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Week in Review

The Week in Review: US Stocks Bounce Back with All Eyes On France

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Weekly Recap

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Asset Current Value Weekly Change
S&P 500 2345 0.85%
DAX 12105 -0.50%
WTI Crude Oil 49.61 -8.12%
GOLD 1285.50 -1.14%
Bitcoin 1229 4.19%
EUR/USD 1.0728 1.21%

 

Global stock markets had an unusually mixed week as European equities were under pressure before the close French presidential election. The latest polls showed a welcome gain for the favored candidate Macron, who will most likely face Marine Le Pen in the second round. Amid the European tensions, the major US benchmarks ended the period higher, with technology stocks leading the way once again. Japanese stocks were helped by the correction in the Yen, while British equities lost ground following Theresa May’s surprise announcement about a snap UK election in June.

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

Oil turned lower after two bullish weeks, and WTI Crude plunged back below the $50 per barrel level towards the end of the week, as the jawboning of some of the OPEC nations was overshadowed by the gloomy fundamental picture. Gold also declined during the week, although because of different reasons, as safe-haven assets retreated from their recent highs despite the continued verbal battle between North Korea and the US. As Donald Trump turned surprisingly active on geopolitical issues, he put pressure on China to take up a role in dealing with the “Korean problem”. If the superpowers finally decide to neutralize the communist leadership in one form or another, markets will likely experience another risk-off period.

Cryptocurrencies had a consolidation week as most of the major altcoins were trading in ranges throughout the period. Ethereum, Ripple, Litecoin, and Monero all traded without a clear direction, although Ripple and Litecoin remained way more volatile following their strong moves. Bitcoin enjoyed a bullish move following the Easter weekend, as it broke the $1215 resistance and touched $1250 on Friday for the first time in more than a month. Ethereum Classic and NEM were among the major movers on the upside, while Dash drifted lower after hitting level $75 again.

Economic numbers were also mixed, but the most awaited releases were mostly negative surprises. US data took a nosedive, with the Philly Fed Index, Housing Starts, and Capacity Utilization all missing the consensus estimates. British Retail Sales were also much worse than expected, putting further pressure on the local market. The Eurozone PMIs were a relatively bright spot, and Chinese Industrial Production gave some hope to investors that the slowdown in the country is, at least, contained.

Technical Corner

The NASDAQ has retained its leading role among the global benchmarks, despite the recent geopolitical fears, as it got very close to hitting a new all-time high, “under the radar”. The DAX decoupled from the NASDAQ in recent weeks, as European traders took a cautious stance before the French election. The tech benchmark is in a slightly advancing trend channel that defines the consolidation zone below the April highs.

The US Tech Index, 4-Hour Chart

The 5500 level might be in the focus in the coming week, especially if the week begins with a relief rally after the elections. Primary support is found at 5400, while the low from last week near 5350 cold provide short-term support as well, with a more important level near 5315. The relative strength of the index is a bullish sign for the broader market, as the NASDAQ is usually a good indicator of the risk appetite of traders.

Key Economic Releases of the Week

Day Country Release Actual Expected Previous
Tuesday US Building Permits 1.26 million 1.25 million 1.22 million
Tuesday US Housing Starts 1.22 million 1.25 million 1.30 million
Tuesday US Industrial Production 0.50% 0.50% 0.0%
Wednesday EUROZONE Final CPI 1.50% 1.50% 1.50%
Wednesday US Crude Oil Inventories -1 million -2.2 million
Thursday US Philly Fed Index 22.0 25.6 32.8
Thursday US Unemployment Claims 244,000 241,000 234,000
Thursday US BOE Governor Carney Speech
Friday GERMANY Services PMI 54.7 55.5 55.6
Friday GERMANY Manufacturing PMI 58.2 58.1 58.3
Friday EUROZONE Services PMI 56.2 56 56
Friday EUROZONE Manufacturing PMI 56.8 56.1 56.2
Friday UK Retail Sales -1.80% -0.30% 1.40%
Friday CANADA CPI 0.20% 0.40% 0.20%
Friday US Existing Home Sales 5.71 million 5.61 million 5.48 million
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%

 

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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Week in Review

Week in Review: South Korea Triggers Crypto Meltdown; Stock Rally Reaches Epic Proportions

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It was a roller coaster week for cryptocurrencies, as investors misread South Korea’s aim to regulate the market as an all-out ban on crypto exchanges. Meanwhile, U.S. stocks put up huge gains as earnings season kicked off.

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Commodities rallied on a weak U.S. dollar, with crude futures climbing above $70 a barrel for the first time in three years.

Cryptocurrencies Plunge as South Korea Mulls New Regulations

Cryptocurrencies suffered a brisk selloff on Thursday on reports that South Korea was considering new reforms to stamp out speculation from the market. Investors had initially believed that regulators were looking to ban crypto exchanges all together. It would later surface that the government was actually looking to ban anonymous trading and ensure banks do not settle unverified cryptocurrency transactions.

Local media group Yonhap News agency provided more clarity on the proposed legislation:

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“Under the new measure, only real-name bank accounts and matching accounts at cryptocurrency exchanges can be used for deposits and withdrawals, while the issuance of new virtual accounts to cryptocurrency exchanges will be banned.”

The cryptocurrency market briefly fell more than $100 billion on Thursday, as investors exited their bitcoin and altcoin positions. At one point, all but five of the top 100 cryptocurrencies were trading in the red, based on data provided by CoinMarketCap. (It’s important to note that CoinMarketCap now excludes South Korean exchanges from its daily volume and pricing data.)

Markets were in recovery mode on Friday, with the total coin value climbing back above $711 billion.

Stocks are Sizzling as Earnings Season Begins

Wall Street put up huge gains this week, as the major indexes closed at new records in four of five sessions. This culminated in back-to-back 200-point gains for the Dow Jones Industrial Average.

On Friday, the blue-chip index closed at 25,803.19, with all but six of its 30 components registering gains.

The broader S&P 500 Index rose 0.6% to 2,786.24. Meanwhile, the Nasdaq Composite Index added 0.7% to close at 7,261.06.

With the most recent gain, the major indexes have added between 4.2% and 5.2% since the new year.

Interestingly, the CBOE VIX Volatility Index has increased in six of the last seven weeks. The so-called “fear index” closed at 10.16. Despite the recent string of gains, it’s still too early to conclude whether volatility is making a comeback.

Fourth-quarter earnings season is also off to a good start, with more than two-thirds of S&P 500 companies reporting better than expected profit results, according to FactSet. While only 5% of S&P 500 companies have reported so far, their blended earnings growth rate is 10.2%.

Oil Hits $70

Oil prices extended their recovery over the past five days, as prices rose to their highest levels in three years.

Brent crude for February settlement briefly traded above $70 a barrel in the latter half of the week before settling at $69.88 a barrel on London’s ICE Futures exchange. The West Texas Intermediate (WTI) benchmark for U.S. crude also put up strong gains, eventually settling at $64.48 a barrel on the New York Mercantile Exchange.

Crude markets on Friday were unfazed by U.S President Donald Trump extending sanctions relief to Iran. One of the primary catalysts for oil prices had been the threat of new sanctions on Tehran, which would have likely affected its crude exports.

NAFTA on the Rocks

One of the world’s largest free trade agreements appears to be in limbo after two Canadian government officials said they were increasingly convinced President Trump will exit NAFTA. The North American Free Trade Agreement (NAFTA) has guided continental commerce for more than two decades.

President Trump has called NAFTA a horrible treaty for the United States given the country’s ongoing trade deficits with both Canada and Mexico. It is unclear whether Trump intends to pull the plug on the deal or use it as a bargaining chip.

The sixth and penultimate round of negotiations between Canada, the U.S. and Mexico will take place in Montreal later this month.

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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Week in Review

Week in Review: Altcoins, Stocks and Gold Shine as 2018 Underway

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Rise

For cryptocurrencies, stocks and gold, the path was certainly higher in the first week of 2018. In the stock and crypto markets, it was more or less business as usual following a soft end to December. Gold, on the other hand, took advantage of a weak U.S. dollar and growing doubts about the Federal Reserve’s ability to raise interest rates as quickly as it predicted.

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Altcoins Dominate Crypto Market

Altcoins took the reigns from bitcoin this week, sending the global cryptocurrency market north of $750 billion. Bitcoin’s share of the overall market continued to dwindle, and by Friday, represented just 37%. At its lowest point this week, bitcoin accounted for just 32% of the market share.

Ripple and lesser known altcoins Cardano, Tron and Stellar surged to record highs, with each adding billions to their market cap. By Friday, Ripple’s XRP token was still the world’s no. 2 cryptocurrency, with prices nearly doubling over the course of the week. XRP briefly traded above $3.00 on Wednesday and Thursday.

Ethereum also reached an important milestone, as its native ether token crossed $1,000 for the first time. Ethereum continues to be the go-to protocol for startups issuing initial coin offerings (ICOs), a fundraising model that collectively raised more than $5 billion last year.

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Wall Street’s Record-Setting Week

It was a stellar four days for U.S. equities, with all three major indexes reaching new milestones.

The large-cap S&P 500 Index and Nasdaq Composite closed at record highs each day this week. On Friday, the S&P 500 Index added 0.7% to 2,743.15, with nine of 11 sectors contributing to the rally. The technology-laden Nasdaq Composite Index rose 0.8% to close at 7,136.56.

The Dow Jones Industrial Average on Friday rose 220.74 points, or 0.9%, to finish at 25,295.87.

A measure of 30-day volatility known as the CBOE VIX fell more than 9% this week to close at 9.22, on a scale of 1-100 where 20 represents the historic average. Wall Street’s preferred barometer of investor anxiety came within half a point of record lows on Wednesday.

The benchmark averages gained between 2.3% and 3.4% in the first week of January. This week was also the first time the S&P 500 crossed 2,700, the Dow 25,000 and the Nasdaq 7,000.

Gold Spikes

Gold spiked to more than three-and-a-half-month highs this week, as the dollar bottomed out against the euro and a basket of other currencies. The February futures contract for bullion steadied at $1,320.30 a troy ounce on Friday, having gained 0.8% for the week.

The yellow metal has rallied more than 6% since Dec. 12, when prices bottomed near $1,241.00 a troy ounce.

The U.S. dollar index (DXY) declined to more than three-month lows this week, as investors opted for the more attractive euro and British pound. Market participants are also beginning to doubt whether the Federal Reserve will be able to gradually raise interest rates as planned. Nevertheless, the minutes of the December Federal Open Market Committee (FOMC) meeting, which were released this week, showed broad support for gradual rate rises.

For some analysts, gold is beginning to look overvalued following the latest rally. The technical indicators paint a similar picture, with the Relative Strength Index (RSI) signaling overbought conditions.

Nonfarm Payrolls Disappoint

The U.S. economy generated fewer jobs than expected last month, capping off one of the softest years for hiring since the recession. Nonfarm payrolls rose by 145,000 in December, well short of the 190,000 projected by economists. The jobless rate held steady at 4.1%, a 17-year low.

Despite the weaker job growth total, December was the 87th month U.S. employers added to their payrolls.

Just 24 hours earlier, payrolls processor ADP Inc. said private sector employers added 250,000 workers in December.

President Donald Trump will attempt to fuel job creation in the coming years through planned infrastructure spending. The Republican administration is already eyeing infrastructure as one of its next major priorities. The president is expected to infrastructure a top priority at the upcoming State of the Union address on Jan. 30.

White House officials are expected to release an infrastructure blueprint by the middle of this month, sources say.

The Trump administration scored a major legislative victory last month after both houses of Congress passed a $1.5 trillion tax reform bill.

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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Week in Review

Week in Review: Ripple Outpaces Crypto Peers; Santa Claus Rally Eludes U.S. Stocks

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It was a big week for Ripple XRP, as the so-called bankers’ token overtook Ethereum to become the world’s No. 2 cryptocurrency by market capitalization. At the same time, bitcoin stabilized in the mid $14,000 range following another major correction.

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On Wall Street, the Santa Claus rally failed to deliver holiday gains as U.S. equities traded lower for the week. Meanwhile, a weaker dollar helped gold prices rise above $1,300 a troy ounce, and also provided the catalyst for U.S. crude’s jump above $60 a barrel.

Ripple Hits $2.00

Ripple (XRP/USD) was the week’s biggest development as far as cryptocurrencies are concerned. The XRP token surged more than 53% on Friday to reach a new all-time high of $1.93. The gain gives Ripple  a market cap of more than $80 billion, enough for the no. 2 spot on the crypto market leader board. By comparison, Ethereum’s native ether token is worth nearly $73 billion.

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Cryptocurrency NEM (XEM/USD) also rose to new highs this week, with prices climbing nearly 17% on Friday to $1.05, according to CoinMarketCap. NEM is now a top-ten cryptocurrency, ahead of Dash and Monero.

It was another week of ups and downs for bitcoin (BTC/USD), with values ranging from the mid-$13,000 to the mid-$16,000. At the time of writing, bitcoin was up nearly 4% at $14,413, paring its weekly drop to around 3%.

The total market cap for all cryptocurrencies is $613 billion, which is a huge improvement over last week’s levels. A total of 35 cryptocurrencies are valued at $1 billion or more and 21 of them are worth at least $2 billion. Bitcoin accounts for roughly 43% of the total market share, which is less than half of what it was at the start of the year.

Seasonality Fails to Lift Stocks

The long-awaited Santa Claus rally failed to materialize after Christmas, as U.S. stocks fell for the first time in six weeks. The large-cap S&P 500 Index declined 0.5% on Friday to close at 2,673.61. The Dow Jones Industrial Average was down 118.29 points, or 0.5%, to close at 24,719.22. Meanwhile, the technology-driven Nasdaq Composite Index fell 0.7% to 6,903.39.

Implied volatility, as measured by the CBOE VIX, rose to its highest level in nearly a month, a sign that the Trump-inspired equities rally was losing steam. The VIX closed at 11.04, which is still well below the historic average.

Even with the weekly decline, U.S. stocks closed out a stellar year, with the major indexes returning between 19% and 28%.

Commodities Rally

It was another solid week for the commodity markets. Oil prices rose to their highest level in two-and-a-half years on news of strong global demand and a bigger than expected drop in U.S. crude inventories. A report from Baker Hughes Inc. on Friday also showed the number of active oil and gas rigs declined this week, bringing the total number to 929.

U.S. West Texas Intermediate (WTI) for February delivery climbed 58 cents, or 1%, to $60.42 a barrel on Friday, its highest level since mid-2015. The U.S. futures benchmark added 12.5% for the year, and was up more than 41% from the yearly low. ICE Brent futures gained 71 cents, or 1.1%, to $66.87 a barrel. The international benchmark ended the year with a gain of 17%.

Gold also ended the year on a high note, with the February contract rising nearly 1% Friday to reach $1,309.30 a troy ounce. The yellow metal has gained in ten of the last 11 sessions, and is now trading at its highest since mid-October.

Commodities were partially supported by a weaker U.S. dollar, which declined on Friday to its lowest levels since September. The dollar index (DXY) retreated 1.3% during the week and nearly 10% for the year, rounding out its worst annual performance since 2003.

The Week Ahead

With the new year upon us, market participants are evaluating whether 2018 will be a continuation of the previous 12 months or whether it will present new challenges for cryptocurrencies and equities. Those questions won’t be answered in the first week of the year, as investors return from holiday and zero in on a steady stream of economic data.

Economists at the U.S. Department of Labor will issue their closely watched nonfarm payrolls report next Friday. The data series is expected to show another solid month of job creation for the world’s largest economy.

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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