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Weekly Analysis: 5 Things to Watch the Coming Week

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Asset Current Value Weekly Change
S&P 500 2398 0.88%
DAX 12675 1.76%
WTI Crude Oil 46.47 -5.75%
GOLD 1228.00 -3.21%
Bitcoin 1570 16.11%
EUR/USD 1.0998 0.91%

5 Things to Watch Next Week

  1. More new all-time highs ahead for stocks?

While several cracks appeared under the surface of the current rally globally—the Chinese woes, the weak performance of the broad US indices, and the slowing US economic growth, the NASDAQ and German equities continued to trend higher to new all-time highs. The leadership of the advance is narrowing, and although that doesn’t mean that a decline is imminent and another leg higher following today’s French is possible, this is definitely not the best time to buy stocks.

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  1. Will the cryptocurrency market hit the $50 billion mark?

Litecoin and Ripple are the stars of the weekend so far among the coins, but Bitcoin is also holding up well despite the volatile correction towards the end of the week. The historic $50 billion level in capitalization is less than 10% away, and it’s hard to believe that the current boom won’t carry the market above that in the coming days, with more and more smaller coins popping up on the radar with stellar gains, like Bytecoin, Dogecoin, Steem, and Stratis.

  1. Is the sell-off in oil over?

Oil fell almost 20% in three weeks after a strong rebound in March, as US production keeps on rising and the recent geopolitical woes failed to prop up the market. Also, the North-Korean and Syrian tensions eased somewhat, even though the verbal bouts continued, and China increased the pressure on the communist regime. An escalation could propel a strong rebound in the Black Gold, as it got clearly oversold, even if the fundamentals remain bleak.

  1. Gold turning higher again?

Sentiment towards precious metals turned negative following the first round of the French election, and the confident words of the Fed pushed gold even lower in the second half of the week. Gold is now almost $80 lower than two weeks ago and that could mean that the metal is close to ending the current correction.  If stocks turn lower next week, gold might quickly snap back above the crucial $1240 level

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  1. The Pound in the spotlight as the Bank of England holds meeting

The GBP has been one of the strongest currencies since Theresa May announced a snap election three weeks ago, pushing the GBP/USD pair towards the 1.30 level. The Pound also held up well compared to the surging Euro, despite the ongoing dispute regarding the Brexit process that points more and more to a “hard” version of the break-up. With the Pound being stronger the pressure to protect the currency is lower on the BOE, so it’s easy to imagine that the central bank will rather try to boost growth, even if just verbally, causing a correction in the GBP.

The Pound in a strong uptrend against the US Dollar, 4-Hour Chart

In Focus: Cryptocurrencies

 

Weekly performance comparison of the major cryptocurrencies, Hourly Chart

Bitcoin took center stage this week, even considering the HUGE rally in Ripple and Litecoin, as the main cryptocurrency stormed to new all-time highs, hitting the $1600 level that seemed so distant just over a month ago, amid the hard-fork fears. BTC breached the $25 billion level this week for the first time in its history, and although a correction is a real possibility here, the currency is hovering just below its highs this weekend. Ripple and Litecoin are on the move once again with LTC copying its weekend break-out from two weeks ago, while Ripple doubled in the course of the last week. The market capitalization list was little changed despite the strong moves although Dash is sliding lower with NEM and ETC both on its neck after the crazy period.  With buy signals all over the market traders were able to ride major break-outs almost on a daily basis, and hopefully, the favorable conditions will persist throughout the next week as well.

Currency Weekly Volume Monthly Volume Market Cap
Bitcoin 4,370 11,044 25,664
Ethereum 1,475 3,721 8,769
Ripple 652 1,157 5.041
Litecoin 988 2,767 1,531
Dash 126 462 729
NEM 52 151 689
Ethereum Classic 339 830 654
Monero 90 247 429


Key Economic Releases of the Week

Day Country Release Expected Previous
Monday CHINA Trade Balance 197 bill 164 bill
Monday GERMANY Factory Orders 0.70% 3.40%
Monday UK Halifax HPI 0.1% 0.0%
Tuesday AUSTRALIA Retail Sales (monthly) 0.3% -0.1%
Tuesday AUSTRALIA Annual Budget
Tuesday CANADA Building Permits (monthly) 0.40% -2.50%
Tuesday US JOLTS Job Openings 5.67 mill 5,74 mill
Wednesday CHINA CPI Index 1.10% 0.90%
Wednesday CHINA PPI Index 6.8% 7.6%
Wednesday EUROZONE ECB President Draghi Speaks
Wednesday US Import Prices (monthly) 0.2% -0.2%
Wednesday US Crude Oil Inventories  – -0.9 mill
Thursday SWITZERLAND CPI Index 0.20% 0.20%
Thursday UK Manufacturing Production -0.20% -0.1%
Thursday UK Service PMI 54.6 55.0
Thursday UK Official Bank Rate 0.25% 0.25%
Thursday UK Monetary Statement
Thursday UK PPI Index 0.2% -0.1%
Thursday CANADA NHPI Index 0.3% 0.4%
Friday GERMANY Prelim GDP 0.6% 0.4%
Friday US CPI Index 0.20% -0.30%
Friday US Core CPI 0.2% -0.1%
Friday US Retail Sales (monthly) 0.60% -0.20%
Friday US Core Retail Sales 0.50% 0.00%
Friday US UOM Consumer Sentimnet 97.0 97.0
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

Daily Analysis: Oil Extends Rally as Nasdaq Leads Stocks Higher

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Friday Market Recap

Asset Current Value Daily Change
S&P 500 2749 1.38%
DAX 12,483 0.18%
WTI Crude Oil 63.58 1.29%
GOLD 1330.00 -0.16%
Bitcoin 10,14 -0.09%
EUR/USD 1.2295 -0.28%

US equities built up some bullish momentum towards the end of the week, ignoring the technical damage that the volatility-crash caused, and the major US indices rallied into the close today, squeezing the shorts. The Nasdaq, which led the rally as we expected, took out the key 6850 level in late trading and added another percent to, incredibly enough, finish only a hundred point of the all-time high.

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NASDAQ 100 Futures, 4-Hour Chart Analysis

Should the tech benchmark retest the high next week, it will be amid very strong negative divergences, but hey, those divergences have been building for months now. The rally in equities was boosted by the dip in Treasury yields, especially at the long end of the curve, while Amazon continued ot lead the charge, closing right at the historic $1500 per share level.

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Russell 2000 (Small Cap) Index, 4-Hour Chart Analysis

The advance in the Dow and the S&P 500 is much less convincing and with small caps also lagging the tech-behemoth juggernaut, we remain skeptical regarding the sustainability of the move. That said, if the broader indices stay above the key levels, we will be trading the long side in equities, even as from an investment standpoint, valuations are still way above acceptable.

Forex Markets and Commodities

The lackluster performance of European and Asian stocks adds to the negative divergences, especially as the Euro stopped appreciating against the Greenback, and that should be helping stocks of the old continent. Of course, the DAX and the EuroStoxx 50 could play catch-up next week, barring another surge in the common currency.

EUR/USD, 4-Hour Chart Analysis

The most-traded forex pair remains in a short-term downtrend, as it failed to recapture the previously broken rising trendline, and the commodity related risk-on currencies also remained under pressure. The Canadian Dollar did bounce back off yesterday’s 8-week lows, boosted by the much hihger than expected inflation release and the jump in the price of crude oil.

USD/CAD, 4-Hour Chart Analysis

Oil benefited from the positive shift in sentiment, while the Syrian situation, which took a backseat in the headlines, still supports the rally. The Japanese Yen and gold were stable amid the risk-rally and that adds to our suspicions regarding the upside potential form these levels.

Cryptocurrencies

The segment started out the day with a strong bounce that carried the major coins higher by around 10%, but given the recent steep short-term pullback, even that wasn’t enough to turn the tide, and the day ended with an (almost usual) sell-off after the US close. Despite the recent volatility, the overall picture is still encouraging, with most of the majors being safely above the crash lows, likely in a new bullish cycle that has the potential to last for several more weeks or even months.

While new all-time highs are it guaranteed following the 60-70% declines among the largest coins, but even without those, plenty of upside potential is left for investors. With that in mind, investors should hold on to their coins and even add to their holdings on the short-term dips like the current one.

ETH/USD, 4-Hour Chart Analysis

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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Analysis

Technical Analysis: Majors Stage Rally but Strong Levels Still Ahead

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The cryptocurrency segment has recovered from a broad correction today in early trading, with the most valuable coins all turning into green during the session, despite the bearish start to the overnight session. With bottom-to-top gains of up to 15%, the rally helped in easing the worries of bulls, especially in the case of the relatively weaker coins.

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Bitcoin and most of the largest altcoins remained stable during the selloff, and BTC recaptured the $10,000 level quickly after trading as low as $9600 overnight. The initial rally topped out near $10,400, and the coin is trading back near the $10,000 level, as the bullish momentum faded away somewhat.

BTC/USD, 4-Hour Chart Analysis

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That said, we expect the uptrend to continue even if the correction could still carry Bitcoin lower. Further strong support is found between $9000 and $9200, while targets are ahead at $11,300, $13,000, and $14,250.

ETH/USD, 4-Hour Chart Analysis

Ethereum showed strength during the bounce again after yesterday, together with the early leaders of the rally, and although the coin dipped below the $845 level in the second half of the session, the signs remain positive for bulls. Support levels are now found at $780, $740, $625 and $575, while resistance is ahead near $910 and $1000.

(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: Stocks Refuse to Fall Even as China Takes Over Key Insurer

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Although it should have been a very quiet week in China, thanks to the New Year celebrations, the recent surge in volatility and the plunge in equities didn’t pass without consequences in the key market. Just shortly after effectively shutting down the Chinese version of the Volatility Index (VIX) (presumably to calm the markets…), one of the main actors of the monstrous financial web, Anbang, of the country had to be taken over to avoid a systemic event and stop the “creative” financial engineering that involved criminal activity (the shadow of 2008).

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China will likely need many more duck-tapes like this one if it wants to stop the largest credit bubble in human history to collapse, but for now, the solution could work. Equity futures edged higher since yesterday’s volatile close, and as the major US indices are holding up well, not far off last Friday’s highs, our bearish short-term view might have to be revised.

Nasdaq 100 Futures, 4-Hour Chart Analysis

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As we discussed before, the long-term uptrend is intact, and we expect at least a re-test of the highs even if we are in a large-scale top formation, but we thought that the technical damage caused by the crash three weeks ago would require more healing.

We are not turning bullish just yet, but today’s session could finally decide if we the BTFD-crowd is strong enough to turn the tide after the choppy drift lower this week. We are still focusing on the Nasdaq, as the broader market seems to be following the lead of the tech benchmark, and a move 6850 (in the Nasdaq 100 futures, and still the 2735 level in the S&P) would be a very positive sign for bulls.

DAX Index, 4-Hour Chart Analysis

The German DAX index is also showing some tentative short-term relative strength although it remains almost 10% below its all-time high, and it remains a strong negative divergence to be monitored.

Forex Markets Quiet

EUR/USD, 4-Hour Chart Analysis

The main pairs are trading in a choppy narrow range today after the strong move in the Yen and the drop in the USD yesterday. US Treasury Yields are edging lower today, helping the calm in equities and currencies, but on a bearish note, commodity currencies failed to rebound so far, and they were providing good signals since the crash. Day-traders should note that the Canadian Dollar will likely be very active again, with the Canadian CPI report coming out pre-market.

To sum the outlook up, we are still leaning on the risk-off side here regarding the short-term outlook, but we wouldn’t bet the farm on that, as there are mixed signals before the weekend.

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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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