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Week in Review: Bitcoin Through the Stratosphere, and Nothing Even Comes Close

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Bitcoin put up an epic rally this week, upstaging equities and political developments centered on tax and the Federal Reserve. An impressive rise in crude oil also made headlines, as investors continued looked on favorably to speculation that OPEC is considering extending its production cuts well into 2018.

BTC/USD Hits $7,000, and then Blows Past It

Bitcoin posted one of its more dramatic rallies this week en route to fresh records. BTC/USD surged to $7,000 and beyond, adding a staggering 24% over a five-day stretch. At press time, BTC/USD was trading at $7,213 for a market capitalization of $120 billion.

A multitude of forces have combined to give bitcoin a market cap that rivals some of Wall Street’s biggest companies. Chief among them is the prospect of greater institutional cash flow following news that CME Group is planning to launch BTC futures contracts. In doing so, CME joins rival CBOE in embracing digital currency.

Bitcoin’s rally failed to generate additional buying interest in altcoins this week. Though the altcoin market improved on Friday, the likes of Ethereum, Ripple and Litecoin struggled throughout the week.

Stocks Return to Record Territory

Wall Street put up steady gains this week, as all three major benchmarks closed at record highs. The Dow Jones Industrial Average climbed rose 0.4% during the week to finish at 23,539.19. The large-cap S&P 500 Index eked out a five-day gain of 0.2% to close at 2,587.84. Meanwhile, the tech-driven Nasdaq Composite Index added nearly 1% to settle at 6,764.43 on Friday.

Technology stocks continued their upward climb after being responsible for 75% of equity returns in October.

Implied volatility also dropped to their lowest level since the summer, as investors kept their portfolios heavily invested in the stock market. The Chicago Board Options Exchange (CBOE) Volatility Index plunged 8% on Friday to close at 9.14. The so-called “fear index” trades on a scale of 1-100, where 20 represents the historic mean.

Powell Gets Fed Nomination

On Thursday, U.S. President Donald Trump  nominated Jerome Powell to lead the Federal Reserve once Janet Yellen’s term expires in February. The move ensures continuity in terms of monetary policy only without Yellen, a Democrat who was on the outs with the current administration.

“Today is an important milestone on the path to restoring economic opportunity to the American people,” Trump said in a press conference Thursday.

“He’s strong, he’s committed and he’s smart, and if he is confirmed by the Senate, Jay will put his considerable talents and experience to work leading our nation’s independent central bank,” Trump said in reference to Powell.

Powell is a current governor with the Fed, and is a voting member of this year’s Federal Open Market Committee. Speculation surrounding his appointment upstaged the Fed’s two-day policy meeting that ran until Wednesday. As expected, policymakers kept interest rates on hold until December.

Crude Oil at 2017 Highs as Rally Continues

Oil prices continued to soar this week, reaching their highest levels of the year on an improved demand outlook and signs that peak supplies were simmering down. U.S. West Texas Intermediate (WTI) for December settlement added 3.2% for the week to close at $55.64 a barrel.

The January futures contract for Brent crude added 2.7% for the week to finish at $62.07 a barrel.

Crude prices received a boost on Friday after rig-services provider Baker Hughes reported another weekly drop in active rigs. Drillers operated 11 fewer rigs last week, most of which was due to a loss in the number of active oil rigs. That was the largest decline this year.

U.S. Jobs Market Back on Track

It has been a positive month for the U.S. labor market after two devastating hurricanes took a knife to the official jobs numbers.

On Thursday, the Labor Department said weekly jobless claims fell to the lowest level in over 44 years. Twenty-four hours later, the same department announced the creation of 261,000 jobs for the month of October. Though far below forecasts of 310,000, the prognosticators discounted a sharp upward revision during the previous month. As it turns out, the economy created 18,000 jobs in a hurricane-ridden month. The original report showed a decline of 33,000 jobs.

Fewer layoffs and more hiring are positive signs for an economy that has shifted into higher gear over the last eight months. America under Trump has been more confident and far more optimistic about the future – at least when measured along certain economic indicators and the stock market. The president is still dealing with an abysmal approval rating, although that could be attributed to sharp partisanship on the part of U.S. voters.

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 503 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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Market Overview

Market Update: U.S. Stocks Edge Lower in Tepid Trading; Earnings Up 21% So Far

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U.S. stocks finished mixed-to-lower Friday as trade uncertainty outweighed robust corporate earnings from Microsoft, one of the tech industry’s most closely-watched blue-chips.

Stocks Struggle for Direction

All of Wall Street’s major indexes hovered around break-even in afternoon trade, with the S&P 500 Index and Nasdaq eventually settling lower.

The large-cap S&P 500 edged down 0.1% to 2,801.83. Eight of 11 primary sectors led by utilities and consumer shares finished in the red.

The tech-focused Nasdaq Composite Index closed down 0.1% at 7,820.20.

Dow industrials were virtually unchanged by the close, settling at 25,058.12.

Wall Street’s VIX fear index, which trades on a scale of 1-100, was virtually unchanged at 12.86.

Earnings on Track for Large Gains

Shares of Microsoft Corp (MSFT) rose to all-time highs after the company reported stronger than expected corporate results late Thursday. The tech juggernaut posted per-share earnings of $1.14 on revenue of $30.1 billion during its fiscal fourth-quarter. Analysts on Wall Street called for earnings of $1.08 per share on sales of $29.2 billion.

Guidance was a big factor in the company’s strong performance Friday. Microsoft said it expected first-quarter revenue of between $27.35 billion and $28.05 billion. Analysts had expected a revenue guidance of $27.4 billion.

General Electric Co (GE), a former Dow blue-chip, also reported earnings and revenue that were higher than expected. However, the company’s share price declined sharply Friday.

S&P 500 companies have reported an annual earnings growth rate of 20.8% for the second quarter, according to FactSet. Eighty-three percent of S&P 500 companies have yet to report.

Trump Breaks Precedent

On Thursday, U.S. President Donald Trump scolded the Federal Reserve for raising interest rates, a move that put him at odds with a long line of presidents who have refused to get involved in central bank policy.

According to Trump, the Fed’s plan to raise interest rates could hurt disrupt the economy at a time when the recovery engine was gaining momentum.

A White House statement later clarified that the president is not trying to influence Fed policy:

“Of course the President respects the independence of the Fed. As he said he considers the Federal Reserve Board Chair Jerome Powell a very good man and that he is not interfering with Fed policy decisions ” the statement said. “The President’s views on interest rates are well known and his comments today are a reiteration of those long held positions, and public comments.”

The U.S. central bank has raised interest rates twice this year and is planning on hiking twice more in 2018.

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 503 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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Market Overview

Bankers & Politicians

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Hi Everyone,

Today is the day. Out of all the meetups, conferences, and hearings that we’ve seen regarding the future of money over the last year, imho none are as critical as the decision expected from India’s supreme court today.

Like several other places in the world, the Indian government is now working hard to form their policy regarding bitcoin and cryptocurrencies but the banking sector has made it clear that they will do everything in their power to halt this.

When Prime Minister Modi made the move to remove 86% of the paper money in India on November 8th, 2016 he inadvertently handed a big win to the banking system and it seems they’re willing to do everything in their power to maintain the status quo.

The crypto ban imposed by the Reserve Bank of India earlier this month is a clear example of this effort. Let’s hope that the judicial system sees through this today and strikes down this policy, doing what is right for the wider public now and for future generations.

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

  • Central Bank Independence
  • Stock Markets are Mixed
  • Divergence in Crypto

Please note: All data, figures & graphs are valid as of July 20th. All trading carries risk. Only risk capital you can afford to lose.

Traditional Markets

It was funny, but yesterday I was teaching a group of new eToro representatives about central banks and happened to use an example of what’s happening in the news.

The point I was making is that central banks are officially disconnected from politics but that politics do end up influencing their actions and vice versa.

In his testimony on Wednesday, Fed Chair Jerome Powell did his best not to take sides on the current trade dispute between the USA and China. However, when pressed, he did admit that the proposed sanctions of $200 billion on Chinese imports would have a negative impact on the economy.

This is similar to when Mark Carney, the Governor of the Bank of England, stated before the Brexit referendum that if the vote passes it would hurt the Pound. The statement doesn’t take sides, it simply states the view of someone who is in a good position to understand the economic impact.

So, it was a bit surprising that a few hours after our lesson, Donald Trump had a few remarks of his own about what he thinks the Fed should or shouldn’t be doing.

Though President Trump insists that he’s not trying to influence the Fed’s decision, the very fact that he stated his opinion will likely have an impact on policy, it certainly had an impact on the markets.

Here we can see the US Dollar falling at the time of the interview.

The price of gold also reacted to the administration’s new policy.

Well… maybe not a new policy. Trump did blast Yellen while on the campaign trail for raising interest rates but this is the first time that any US President has so publicly disputed central bank policy, at least not since Bush Senior & Greenspan.

Meanwhile, Trump is still under pressure for his performance with Putin in Helsinki and we’re watching that play out in the press and in Congress.

Stock markets remain mixed while all this sinks in.

Mixed Crypto Rally

There’s been a lot of excitement in the crypto markets over the last few days and everybody wants to know where this is going.

Here’s an article that’s rather bullish…

…and here is one that’s quite bearish…

My thoughts…

It’s still too early to say for certain. The chart of bitcoin is sending rather mixed signals. On the one hand, the downward trendline (yellow) that that has loomed over Bitcoin for the better part of this year has now been broken.

On the other hand, the current rally has stopped significantly short of breaking the strong line of resistance (dotted blue) that kept the price notably depressed in early June. A break above that could very well lead us to $10,000 (green line) but only a clean break above that would indicate a shift in the medium term trend.

One point that is giving a positive sign is the level of divergence between different digital assets. Here we can see a graph containing all the cryptos currently traded at eToro over the last few days.

We’ve noticed in the past that when the trend is down the cryptos tend to stick more closely together, whereas when things are moving up we tend to see more mixed results. The price action over the last 48 hours would certainly indicate the latter.

As always, tag me at the links below if you need anything at all. Wishing you a very pleasant weekend.

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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4.7 stars on average, based on 115 rated postsSenior Market Analyst at Etoro.com.




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Analysis

Pre-Market: China Tries to Support Markets as Global Stocks Slide

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Yesterday’s risk-off shift continued today in early trading with nervous and choppy trading in Asia and Europe, as global financial markets are still haunted by trade war fears and emerging market weakness. The major US indices rolled over after another period of apparent relative strength, with the Nasdaq being the most robust market once again, while most of the key European benchmarks continue to lag behind.

S&P 500 Futures, 4-Hour Chart Analysis

Chinese assets are still in focus before the weekend, as the Yuan’s recent steep devaluation sparked fears of a credit meltdown in the country. With the largest credit bubble in human history casting its shadow on China, some analysts think that with Trump’s trade war, the bug finally found its windshield and the bubble already started to burst.

USD/Yuan, 4-Hour Chart Analysis

All eyes are on the USD/Yuan pair as Chinese authorities are reportedly intervening in the market of the currency, and most likely local equities as well, trying to prevent a serious run on the most important assets.

With the Chinese stock market already in a bear market, and the Yuan trading at fresh 12-month lows against the Dollar, it might be a bit late to stop the slide, but the intervention could cause spectacular short squeezes.

Italy also made headlines today during the European session, as Italian government bonds got slammed lower, as the future of the new finance minister is uncertain, with another round of political turmoil possibly ahead for Europe’s most vulnerable country.

Unicredit (UCG), 4-Hour Chart Analysis

Looking at the charts of Italian banks, it’s clear that the spring turmoil had a lasting effect on the financial system, as Unicredit is on the verge of hitting a new low, and the other large players also remain under pressure, in part explaining the general weakness in European equities.

Europe Still Far Behind amid Mixed Economic Numbers

USD/CAD, 4-Hour Chart Analysis

The economic calendar is almost empty today with regards to the key markets, as the Canadian Retail Sales and CPI reports are the most important releases. The Canadian Dollar rebounded when the USD entered a correction June, but now the currency edging lower again, as the weakness in commodities and the Greenback’s rally are taking their toll. New highs are likely in the USD/CAD pair in the coming weeks, although strong resistance is just ahead at 1.33.

Commodities are little changed today after yesterday’s volatile session, as the bounce in China helped to stabilize the segment. Notably copper is back above the key $2.70 level, while WTI crude oil is trading at $68 per barrel again, and gold is hovering around $1225.

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 296 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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