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Week in Review

Weekly Analysis: European Stocks Hit New Highs in a Historic Period for Cryptocurrencies

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Weekly Recap

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%

Global stock markets had a surprisingly quiet week, despite Federal Reserve’s meeting and the US Employment Report, which usually cause volatile episodes all over the world. The major indices were mixed with the European exchanges outperforming their peers by a wide margin. US equities showed weakness “under the hood”, as several broad indices underperformed the leaders of the market. This divergence might be the precursor of a risk-off period, although the second round of the French election will likely be a positive influence in the first days of the week.

Traditional currencies were little changed amid the cryptocurrency-surge, as the Fed’s rate hike strategy seems unchanged, and the uptick in the US economic numbers halted the ongoing depreciation of the US Dollar. The Yen was among the weakest majors, while the Pound gained ground on most of its peers. Commodity currencies took a huge hit in this week, although the Canadian Dollar recovered strongly on Friday thanks to the rebound in the price of oil. Oil suffered a “liquidation-event”, as it plunged below its 5-month lows and crashed as low as $44 per barrel. Gold also fell sharply, and ended the week near the $1225 level, as the positive global sentiment hurt safe-haven assets.

 

WTI Crude Oil Futures, Daily Chart Analysis

Cryptocurrencies

The cryptocurrency market had a euphoric week, as the strong rally in Bitcoin and the continued surge in almost all other major coins propelled cryptocurrencies to the headlines of the mainstream media. BTC hit a high near $1600 on all of the major exchanges before entering a fierce and volatile correction towards the end of the week.  The total capitalization of the market reached as high as $46 billion, an incredible 40+% jump in once week. Litecoin and Ripple were the other stars of the week, closely followed by NEM and Ethereum. Monero also performed well, while Dash and Ethereum Classic were the laggards of the period, although the latter held on well to its recent lofty gains.

Litecoin, 4-Hour Chart Analysis

Economic Numbers

The holiday-shortened week proved to be the most bullish regarding economic news in a while, with the US and British numbers providing plenty of positive surprises throughout the period. The Fed’s interest rate decision was in line with expectations, while the Employment Report was back on track, with a Non-Farm Payroll growth of 211,000 and the lowest Unemployment Rate since 2008, at 4.4%. Manufacturing PMIs were mixed globally, with the Chinese and US numbers slightly missing the consensus estimates, while the British number coming in much higher than expected.

On a negative note, the fall in commodities is suspicious for the global economy, especially after the huge Hurray following Trump’s victory. All in all, modest growth is expected to continue, although the very high level of debt in virtually all major countries, coupled by the record low level of interest rates makes the “growth story” very fragile.

Technical Corner

S&P 500, 4-hour Chart Analysis

The S&P 500 remained in a tight range throughout the week as it failed to follow through the surge of the gap of the previous Monday. This slightly negative behavior might lead to a break-down in the coming days, although a push to new highs is also in the cards following the last minute surge on Friday. The MACD indicator drifted back to neutral territory thanks to the sideways price action, with a possibly developing advancing trend-line being just below the current levels. The current pattern will likely resolve soon, and Sunday run-off in France could provide a trigger for the next directional move.

Key Economic Releases of the Week

Day Country Release Actual Expected Previous
Monday UK Treasury Sec Mnuchin Speaks
Monday US Personal Spending 0.00% -0.10% 0.20%
Monday US ISM Manufacturing PMI 54.8 56.6 57.2
Tuesday CHINA Manufacturing PMI 50.3 51.4 51.2
Tuesday AUSTRALIA Base Interest Rate 1.50% 1.50% 1.50%
Tuesday UK Manufacturing PMI 57.3 54 54.2
Wednesday UK Construction PMI 53.1 52.1 52.2
Wednesday EUROZONE Prelim GDP 0.50% 0.50% 0.40%
Wednesday US Crude Oil Inventories -0.9 million -3.3 million -3.6 million
Wednesday US ISM Non-Manufacturing PMI 57.5 56.1 55.2
Wednesday US ADP Employment Report 177,000 178,000 263,000
Wednesday US FOMC Statement
Wednesday US Base Interest Rate 1.00% 1.00% 1.00%
Thursday AUSTRALIA Trade Balance 3.11 bill 3.3 bill 3.57 bill
Thursday UK Service PMI 55.8 54.6 55.0
Thursday CANADA Trade Balance -0.1 bill 0.3 bill -1 bill
Thursday US Initial Jobless Claims (weekly) 238,000 246,000 257,000
Thursday US Trade Balance -43.7 bill -44.9 bill -43.6 bill
Thursday EUROZONE ECB President Draghi Speaks
Friday CANADA Employment Change 3,200 20,000 19,400
Friday CANADA Unemployment Rate 6.50% 6.70% 6.70%
Friday US Employment Change 211,000 194,000 98,000
Friday US Unemployment Rate 4.40% 4.60% 4.50%
Friday US Hourly Earnings 0.3% 0.30% 0.20%
Friday US FED Chair Yellen Speaks

 

The Story of the Week: Something Smells Fishy in China…

 

Long-Term Chart of the Shanghai Composite

We have been monitoring Chinese stocks in recent weeks, as the global rally since the French elections failed to ignite an advance in mainland China. In fact, the Shanghai Composite had scary declines in the wake of the crumbling of the interbank lending system, and the “shadow banking system” in the country. While this might sound technical, it is a very simple thing; the major Chinese banks are losing trust in each other and refusing to lend money to one another. Why is that? Because they fear (actually they know) that there is a huge problem in the banking system of the country.

Some experts argue that the country is in the “Mother-Of-All-Credit-Bubbles” that has been blown by the government in order to maintain growth in the country. Sure, the volume of construction projects that has been driving growth in recent years is borderline insane; and those projects were running on borrowed money, with, sometimes, very bleak return prospects. The chart above shows that non-financial credit in the country went up almost 5-times in 8 years until 2015, and that trend continued in the past year as well.

If we look around, we can see that besides stocks several related assets are showing signs of distress as well, such as commodities, commodity-related currencies, and Chinese corporate bonds. That said it’s hard to say that the bubble is popping right now, and that a US-style credit crisis is imminent. Credit bubbles tend to go on for much longer than expected even in free economies, let alone in a country which is centrally governed by people who get scared if the GDP growth rate falls below 5%.

As China expert Kyle Bass notes in this video, the re-structuring of the system is inevitable, and it will cause huge waves globally, but the timing of it is more than tricky. On another note, the coming Chinese credit crisis won’t mark the end of the China or the global economic growth, but it will be a huge bump on the road, with lots financial pain.

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 443 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

Weekly Recap: Crypto Winter Grows Colder; Trump Goes Prime-Time

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Weeks of steady progress in the cryptocurrency market unraveled on Thursday, as bitcoin headed for its worst drop since November. Bitcoin’s quick and sudden collapse triggered a market-wide correction, with the likes of Ethereum, bitcoin cash and Litecoin heading for double-digit declines.

Stock markets traded in the opposite direction of cryptocurrencies thanks to renewed optimism that the United States and China will reach a new trade agreement. Both sides met for longer than expected this week, highlighting progress on a number of important issues.

Crypto Markets Crumble

The cryptocurrency market experienced a sharp and sudden pullback on Thursday after bitcoin plunged 5% in less than an hour. The leading digital currency continues to exert a gravitational pull on the broader market, which exposed assets like Ethereum, XRP, bitcoin cash and others to heavy selling pressure.

Prior to the selloff, bitcoin had successfully regained $4,000, leading the broader crypto market cap north of $138 billion. It has since fallen to $123.5 billion. There was no immediate catalyst for the drop, which likely means technical trading was the biggest factor.

Most major assets are headed for weekly losses, with Ethereum and bitcoin cash experiencing the biggest percentage drop. Tron is still on track for a weekly gain of around 26% after prices peaked at five-month highs earlier in the week. Read: Tron Surges to Five-Month High as BitTorrent Token Enters Circulation.

Ethereum Hard Fork

After nearly doubling in price over a three-week stretch, Ethereum dropped more than 14% on Thursday. As a result, ether dropped back to third spot in the crypto market ranking, with XRP returning to no. 2.

After Doubling in Price, Ethereum Faces Inevitable Correction Ahead of Big Upgrade

Ethereum had enjoyed strong momentum ahead of a highly-anticipated technical upgrade. Constantinople is scheduled to go live between Jan. 14-18, and will bring much needed upgrades to the network. The hard fork created a sense of urgency for investors and miners, who will see their block reward lowered to 2 ETH from the current rate of 3 ETH. The upgrade will be hardly noticeable to average users but is considered an essential component of the development road map, including future improvements to scalability.

Stock Recovery Deepens

U.S. stocks rose sharply this week, with the major indexes building on a recovery that began in earnest on Boxing Day. The S&P 500 Index is in the midst of its strongest two-week stretch since 2011, having rebounded 10% over that period.

Markets were propelled higher last Friday by better than expected nonfarm payrolls numbers. This week, positive developments around U.S.-China trade negotiations were among the biggest catalysts. Trade delegates from both countries met in Beijing this week, where they ironed out important details concerning U.S. commodity purchases and access to mainland China markets.

Investors are gearing up for a potentially volatile earnings season now that Apple has lowered its guidance on Q4 sales. Corporate reporting season will begin later this month.

Trump Goes Prime-Time

President Donald Trump delivered his first Oval Office address on Tuesday, where he urged Americans to support his fight for increased border protection. The president described the situation on the U.S.-Mexico border as a “humanitarian crisis” that needs to be resolved immediately. Read: President Trump Makes His Case for a Border Wall as Economy Hangs in the Balance.

Trump and congressional Democrats remain locked in a bitter dispute over a proposed border wall that will cost $6 billion. Democrats’ refusal to approve the funding has blocked a new budget from being formed and caused several government agencies to shut down. As many as 800,000 federal workers lost their first full paycheck on Friday as the impasse continued.

The latest talks between Trump and Democrats broke down on Wednesday after House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer said they would refuse to grant wall funding even if government reopened.

The Week Ahead

The longest government shutdown in U.S. history will certainly have ramifications on Wall Street unless Democrats and Republicans are able to reach a solution shortly. There’s already signs that the federal shutdown is starting to make investors anxious, which could put additional pressure on the Trump administration to reach a compromise.

In cryptocurrencies, bitcoin will look to defend a critical support level over the weekend. Its ability to hold $3,500 could dictate whether the market enters full-blown capitulation mode or recovery. The hard fork of Ethereum will also be of interest to crypto traders looking to evaluate ether’s technical progress.

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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4.7 stars on average, based on 738 rated postsSam Bourgi is Chief Editor to Hacked.com, where he leads content development for one of the world's foremost cryptocurrency resources. Over the past eight years Sam has authored more than 10,000 articles and over 40 whitepapers in the fields of labor market economics, emerging technologies, cryptocurrency and traditional finance. Sam's work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Contact: sam@hacked.com Twitter: @hsbourgi




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Week in Review

Weekly Recap: Crypto New Year Begins Quietly as Apple Roils Traditional Markets

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Crypto markets opened 2019 on a soft note, as bitcoin and the major altcoins saw more stable trading ranges following weeks of volatility. Ethereum emerged as the week’s biggest gainer following a 16% surge in price, which allowed it to reclaim the second spot from XRP in the market-cap ranking.

In traditional markets, Apple’s admission that it may have a big China problem wreaked havoc on stock prices, with the Dow Jones Industrial Average plunging more than 600 points in a single day of trade. Stocks remain highly vulnerable to extreme swings, a trend that is expected to continue for the duration of the first quarter.

Cryptos Stabilize

The cryptocurrency market showed greater upside potential this week, as bitcoin clawed back above $4,000 on multiple occasions and Tron showed signs of a bullish breakout. However, on balance, the market is little changed compared with last week. Since peaking near $136 billion on Wednesday, the cryptocurrency market capitalization has drifted back below $130 billion.

Further reading: Projects Like Tron are “Just Garbage,” Says Jed McCaleb; TRX Price Ticks Higher on New Year’s Day.

Bitcoin is once again benefiting from positive sentiment tied to Intercontinental Exchange’s forthcoming BTC futures market. Unlike CBOE and CME, the Bakkt trading platform will offer physically settled bitcoin futures, a move that many in the blockchain community believe could boost institutional adoption of digital assets.

Bitcoin on Track for Narrow Weekly Gain as Outlook Brightens; Breakout Imminent?

Bitcoin is currently trading slightly above $3,800 and is down less than 1% for the week. Percentage-wise, bitcoin SV (BSV) was the worst performer among the majors this week, falling 4%.

Ethereum Pulls Ahead

Ethereum pulled ahead of the pack this week, climbing 16% to overtake XRP for second spot in the market-cap rankings. XRP, which fell nearly 3% this week, held the no. 2 spot for the better part of six weeks.

At the time of writing, ether’s price was valued just above $150 for a total market value of $15.5 billion. The so-called developer’s cryptocurrency peaked near $16.3 billion on Wednesday as the price approached $160.

For the first time in months, Ethereum is benefiting from positive news flow ahead of the highly anticipated Constantinople upgrade. The soft fork, which is scheduled to take place Jan. 16, will introduce much needed upgrades to the protocol. It will also lower the block reward for mining ETH, thereby boosting demand for the digital currency. Read more: Ethereum Flips XRP for Second Spot in Crypto Market Ranking Following 12% Gain.

Apple’s Ominous Warning

Apple has finally admitted that it might have a big China problem. On Wednesday, CEO Tim Cook issued a letter to investors warning of an unexpected downturn in revenue for the holiday quarter. It was the iPhone maker’s first revenue cut in 15 years and couldn’t come at a worse time.

The company already faces an uphill battle in an overly saturated Chinese market where low-cost handhelds are taking away market share. As we pointed out on CCN, global smartphone sales likely fell in 2018 and while growth is expected to pick up, it won’t be more than single digits.

Apple’s stock price tanked nearly 10% on Thursday, dragging the company’s market cap below $700 billion. The company’s value peaked north of $1 trillion last year. The selloff in AAPL shares had a noticeable impact on Wall Street, dragging the Dow Jones Industrial Average lower by 660 points. Markets recovered sharply on Friday and are on track for a solid weekly gain.

The Week Ahead

Crypto markets are still in a long-term downtrend, but optimism about the future is quietly growing after bitcoin celebrated the ten-year anniversary of its Genesis Block. Although technical trading continues to dominate prices, a shift to fundamentals is likely in the coming weeks as investors prepare for the launch of Bakkt, the first physically-settled bitcoin futures market.

In terms of traditional assets, the fallout from Apple’s announcement will continue to resonate next week as FAANG stocks continue to struggle. A resolution to the partial U.S. government shutdown, now in its second week, will also be in focus.

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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4.7 stars on average, based on 738 rated postsSam Bourgi is Chief Editor to Hacked.com, where he leads content development for one of the world's foremost cryptocurrency resources. Over the past eight years Sam has authored more than 10,000 articles and over 40 whitepapers in the fields of labor market economics, emerging technologies, cryptocurrency and traditional finance. Sam's work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Contact: sam@hacked.com Twitter: @hsbourgi




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Analysis

GBP/USD Price Forecast: Brexit Has a “50-50” chance – Top UK Cabinet Minister

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  • UK International Trade Secretary, Liam Fox, says that Brexit has a “50-50” chance.
  • GBP/USD remains vulnerable to downside risks, given the lack of political progress.

UK Brexit worries remain at elevated levels, while the British ministers continue to enjoy their ‘Christmas recess’. Unfortunately, the talk of the UK EU Membership referendum, is very much going to be carried well into a third year.

Brexit Has a “50-50” Chance

In terms of the latest commentary, the international trade secretary, Liam Fox, suggested that Brexit now has a “50-50” chance. The possibility that the UK will not be leaving the EU on 29 March, should the MPs reject Theresa May’s Brexit deal.

UK members of parliament will be due to vote on the Prime Minister’s withdrawal agreement in January. The deadline of UK scheduled to leave the EU on 29 March is drawing ever closer, while being very much up in the air.

This vote was initially scheduled for 11th December, however a big loss of confidence for Theresa May as she was forced to make a decision and postpone it. She did this as it became clear there was going to be defeat at quite a large margin.

The Labour Party leader, Jeremy Corbyn, continues to pile on the pressure, urging Mrs May to cut short MPs’ Christmas break. He is calling for this to allow for an earlier vote, as they are not due back in the Commons until 7th January.

Technical Review GBP/USD

GBP/USD daily chart. Price action has been stuck within a 1 cent range, 1.26-1.27. It remains vulnerable to downside risks.

Over the last two weeks, there has been little in terms of major price movement for GBP/USD. This not being surprising of course, given the festive period and market closures. Volumes are expected to gradually pick up this week, from 2nd January, as market participants return from their holidays. In terms of real full swing, this may not be anticipated until the second week of January.

GBP/USD has been moving within a tight range of 1.26-1.27 price range. Given there will be much uncertainty heading into the UK ministers return and the vote, it wouldn’t be surprising to see GBP on the back foot. As seen in the back end of this year, GBP is extremely sensitive to any Brexit updates.

Breakout and Retest of Rising Wedge

GBP/USD 4-hour chart. Price action has broken out and retested a rising wedge pattern.

Aside from the bearish fundamentals, via the 4-hour chart view, GBP/USD had been moving within a rising wedge pattern. The formation of this began on 11th December, to then be breached by the bears on 26th December. A retest of that pattern was seen on 28th December, with the lower trend line rejecting a break back through.

Should the bears capitalize on the above-detailed, then a retest of the December low area may be seen. This can be observed sub-1.25, the low printed on 11th December, down at 1.2480. A breach of this could be very punishing, potentially inviting a free-fall. The direction however will be helped on from the latest developments on Brexit, for now they remain bearish.

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 107 rated postsKen has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.




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