil Rig Count report published on November 9th (+12 units) and rumors about the OPEC’s readiness to decrease crude oil production in order to stabilize commodity prices have already been included into quotes. As for facts that are already known, it’s Saudi Arabia’s strategy to reduce BOPD (Barrels Of Oil Per Day) in November and December.

At the same time, oil extraction and production in the USA are quickly growing, as can be seen in the weekly reports that show oil refinery plants utilization and the increase of oil reserves. For the companies involved in shale oil production, the current prices are pretty comfortable. It appears that the “bearish” tendency in the oil market may get even stronger.

As we can see in the daily chart of Brent, the descending impulse has broken the support line of the previous rising channel, which means that the current long-term tendency may change. In addition to this, one should note that the previous uptrend has been corrected by 38.2% and the price may continue trading towards the retracements of 50.0% and 61.8% at 65.83 and 60.80 respectively. The key downside target may be the support line of the projected channel at 60.80.

The H4 chart of Brent shows that the price is steadily trading inside the same channel, thus indicating a stable trend. At the same time, there is a convergence at MACD, which may indicate a possible ascending correction in the nearest future. A signal to start this correction may be either “Golden Cross” at MACD or breakout of the current resistance line at 72.00. The key correctional targets may be the retracements of 38.2% and 50.0% at 75.40 and 77.63 respectively.

Disclaimer

Any predictions contained herein are based on the authors’ particular opinion. This analysis shall not be treated as trading advice. RoboForex 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 17 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

Bitcoin Cash Continues To Drop Ahead Of The Hard Fork

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The past few months have been really quiet in the crypto world.  Traders are used to dealing with big stories and big drama.  And while there hasn’t been much drama over the past few months, that’s all about to change.  Bitcoin Cash (BCH) has had a crazy 30 days of trading ahead of its scheduled hard fork on November 15.

For a while, it appeared that BCH would be trading near a high as the fork commenced.  BCH had a strong rally for about a week starting on November 1.  The price soared by more than 50% as it reached its high of approximately $637.  But over the past week, the price has been tanking and doesn’t show any signs of recovering.  Since November 7, BCH has dropped in value by more than 20%.

Why Is Bitcoin Cash Falling Ahead of the Fork?

There are two possible explanations for why Bitcoin Cash is dropping ahead of the scheduled hard fork.  One reason is profit taking.  Although a 50% return wouldn’t have meant much in 2017, it certainly is a lot in 2018.  However, a second and potentially more troubling reason is the conflict between Bitcoin Cash SV and Bitcoin Cash ABC.

Craig Wright, an Australian computer scientist and the biggest proponent of Bitcoin Cash SV (BCHSV), appears to be at war with Roger Ver, the most famous name behind Bitcoin Cash ABC (BCHABC).  Wright was in the news recently after proclaiming to be Satoshi Nakamoto, the founding father of Bitcoin (BTC).

As of this writing, BCHABC is trading at $420 while BCHSV is trading at $118.  According to Coin Dance, data shows that a majority of hash power favors SV.  On the other hand, there are significantly more BCHABC nodes running on the Bitcoin Cash network than there are BCHSV nodes.  Although it’s interesting to look at this data, it’s quite simply impossible to determine what this means as far as which network will come out victorious.  Creating a BTC node is relatively inexpensive so a user could start several of them for under $1,000.  And while the hash rate is important for demonstrating PoW (proof-of-work), it’s meaningless if exchanges don’t accept the coin.

Bitfinex Support

On November 12, Bitfinex announced support for the Bitcoin Cash hard fork.  On the exchange’s twitter handle, they tweeted, “We are happy to provide full support for the upcoming Bitcoin Cash hard fork.”  While the support is certainly helpful for traders, Bitfinex wouldn’t commit to choosing a side.  Instead, the exchange said, “At the time of writing, we do not believe that there is sufficient consensus to identify a clear winner in the Bitcoin Cash hard fork.”  Bitfinex expects to release an additional statement on November 16.  Traders should certainly pay attention to that as it could be material.

Final Thoughts

There is an incredible amount of information to digest regarding the hard fork.  As of this writing, it’s unclear which side will prevail as both certainly have their positives and negatives.  Given the recent slide of Bitcoin Cash, BCH holders should certainly be paying very close attention as the hard fork nears.

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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