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The Week in Review: Cryptocurrencies Shine as Global Stocks Rise

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Weekly Recap

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Asset Current Value Weekly Change
S&P 500 2363 0.80%
DAX 12312 2.06%
WTI Crude Oil 50.81 5.92%
GOLD 1247.50 -0.24%
Bitcoin 1072 1.19%
EUR/USD 1.0657 -1.49%

The correction that took hold of global stock markets last week didn’t last too long and the leaders of the rally, namely the Nasdaq and the DAX, were once again flirting with all-time highs this week. The US healthcare bill debate was put on the sideline, as the media’s attention switched to the Brexit process that officially started on Tuesday with the triggering of Article 50 by the British Government. The Pound experienced some volatility thanks to the announcement, but the currency finished the week on a positive note, even as the FTSE 100 underperformed most of its peers.

Weekly progress of the main global indices, Comparison Chart (% gains)

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The end of the first quarter brought active trading in the second half of the week, as per usual, but volatility remained muted following the most volatile period in a while. Oil bounced back strongly after the key technical breakdown of the previous week, and the WTI contract finished above the crucial $50 per barrel on Friday. Gold hovered around the $1250 level all week long, successfully ignoring the rally in the Dollar, as it remains encouragingly strong despite the rate hike cycle of the Federal Reserve. The Euro lost ground against all of its major counterparts, while the Yen and the Franc remained stable throughout the week.

Cryptocurrencies had a great week, with several up-and-coming altcoins gaining significant ground during the period. Ripple and Litecoin were the most notable winners of the week, but Ethereum and Monero also held on to their recent gains. Bitcoin traded sideways, but it remained above the crucial $1000 level, while Dash was the only clear loser of the week.

Economic numbers continued to provide support for the global bull market, with only a few negative surprises throughout the week. In fact, there were several blowout numbers, such as the German retail sales reading, the US consumer confidence index (a new 16-year high!!), and US pending home sales. The only worrying sign is the rise in US initial jobless claim, but even if it’s a quite reliable early indicator, the 258,000 number is still far from being scary.

Technical Corner

The recent correction in global stocks was led by the US financial sector, as the largest US banks suffered double-digit losses following the Fed-meeting. Investors evaluated the central bank’s statement as a sign of a less aggressive rate hike schedule. That pushed bank’s lower, as the hikes are generally considered bullish for them in the current environment. That said, the sell-off was very much in the cards already, as technicals screamed for a correction.

The US financial sector (XLF), Daily Chart

The sector was well in overbought territory following the strong post-election advance, and the ETF that represents the segment also showed a significant momentum divergence before the decline. The extent of the previous rally is well described by the fact that a 12% correction only carried XLF to around the middle of the rising trend channel (this is a multi-trillion dollar industry, mind you).

This week’s bounce took the sector back to a previously important resistance level at $23.75, after precisely reaching the 23.6% Fibonacci retracement level at $23.07. The MACD indicator is now in neutral territory, but further sideways price action, or another sell-off, is still likely before a sustainable rally can develop. It will be interesting to see how the segment performs, as it should be a good tell for the direction of the whole US market in the coming weeks.

Key Economic Releases of the Week

Day Country Release Actual Expected Previous
Monday EUROZONE German Ifo Business Climate 112.3 111.2 111
Tuesday US CB Consumer Confidence 125.6 113.9 114.8
Wednesday US Pending Home Sales (monthly) 5.50% 2.30% -2.80%
Wednesday US Crude Oil Inventories 0.9 million 1.2 million 5.0 million
Thursday GERMANY Prelim CPI 0.20% 0.40% 0.60%
Thursday US Final GDP 2.10% 2.00% 1.90%
Thursday US Initial Jobless Claims (weekly) 258,000 244,000 261,000
Friday GERMANY Retail Sales 1.80% 0.70% -0.80%
Friday UK Current Account -12.1 billion -16.3 bil -25.5 bil
Friday UK Final GDP (quarterly) 0.70% 0.70% 0.70%
Friday CANADA GDP (monthly) 0.60% 0.30% 0.30%
Friday US Chicago PMI 57.6 57.2 57.4

 

The Story of the Week: Apple Hits New High Again And Tops $750 Billion

Apple, Weekly Chart Analysis

The most valuable company in the world keeps on delivering respectable returns to its shareholders, despite its already enormous size. As an example of just what $750 billion dollars mean, a country with such a GDP would be in the top 20 largest economies globally. With that in mind, the fact that the value of the company went down by more than 30% in the past years alone is mind-boggling.

The obvious question is that did the value of the company really change that much in that short period of time? Well, the correct answer is that probably not. The emotional rollercoaster of the stock market led to these fluctuations, together with the change in global investor sentiment, while also being heavily influenced by the amount of “free” money supplied by the central banks.

So, will this be another triple digit rally, or is the stock about to turn lower? The answer is tricky, since we are after an 8-year bull market that helped Apple immensely, and a new bear market could wipe out a large chunk of its recent gains (yes, even such a strong brand is vulnerable). What’s sure is that the trend is still clearly bullish, and the company also keeps on paying dividends. That said, taking some chips off the table when the stock is getting overbought, like right now, is not a bad idea, as a good entry point is always ahead.

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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Analysis

Bitcoin Bears Running Out of Gas, According to Price Manipulation Theory

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A group of researchers at The Crypto Fam have linked price manipulation to bitcoin’s bear market, suggesting that the arrival of institutional trading allowed investors to dump oversized holdings of digital currency.

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Bitcoin Price Manipulation?

According to a new theory, it is no coincidence that bitcoin’s long unwind began on Dec. 17, the same day that bitcoin futures were launched. Over the next several months, the bitcoin-dollar exchange rate would fall from a high near $20,000 to a low of $5,980.

The rapid decline was aided by futures trading, which allows traders to short assets much more easily. As we’ve written before, shorting bitcoin was practically impossible prior to the launch of futures.

The theory posits that institutional money was stocking up on bitcoin well before Dec. 17, likely in anticipation of the CBOE/CME futures contracts. The bear market that ensued consisted of three major down moves, with the third leg beginning earlier this month.

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Each down move follows a similar pattern: (1) a fake-out dump, (2) a failed rally and (3) a major dump. Each leg down is driven by lower selling volume with each drop less severe than the previous.

The compelling study was presented this week in a series of tweets by The Crypto Fam, which describes itself as “a community of crypto enthusiasts bridging the gaps.” The group’s stated goal, according to its website, is to “make crypto not so cryptic.”

In describing the pattern, the researchers concluded that “the bear market is running out of gas” because their supply of bitcoin has declined since the pump culminated on Dec. 17.

“This is a very simplified explanation of how markets work. A great deal of the total BTC supply is not traded. Some is lost forever in idle or forgotten wallets. Other Bitcoin is hodled by strong hands who never sell. This gives [market makers] greater power with their share of BTC.”

End of the Downtrend?

With the bears and market makers running low on supplies, the researchers concluded that the end of the downtrend is near. Bounces are more shallow than before while bottoms aren’t nearly as low.

Bitcoin prices fell below $7,300 earlier this week but have since recovered to the $7,500 range. Since bottoming below $6,000, prices have failed to test new lows. On the opposite side of the ledger, rallies have also been limited to $12,000 and $10,000, respectively.

Institutional adoption is widely viewed as a positive development in the evolution of cryptocurrency trading, though the latest study sheds light on the downside risks of derivatives trading. A similar conclusion was drawn earlier this month by the San Francisco Fed, which compared the launch of bitcoin futures to innovations in securitization in the mortgage market. However, this model has been criticized heavily for mistaking correlation with causation.

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 417 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

Long-Term Cryptocurrency Analysis: Correction Deepens but Leaders Remain Stable

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As the major cryptocurrencies got hit hard this week, losing around 20% on average, the long-term picture in the segment got close to an entry point for investors. The overbought readings that developed during the late-April rally are now cleared and although the short-term trends are still clearly negative, we still expect the coins to resume the recovery. With that in mind, long-term investors could start accumulating the relatively stronger coins.

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On a negative note, even the leaders violated key support levels during this week’s selloff, but the secular long-term trends are not yet in danger. The prior leaders Ethereum, EOS, and IOTA are still in the center of attention, as we expect them to form a bottom soon. Bitcoin and the other relatively weak coins, like Litecoin, Monero, Dash, and NEO are still lagging the form a technical perspective, but they are also well above the support levels that would indicate an end of the secular bull market.

BTC/USD, Daily Chart Analysis

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Bitcoin is below the key $7650-$7800 support level and it remains the biggest drag on the market, despite a brief period of relative strength this week. The upper boundary of the base pattern that we identified in April is found near $6150, with a weaker zone around $6500, and with the short-term trend clearly being negative, the latter might be tested before a bottom forms. Further resistance is ahead at $8400, $8700, and between $9000 and $9200, and traders and investors still shouldn’t enter positions here.

ETH/USD, Daily Chart Analysis

Ethereum is testing the $555-$575 support zone after violating the $625-$645 range, with the declining short-term pattern being intact. A bottom near the $500 would still keep the recovery intact, but the correction low might already be in, and investors could already add to their holdings here. Further resistance zones are ahead between $735 and $780 and near $845, while support is found near $450.

(more…)

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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Analysis

Pre-Market: Oil Plunges Below $70 as Markets Mixed Before Long Weekend

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Financial markets are relatively calm today, despite the hectic week that was highlighted by the Turkish currency crisis, wild swings in bonds, and a step back in US-North Korean relations. Stock markets turned lower globally, with US equities outperforming the rest of the world, essentially drifting sideways all week long, thanks to the slight correction in the Dollar’s rally, and the dip in Treasury yields that was triggered by the dovish Fed meeting minutes.

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S&P 500 Futures, 4-Hour Chart Analysis

Today, the durable goods report came out before the opening bell and although the headline number was a tad worse than expected the more important core figure beat the consensus estimate, helping the slightly dampening economic outlook, even as yields continue to fall, especially with regards to long-dated Treasuries.

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EUR/USD, 4-Hour Chart Analysis

Although emerging market currencies are way less volatile today than recently, despite the rebound in the Dollar, equities shed their early gains and are now slightly in the red. The all-important EUR/USD pair hitting yet another 6-month low near 1.1650, and the test of the key long-term 1.1450-1.15 zone looks more and more likely in the coming weeks, even as the pair is a bit oversold.

Energy Markets in Turmoil as OPEC Signals Production Increase Again

WTI Crude Oil, 4-Hour Chart Analysis

It seems that the crude oil market is in for a strategic switch yet again, as the OPEC, together with Russia made it clear today that the price of the Black Gold finally reached a desirable level. The cartel will be targeting a higher level of output later on this year in order to keep the US shale players under pressure by capping the advance in the key commodity’s market.

The WTI contract reached a 4-year high at $72 per barrel recently and the Brent contract which is more exposed to Middle East woes rose as high as $80 per barrel after trading below the $30 level just two years ago. The last phase of the advance extended above the level where a large portion of the shale plays turn profitable, and as global growth worries also surfaced, the commodity entered a selloff this week.

Gold Futures, 4-Hour Chart Analysis

Safe haven assets continue to be bid despite the relatively calm environment, and gold hit a two-week high today despite the bounce in the Greenback as buyers are back after the wash-out plunge below $1300. With the long-term setup and fundamentals still being favorable for the precious metal, the short-term downtrend line is in danger here.

As US markets will be closed on Monday, which usually favors an active session, volatility might remain high throughout the day.

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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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