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Market Overview

Week In Review: Stocks Take-Off Along with Bitcoin and the Dollar

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Stocks, bitcoin and the dollar are seeing green this week, with momentum hard to stop thanks to a multitude of favorable developments in the global financial markets.

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Wall Street’s Rally Extends to Six Weeks

U.S. stocks ended in record territory on Friday, with the Dow, Nasdaq and S&P 500 setting fresh highs. Upbeat earnings and progress on the political front have been the main catalysts behind the recent run of gains.

The Dow Jones Industrial Average rose 0.7% on Friday, extending its weekly rally to 2%. The blue-chip index has gained 18% since Jan. 1.

The Nasdaq Composite Index on Friday produced its 62nd all-time for the year, on par with the 1999 tech bubble. The S&P 500 Index also printed fresh records Friday for the 49th time this year. According to Bloomberg, that rate has been eclipsed five times since 1946.

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A measure of 30-day volatility known as the CBOE VIX settled in the single digits Friday. Investors have been net short volatility all year long.

The VIX has traded in the 9s for the better part of the month. That’s less than half of its historic mean.

Corporate Earnings Mostly Positive

Several Dow Jones blue chips reported earnings this week, with the likes of UnitedHealth (UNH) and Goldman Sachs (GS) beating forecasts. The broader S&P 500 is on track for another quarter of year-over-year earnings growth, according to FactSet.

The financial researcher says 17% of S&P 500 companies have reported earnings through Friday. Their blended earnings growth is 1.7%. Six sectors have contributed to the gains, with energy leading the way.

Dollar Gains Traction

The U.S. dollar index (DXY) rose half a percent Friday en route to two-week highs after Republican senators approved a budget blueprint that paves the way for President Trump’s tax overhaul. Lawmakers voted along party lines, with 51 GOP Senators backing the budget.

The DXY dollar basket finished the week at 93.70, having gained in five of the last seven sessions. The greenback rose to more than three-month highs against the yen. It also jumped more than 1% against the Canadian dollar Friday to reach the highest level since August.

A stronger dollar also weighed on commodities, which are denominated in the U.S. currency. U.S. West Texas Intermediate (WTI) crude futures finished higher for the week, but were knocked off multi-week highs.

Precious metals were among the biggest losers this week, with gold futures shedding more than $24 to settle at $1,280.50 a troy ounce. That’s the lowest settlement in two weeks on the Comex division of the New York Mercantile Exchange.

Silver futures also sold off 1.9% to $17.08 a troy ounce.

Bitcoin Reaches New Milestone

Bitcoin surpassed its altcoin competitors this week by posting fresh all-time highs. The world’s no. 1 blockchain asset briefly rose above $6,000 on Friday, bringing its total market cap to $100.8 billion. If bitcoin were a stock, it would be more valuable than Goldman Sachs and Netflix.

Like prior rallies, there was no immediate explanation for bitcoin’s massive appreciation. Investors continue buying the dips as bullish sentiment extends globally.

The broader cryptocurrency market didn’t participate in bitcoin’s rally on Friday. The asset class is collectively valued at over $173 billion, according to CoinMarketCap.

The Week Ahead

Economic data are back in focus next week, headlined by U.S. durable goods orders, U.K. GDP and a slew of PMI reports. Corporate earnings from the S&P 500 are also set to continue all week.

On the policy front, the European Central Bank and Bank of Canada are scheduled to deliver interest rate decisions. No change on either front is expected.

The outcome of Japan’s forthcoming election will also be in the spotlight. Prime Minister Shinzo Abe is expected to win big in the Oct. 22 vote.

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 153 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

Pre-Market: US Stocks Return on a Bearish Note after Long Weekend as Dollar Rallies

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After the hectic session on Friday, US equities took a long break thanks to the Presidents’ Day yesterday, but the technical setup that we have been monitoring remained intact. The major indices formed a short-term top exactly in the Line-In-The-Sand area that seemed likely to stop the post-crash rally at least temporarily.

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S&P 500, 4-Hour Chart Analysis

The key levels to watch during today’s session will likely be 2735 and 2700 in the S&P 500 (25350 and 24800 in the Dow), but below 2735 the benefit of the doubt is on the bears’ side.

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So short-term, we continue to lean on the bearish side here, at least short-term and we expect the market to head for a test of the correction lows in the coming period. European and Asian markets continue to underperform their US peers, despite the strength in the Dollar, and that doesn’t bode well for bulls, as Europe has been spearheading the decline so far.

Dollar Still in the Center of Attention

EUR/USD, 4-Hour Chart Analysis

Europe bounced higher today following the release of the better than expected (but worse than the latest) German ZEW Economic Report but that didn’t stop the drift lower in the common currency. The EUR/USD pair fell back below 1.2350 after the fake-out on Friday that indeed proved to be a bull trap as we speculated, and a test of the rising trendline is now possible in the coming days.

USD/JPY, 4-Hour Chart Analysis

On a positive note, the main safe-haven assets, the Japanese Yen and Gold, are also losing ground to the Greenback today, and that could point to a less significant shift in the risk appetite of investors.

That said, commodity currencies are still under pressure, and they have been a good proxy so far for judging the risk-on/risk-off divide, and with oil and copper turning lower this morning, another round of selling could be underway.

WTI Crude Oil, 4-Hour Chart Analysis

Looking at the bond markets, rates are edging higher across the yield curve and the Volatility Index (VIX) is also on the rise again, and all looks set for another active day in US markets, with plenty of trading opportunities in equities and currencies alike.

We expect Wednesday to be the most interesting day of the week, as the arguably most important release, the FOMC meeting minutes will come out in late trading. Until then, the volatile, technicals-led trading could continue.

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 101 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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Market Overview

Let’s Be Optimistic Here

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Today we witness history.

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Just about every government and bank on the planet has toyed with the idea of making their own cryptocurrency. Today, of all people and places, Nicolas Maduro will make this a reality in Venezuela.

This new experiment is actually a milestone in blockchain technology and could very well provide an excellent case study for economists for generations to come.

Big thanks to the author of this excellent article for his praise of my analysis…

Wait a second… am I the only one? Maybe I’m being naive…

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Indeed, everybody, I speak with and everything I read about this seems to indicate that this project is doomed to fail. However, the more I think about it, the more I can’t help but be tempted by the possibility that a plagued nation may finally be on the cusp of salvation and a stable economy.

To me, this just doesn’t seem to be a Kodak moment or just another ICO scam. Of course, if it is it won’t take long before it’s completely exposed.

By putting the entire economy on a decentralized blockchain, Nicolas Maduro is actually opening up the books. Every person on the planet will have the option to scrutinize every transaction with indisputable evidence.

Maduro is plagued by a lack of trust from his people. He’s made many efforts to change his image but they have often been met with skepticism. This effort is really a Hail Mary for him and if it doesn’t work there will be consequences.

As with many other ICOs I’ve seen, information on the website isn’t exactly clear or organized. Of course, as with any other ICO the risk element is through the roof and there is a high probability that this will not work. However, that doesn’t always stop alternative investors from participating.

Personally, I will likely put a small amount of Ether on this project. Not because I think the price will go to the moon (this is highly unlikely given that this will be a commodity-backed currency) but because I would like to be part of this fascinating experiment.

Ultimately the success of this project will depend on the people of Venezuela. If they choose to adopt the new currency then it will actually have a fighting chance of survival.

@MatiGreenspan
eToro, Senior Market Analyst

(Reminder: Today’s Webinar will be at 15:00 GMT. If you haven’t registered yet, please do so now: eToro.tw/Webinar)

Today’s Highlights

  • Back in Business
  • $250 Billion Bonds Coming
  • Crypto Momentum Building

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

Traditional Markets

China is still on holiday until Thursday, so it will be Europe leading this session. The ECB’s minutes from their last meeting will be released at 12:30 GMT, which should kick things off nicely several hours before Wall Street returns from their long weekend.

During the stocks downtime, we did see a bit of movement in the currency markets. Especially on the US Dollar, which recovered a bit from the extreme lows of last week.

Lots of Bonds

For those of you who have been paying attention to the markets over the last 3 weeks, you’ve probably noticed that the bond market has been holding an increased significance in the global investment narrative.

So it should be noted that about $250 Billion worth of new bond notes will be put auctioned off by the US government over the next three days.

It will be very interesting to see how much appetite the market has for these treasures at this time. Who knows, perhaps oversupply really does spark demand.

Here we can see the US 20 Year Bond, which has fallen sharply since December.

Now for Crypto

We’re well off the lows now. Bitcoin is rallying and finally, we’re seeing some very welcome divergence in the crypto-market.

Since the lows two weeks ago (February 6th), we can see a massive difference in the performance of some of the top cryptocurrencies with Ethereum gaining 51% while Litecoin has rocketed 109%.

This is an excellent sign and one we’ve been waiting for.

However, the main downward trendline (purple) on Bitcoin has not yet been broken. If we do see that broken soon, there’s a fair chance the next leg could take us above $15,000.

As always, please feel free to send me any questions, comments, feedback, or resources. I’m always happy to receive them. 🙂

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.

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 31 rated postsSenior Market Analyst at Etoro.com.




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Market Overview

European Stocks End Lower in Quiet Monday Trading

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European equity markets edged lower on Monday  after the region posted its best week in over a year. Overall trading conditions were quiet at the start of the week, with China and the New York Stock Exchange closed for holidays.

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Markets Down Across the Board

All of Europe’s major indexes finished lower. The pan-European Stoxx 600 Index fell 0.2% to close at 379.70. In individual markets, Germany’s DAX, France’s CAC and the U.K.’s FTSE 100 each fell 0.2%.

European markets roared back last week after one of their worst selloffs in recent memory. The regional Stoxx 600 index climbed 3.3% for its best week since December 2016. The gains were partly driven by a relief rally on Wall Street, with the S&P 500 Index posting its best week since 2013.

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U.S. stock futures were down across the board on Monday. At the time of writing, the Dow Jones mini contract was down 87 points. The March S&P 500 futures contract was also down 4.25 points.

Japanese Equities Gain

Japan’s main stock index traded firmly higher on Monday as the yen gave back some of its recent gains versus the dollar. The Nikkei 225 Index climbed 2% to 22,149.21. Despite the gain, Japan’s benchmark index is down 7% on the month.

The Topix index added 2.2% to close at 1,775.15 on Monday.

Markets in Hong Kong will reopen on Tuesday. Traders in mainland China return to their desks on Thursday.

Data, Monetary Policy the Focus of the Week

Traders in search for catalysts could find them in the form of economic data and monetary policy later this week. In terms of economic data, action picks up on Wednesday with a deluge of PMI reports covering the Eurozone and U.S. markets. U.K. earnings and employment data will also make headlines. U.K. and Eurozone GDP numbers are also scheduled for release in the latter half of the week.

On the monetary policy front, the Federal Reserve will release the minutes of last month’s FOMC meeting, which could shed light on the future path of interest rates. The U.S. central bank is widely expected to hike rates at its forthcoming meeting in March. At the time of writing, traders were pricing in an 83.1% likelihood of a rate hike at the Mar. 20-21 meeting, according to the CME Group’s Fed Fund futures prices.

Multiple Fed officials will deliver speeches in the latter half of the week, including FOMC member Loretta Mester and Neel Kashkari. Fed Governor Randal Quarles and William Dudley of the Federal Reserve Bank of New York are also scheduled to make the rounds.

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 153 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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