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Week in Review

The Week in Review: Bitcoin Surges as Syrian War Looms

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Weekly Recap

Asset Current Value Weekly Change
S&P 500 2355 -0.30%
DAX 12225 -0.71%
WTI Crude Oil 52.23 2.78%
GOLD 1257.50 0.81%
Bitcoin 1090 10.10%
EUR/USD 1.0599 -0.53%

 

The second quarter started with a hectic week for global financial markets, as the central banks remained in the center of attention before the US missile attack in Syria took over the headlines. Stocks remained stable with a slight rotation between the main indices, as the previously strong DAX and Eurostoxx 50 were among the weaker benchmarks during the period. The Fed’s and the ECB’s meeting minutes were the most anticipated announcements of the week (dwarfing even the expectations regarding the usually crucial US employment report), and the US Dollar came out as the strongest currency after the choppy period, as the Fed still seems to be the most committed to raising interest rate and tackling inflation.

Crude oil was among the winners of the period, despite the rally in the Dollar. Gold had a mixed week, as it finally topped $1260, but plunged back below the crucial resistance on Friday as stock markets recovered, possibly pointing to a more significant correction ahead. The Euro was very weak in the second half of the week, as the dovish comments from Mario Draghi cooled down expectations regarding an imminent monetary tightening in the Eurozone. The Pound also lost ground against its major peers although British equities were holding up well.

 

Gold Futures, 4-Hour Chart Analysis

Bitcoin and Litecoin dominated the cryptocurrency market, as the stellar weekend rise of Ripple was halted by a deep correction. Bitcoin rose back near the $1200 level just two weeks after testing the 880 level, while Litecoin hit $12.50 following a strong breakout from below the $4.50 zone. Ethereum traded sideways throughout the week above the $40 level, while Monero drifted lower after a failed rally attempt. Dash found support near the $60 level after rising 5-fold from $20 to $100 between the end of February and mid-March.

The UK provided a number of negative surprises on the economic front this week, as the manufacturing PMI, the construction PMI, manufacturing production, and industrial production all disappointed, with only the services segment showing strength. US and other European numbers were mixed, but remained mostly in line with the stable growth narrative. The ISM non-manufacturing PMI provided the biggest negative surprise, but it still shows robust growth in the sector. US initial jobless claims dipped lower after a worrying jump, although the employment report was mixed once again. Canada is still a bright spot globally, despite the weakness in the local real estate market.

Technical Corner

Range contraction was the name of the game for the most watched stock index in the world, as last week’s bounce stalled out near the upper boundary of the dominant technical pattern (a so-called Megaphone). The benchmark got stuck in a narrow interval towards the end of the week, and this phenomenon often precedes a significant move, as the “tension” in the market grows. The MACD also shows how compressed the recent days were for US stocks, as the indicator didn’t leave the neutral zone, and failed to give a meaningful signal in any direction.

S&P 500, 4-hour Chart

The S&P 500 finished the week right in the middle of the crucial 2350-2355 support/resistance zone that played a key role in recent weeks. The recent all-time high near the 2400 level is the most important resistance ahead, while the 2332 support could also be in play next week, should the index leave the current holding pattern on the downside. The financial sector that we have been monitoring recently also traded in a narrow range throughout the week, so the first few sessions could be critical next week.

Key Economic Releases of the Week

Day Country Release Actual Expected Previous
Monday AUSTRALIA Retail Sales (monthly) -0.10% 0.30% 0.40%
Monday UK Manufacturing PMI 54.2 55.1 54.6
Monday US ISM Manufacturing PMI 57.2 57 57.7
Tuesday AUSTRALIA RBA Rate Decision 1.50% 1.50% 1.50%
Tuesday UK Construction PMI 52.2 52.5 52.5
Tuesday CANADA Trade Balance -1 billion 0.7 billion 0.8 billion
Tuesday US Trade Balance -43.6 billion -46.7 bill -48.5 bill
Tuesday US Factory Orders (monthly) 1.00% 0.90% 1.2%
Wednesday UK Services PMI 55 53.5 53.3
Wednesday US ADP Employment Change 263,000 184,000 298,000
Wednesday US ISM Non-Manufacturing PMI 55.2 57 57.6
Wednesday US Crude Oil Inventories 1.6 millon -0.1 million 0.9 million
Wednesday US FOMC Meeting Minutes
Thursday GERMANY Factory Orders (monthly) 3.40% 3.50% -0.80%
Thursday EUROZONE ECB Meeting Accounts
Thursday CANADA Building Permits (monthly) -2.50% 5.40%
Thursday US Initial Jobless Claims (weekly) 234,000 251,000 258,000
Friday CANADA Employment Change 19,400 5,700 15,300
Friday CANADA Unemployment Rate 6.70% 6.70% 6.60%
Friday US Hourly Earnings 0.20% 0.20% 0.20%
Friday US Employment Change 98,000 175,000 235,000
Friday US Unemployment Rate 4.50% 4.70% 4.70%

 

The Story of the Week: Quarterly Performance of Asset Classes

Performance of different asset classes in Q1, Source: Deutsche Bank

If you follow financial markets on a daily basis, it is sometimes inevitable that you lose track of the big picture. As the first quarter of 2017 ended last week, we take a look at the performance of the major global asset classes with the help of Deutsche Bank’s cheat sheet. Generally speaking, the quarter was quiet, as volatility remained tame, especially in the US where the Volatility Index (VIX) hit record lows, as the S&P 500 didn’t fall by 1% for more than a 100 trading days in a row.

Interestingly commodities are found on both ends of the performance chart, as Crude Oil was the worst performing asset thanks to the technical breakdown of the last week of March, while precious metals sit at the top of the list after a healthy rally. Emerging markets were also among the best places for investors in the quarter with the Brazilian Bovespa Index yielding more than 10%.  The Hang Seng (Hong Kong) and the DAX were the strongest major indices, but the FTSE and the main US benchmarks also performed well. Russian equities lagged their global counterparts as the weakness in oil coupled with the increasing political tensions weighed on the country’s assets.

Looking at currencies, the Dollar’s correction was the main theme of the quarter, as the greenback retreated a bit, off its multi-decade highs against the Pound and the Euro after the post-election euphoria faded away. Donald Trump’s first months in office were less significant to financial markets than most analysts expected, although the media-hype was constant. US indices hit all-time highs throughout the period as the global bull market turned 8 on the 6th of March.

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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Week in Review

Week in Review: The Two Tales of Volatility

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When it comes to volatility, stocks and cryptocurrencies diverged wildly this week. On the equities front, major selloffs in China and Wall Street were followed by equally large single-day rallies, as investors bought on the dip. For cryptocurrencies, the picture was largely unchanged for most of the week, as bitcoin and the broader market hovered near break-even.

Cryptos Stabilize

Despite experiencing a minor dip on Friday, cryptocurrency prices have held within a remarkably narrow range over the past five days. The cryptocurrency market capitalization, which accounts for all digital assets including bitcoin, has hovered around $210-$212 billion for much of the week. On Friday, the market dipped to around $207 billion as bitcoin fell below $6,500.

Tether on Monday induced heavy volatility in the market as traders cut ties to the controversial stablecoin. The value of USDT not only lost its peg to the dollar, it briefly fell below $0.90. A collapsing USDT triggered a sharp spike in the value of bitcoin, with major exchanges like Bitfinex reporting a large premium on BTC. That’s because Bitfinex, among others, process a much larger volume of BTC/USDT trades.

Bitcoin’s volatility index, which tracks daily fluctuations in the digital currency’s opening price, is hovering below 1.9% over the last 30 days. Bitcoin’s average fluctuations over the last 120 days are 2.91%, according to bitvol.info.

China Takes the Plunge

Chinese equities resumed their massive selloff this week, as a U.S.-led trade war continued to roil mainland markets. An attempt by the People’s Bank of China to ease capital controls was also met by skepticism by investors who remain critical of the country’s long-term growth outlook.

As of Thursday, China’s benchmark Shanghai Composite Index was down a staggering 12% for the month of October. The index rebounded sharply on Friday, gaining 2.6%, as government officials offered soothing comments about the health of the economy.

The Chinese yuan fell to nearly two-year lows this week after the U.S. Treasury refrained from labelling the country a “currency” manipulator in its biannual report. The Trump administration has called out China for manipulating its currency to gain an unfair trading advantage over its peers.

Pressure on Saudi Builds

Saudi Arabia is in the hot seat after a known dissident journalist was reportedly drugged, tortured and killed at the Saudi consulate in Istanbul, Turkey. Jamal Khashoggi, the journalist in question, was last seen entering the consulate on Oct. 2.

U.S. President Donald Trump has moved closer to acknowledging Riyadh’s role in the disappearance of Khashoggi amid new evidence indicting Crown Prince Mohammed Bin Salman. A source familiar with the investigation has told CNN that Saudi Arabia’s first secretary was involved in planning the attack.

The Saudis have denied any involvement in Khashoggi’s disappearance but are prepared to admit that he was killed in the consulate. Earlier this week, Riyadh implicitly threatened to use oil as a weapon should Western powers pursue sanctions against it.

The Week Ahead

The crypto bulls failed to show up after Monday’s sudden accumulation, a sign that bear-market conditions are likely to persist for a while longer. A lack of trading catalysts, combined with negative sentiment already present in the market, are clear signals that prices will remain subdued as we head into the final week of October.

The outlook on equities is much more mixed, as investors weigh a new batch of corporate earnings against a backdrop of political and trade-related concerns. It also remains to be seen whether the Trump administration will take decisive action against the Saudis should conclusive evidence link the government to Khashoggi’s disappearance.

On the data front, the U.S. government will release preliminary third-quarter GDP data next Friday. The world’s largest economy is said to have expanded 3.9% between July and September, according to the latest Atlanta Fed GDP Tracker.

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 647 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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Week in Review

Week in Review: Red October – Equities, Cryptos Take the Plunge

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Global equity markets sold off sharply this week, as rising bond yields and a weaker growth outlook rattled investors’ appetite for riskier assets. The shift to risk-off mode benefited gold but not cryptocurrencies, as the latter market booked an 11-figure plunge on Thursday.

China was the center of the storm this week as investors returned from Golden Week celebrations to disappointing economic data, escalating trade tensions and an insufficient response from central bank policy.

Bull Market in Jeopardy

After recording their best quarter in five years, U.S. stocks have experienced multiple steep declines to start October. This culminated on Wednesday and Thursday with a 1,300-point plunge in the Dow Jones Industrial Average, marking the worst two-day stretch since February. The broader S&P 500 Index also fell to more than three-month lows, which triggered a sharp rise in volatility.

The CBOE VIX, Wall Street’s preferred measure of investor anxiety, spiked above 26 this week en route to its highest level in six months. The so-called fear gauge tracks inversely with S&P 500 Index futures roughly 75% of the time.

Wall Street’s dramatic declines triggered even bigger losses for China’s benchmark indexes, which on Thursday plunged to multi-year lows. The Shanghai Composite Index experienced a modest rally on Friday but still ended the week with a loss of 7.6%. Markets in Europe, Japan, Canada and Australia also ended firmly lower.

IMF Downgrades Outlook

The International Monetary Fund (IMF) has downgraded its outlook on global growth, citing rising import tariffs as a primary concern. The Washington-based lending institution lowered its outlook on global, Chinese and U.S. economic growth by 0.2 percentage point each for 2019. At 6.2%, China’s expansion is forecast to be the weakest since 1990.

A tit-for-tat trade war with the United States only exacerbates China’s broad economic slowdown, which began several years ago when Beijing embarked on a slow transition away from smokestack industries toward consumption. Although Beijing has responded to the Trump administration’s tariff policy, it will not be able to match duties on a dollar-for-dollar basis.

As Hacked reported Thursday, President Trump and his Chinese counterpart Xi Jinping are scheduled to hold high-level trade talks at the upcoming Group of 20 summit in November. Both sides were planning in-depth negotiations last month before the U.S. enacted a new round of tariffs targeting $200 billion of Chinese goods.

Cryptocurrencies Fall but Bitcoin Maintains Support

After weeks of relative calm, cryptocurrencies experienced a brisk selloff Thursday. More than $16 billion was wiped from the combined market capitalization with bitcoin, Ethereum and other major assets leading the declines.

There was no immediate catalyst for the sudden reversal, though the pattern of quick declines following relative calm have been observed before. Cryptocurrencies are struggling to make new technical breakthroughs despite improving fundamentals.

Despite the loss, bitcoin continues to defend $6,000 – a critical level that is commonly associated with the cost of mining the virtual currency. The 6% drop on Thursday dragged prices to the low $6,200 region before recovering 24 hours later.

Week-on-week, the cryptocurrency market cap is down roughly $18 billion. However, trading volumes are up slightly.

The Week Ahead

All eyes will be on government bond yields next week as investors continue to evaluate the impact of rising interest rates on the market. Despite a sharp drop mid-week, the yield on the benchmark 10-year U.S Treasury note continues to show upside potential. According to Jeffrey Gundlach, the so-called “bond king,” the benchmark yield could make it to 3.6% in the short term.

“If you look at the charts and you look at the way the market’s behaving and you think about the trends that are underneath the bond market, it wouldn’t be surprising at all to see the 30-year go to 4% before this move of the breakout above 3.25 percent is over,” Gundlach told CNBC Thursday.

Until now, cryptocurrencies like bitcoin have not benefited from safe-haven demand amid the broad market downturn. It remains to be seen whether mainstream investors will find comfort in bitcoin’s status as a non-correlated asset should bond yields continue to pressure stocks.

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 647 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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Week in Review

Week in Review: NAFTA 2.0, Bond Yields and ErisX

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Traditional markets stole the headlines this week, as Canada, Mexico and the United States wrapped up a new free-trade agreement. Surging bond yields pressured stock markets, leading to the biggest one-day selloff on Wall Street since late June. In crypto news, Ripple Labs concluded a successful Swell conference with the launch of a new xRapid product and TD Ameritrade announced it was backing a new regulated cryptocurrency exchange.

NAFTA 2.0

Canada and the United States ended a 13-month impasse late Sunday by reaching a new free-trade agreement ahead of a self-imposed deadline. The new United States Mexico Canada Agreement (USMCA) rebalances continental trade after more than two decades of NAFTA rule.

By striking a deal, Canada ensures that more than one-fifth of its gross domestic product (GDP) isn’t compromised by the loss of tariff-free access to the United States. In exchange for accommodations on auto tariffs and dispute resolution, Canada offered American farmers greater access to the nation’s highly protected dairy industry.

U.S. President Donald Trump called the new agreement a “historic transaction” and praised leaders on both sides of the border for getting it done. By striking a deal by Sept. 30, negotiators gave Mexico’s current president enough time to sign it into law before leaving office in November.

Surging Bond Yields

U.S. government bond yields set multiyear highs this week as investors continued to unload U.S. Treasuries at an accelerated pace. The yield on the benchmark 10-year U.S. Treasury note crossed 3.20% on Thursday, the highest since 2011. The yield on short-term notes peaked at ten-year highs. Bond yields rise when prices fall.

The selloff in U.S. government debt comes amid heightened expectations that the Federal Reserve will continue raising interest rates at an aggressive pace. The U.S. economy is riding a tailwind of consumer optimism, corporate tax cuts and declining unemployment with GDP on track for another blowout quarter.

Yield watchers should keep tabs on interest rate expectations ahead of the Federal Reserve’s December policy meeting. Officials are expected to hike rates again in their final meeting of the year.

Bitcoin Volatility Declines

Bitcoin’s price volatility declined this week to the lowest level in 15 months, underscoring tepid trading conditions in the cryptocurrency market. The bitcoin volatility index, which monitors BTC’s price fluctuations over time using the standard deviation of daily open prices, declined to 2.52% on Wednesday compared with 30 days ago.

Declining volatility is a double-edged sword. On the one hand, it shores up confidence among investors that bitcoin’s market is maturing after years of dramatic price swings. On the other hand, it makes massive price rallies like the ones we saw in 2017 less likely. As such, billionaire investor Mike Novogratz believes bitcoin is unlikely to crack $9,000 this year.

The bitcoin price saw highs near $6,650 on Thursday but has since fallen back toward the $6,550-$6,600 range. The combined capitalization of all cryptocurrencies hovered around $220 billion all week.

TD Ameritrade Backs Regulated Crypto Exchange

One of America’s largest retail brokers has announced plans to invest in an up-and-coming cryptocurrency exchange that will be fully regulated by the U.S. Commodity Futures Trading Commission (CFTC). TD Ameritrade, which boasts 11 million users and $1.2 trillion in assets under management, has made a strategic investment in ErisX, a platform that will offer spot crypto and futures trading.

“We listened to our customers – what we continued to hear was that they wanted access to trade digital currency products,” JB Mackenzie, managing director, said in an interview with CNBC.

ErisX provides retail stock and ETF traders access to regulated cryptocurrency markets, potentially spearheading wider adoption of digital assets.

The Week Ahead

Crypto markets have stabilized following a rocky month of September, but declining trade volumes and a lack of new buyers continue to limit upside. Although fundamental developments continue to point to wider mainstream acceptance of digital assets, this hasn’t translated into higher prices.

Nevertheless, optimism over Ripple’s commercialization efforts and chatter over the upcoming Bakkt trading platform could add a positive spin to tepid market conditions. It remains to be seen whether this will generate sustained interest among buyers.

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 647 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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