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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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Week in Review

Week in Review: Crypto Recovery Runs Into  Hurdles as Market Plummets Friday 

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Friday marked another down week for cryptocurrencies after a series of technical hurdles failed to spur the bullish revival many had hoped would materialize. Surprisingly, the market exhibited relative calm following yet another hack of a high-profile digital currency exchange.

Meanwhile, traditional markets were consumed by trade-war fears and a key production meeting of the Organization of the Petroleum Exporting Countries (OPEC). Monetary policy was also on the radar as the European Central Bank (ECB) hosted a forum in Portugal while the Bank of England (BOE) signaled that an interest rate hike could be on the way this summer.

Crypto Rally Fizzes

Cryptocurrencies lost $22 billion in combined market cap this week, though all the declines were concentrated in Friday trading.

Although there was no immediate catalyst for the Friday selloff, which wiped as much as $29 billion from the market, the declines reflect a continuation of a bearish cycle that re-emerged last month.

EOS, Ethereum and bitcoin cash were the majors’ biggest decliners after recording double-digit losses over a 24-hour period.

Bitcoin also fell sharply after the bulls failed to rally past the technically significant $6,800 level.

The biggest development of the week came out of South Korea after Bithumb confirmed it fell victim to a cyber breach costing $30 million in cryptocurrency. The attack compromised roughly 6% of the exchange’s capital.

It is not yet clear how the perpetrators pulled off the heist. Bithumb has fallen prey to multiple attacks over the past 12 months, prompting management to invest millions more in cyber security and IT staff.

OPEC Agrees to Raise Crude Production

The Organization of the Petroleum Exporting Countries (OPEC) reached a tentative agreement Friday to raise crude-oil production by around 600,000 barrels per day following high-level talks in Vienna, Austria.

The Wall Street Journal confirmed that the deal is only in principle and involves so-called effective barrels, which refers to “real” barrels that will actually reach the market. Saudi Arabia, the group’s de facto head, entered the meeting with the stated goal of boosting output by one million barrels per day.

In 2016, the cartel agreed to limit output by about 2% of global production, which at the time amounted to roughly 1.8 million barrels per day.

After a prolonged bear market for crude, OPEC’s production rollback supported a global recovery in oil prices, with Brent briefly trading above $80 a barrel last month. U.S. President Donald Trump has blamed OPEC for inflating oil prices through its production policies, adding pressure on the cartel to raise outputs.

Monetary Policy in Focus

Central-bank meetings have carried more significance as of late as policymakers in the United States and Europe seek to clarify their positions on monetary policy. This week, the Bank of England held interest rates in check at 0.5% but sent a strong signal that changes could be looming over the horizon.

Andrew Haldane, the Bank’s chief economist, joined two other Monetary Policy Committee members in voting to raise interest rates by 25 basis points following the meeting on Thursday. Although they were offset by six votes in favor of keeping rates unchanged, the split suggests that a shift in policy could be coming.

Meanwhile, European Central Bank (ECB) President Mario Draghi told a central-bank summit in Sintra, Portugal that he will take a gradual approach in raising interest rates once officials wind down crisis-era policies later this year. Last week, the ECB’s Governing Council said it would put an end to bond purchases by the end of 2018.

The Week Ahead

The crypto markets appear to have found a bottom but the near-term outlook remains shaky. This is partly owed to abnormally low trading volumes. Last weekend, daily turnover plunged to its lowest level in over two months. Daily volumes fluctuated between $11 billion and $13 billion for most of the week.

On the economic calendar, investors can expect a steady stream of market-moving data, including revised U.S. GDP, durable goods orders and core personal consumption expenditures.

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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4.6 stars on average, based on 464 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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Week in Review

Week in Review: Cryptocurrency Market Extends Collapse with $60 Billion Decline but SEC Provides Silver Lining

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The cryptocurrency market plunged by as much as 21% this week in an apparent selloff that was driven by volatile futures trading. Negative headlines concerning Tether price manipulation, a South Korean exchange hack and widening investigation by CFTC regulators all hastened the collapse as cryptos approached their lowest levels since February.

However, a top official with the U.S. Securities and Exchange Commission (SEC) gave investors something to cheer about by concluding that Ethereum is not a security. Meanwhile, a government-appointed panel in India is expected to challenge the central bank’s unilateral ban on digital currency trading, according to multiple reports by local media.

Cryptocurrency Market Plunges

Cryptocurrencies bled more than $60 billion over the past seven days, as the market approached the February bear-market low. The declines were largely concentrated in the first half of the week as investors reacted to a security breach of a South Korean exchange and news of a widening investigation by CFTC officials into bitcoin futures.

While these factors certainly played a role, the main culprits of the decline appear to be volatile futures trading and the gradual exit of long-term holders from the market.

According to crypto analyst Tom Lee, traders are longing bitcoin and shorting the futures contract to generate profits before the expiry of the monthly contract. This works by selling a large share of holdings in the futures market at a volume weighted average price, and then selling the remaining amount during expiration.

On the other side of the spectrum, a lack of new buying interest is keeping the supply of bitcoin elevated. Based on Google search trends and overall trading volumes on major exchanges, the influx of new buyers is the lowest it has been this year.

Research carried out by Chainanalysis also suggests that long-term holders of cryptocurrency are gradually unwinding their positions, possibly due to frustration, tax requirements or other factors. The researchers said bitcoin’s long-term backers sold about $30 billion worth of digital currency between December and April.

Bitcoin bottomed near $6,100 this week but has since recovered to around $6,700. Some analysts believe that a bigger reversal is in play, possibly exposing new lows of around $5,000.

Bitcoin, Ethereum Not Securities by SEC Standards

A high-ranking official at the U.S. Securities and Exchange Commission (SEC) has publicly stated that Ethereum is not a security, ending months of speculation that the world’s second-largest cryptocurency would fall under the purview of federal regulators.

Speaking at the Yahoo cryptocurrency summit in San Francisco on Thursday, corporate finance director William Hinman issued the following statement:

“Based on my understanding of the present state of ether, the Ethereum network and its decentralized structure, current offers and sales of ether are not securities transactions.”

Although the statement doesn’t reflect the SEC’s official position on the matter, the regulator’s view of Ethereum likely falls in line with its approach to bitcoin, which it says is too decentralized to be a security. Likewise, Ethereum is not a security because its network is too decentralized.

On the subject of tokens, however, the SEC has an entirely different view. SEC Chairman Jay Clayton believes all initial coin offerings (ICOs) should be classified as securities. Hinman offered a more nuanced approach Thursday by acknowledging that some ICOs can be structured like a consumer good rather than a security.

Nasdaq’s Record Surge

U.S. stocks headed for another week of gains, as pro-growth optimism and the easing of geopolitical tensions spurred demand for riskier assets. The technology-driven Nasdaq Composite Index continued to outperform the market by notching its fifth record close in two weeks.

Wall Street has now vastly outperformed its global peers over the past month, with the major indexes returning between 1.2% and 4.9%. European and Asian markets are virtually all lower over the same period.

A successful meeting between President Trump and North Korea’s Kim Jong-un Tuesday helped reassure investors that diplomacy would prevail in Washington’s attempt to denuclearize the Communist state. Trump and Kim issued a joint statement following the meeting where they pledged to continue negotiations.

Central Banks in Focus

Monetary policy was a primary focus this week as investors monitored central-bank meetings in Washington and Riga.

The U.S. Federal Reserve voted Wednesday to raise the target for the federal funds rate to 2% in a decision that was widely expected by markets. In doing so, policymakers dropped neutral language about the economy and priced in two more rate adjustments this year.

The European Central Bank (ECB) kept monetary policy unchanged Thursday but vowed to wind down its crisis-era stimulus plan this year. ECB officials said they are planning to end monthly bond purchases by the end of the year.

ECB President Mario Draghi vowed to cut quantitative easing from the current rate of €30 billion per month to €15 billion beginning in September. The program will come to a full stop in December.

However, by urging caution, the ECB struck a dovish tone in the currency markets, triggering a landslide in the euro and sending the U.S. dollar to its highest level of the year.

The Week Ahead

Fallout from crypto carnage will be top of mind for digital currency traders next week. It remains to be seen whether the recent lows will attract bargain hunters or keep potential buyers out of the market indefinitely. As a benchmark, trading volumes during the April rebound averaged between $20 and $30 billion. Daily market turnover is now struggling to break $15 billion.

On the economic calendar, the Bank of England and Swiss National Bank are scheduled to deliver their next policy edicts June 21. Fed Chairman Jerome Powell is also scheduled to speak publicly next week following the central bank’s decision to raise interest rates on Wednesday.

European Central Bank (ECB) President Mario Draghi will also deliver multiple public addresses after his Governing Council vowed to put an end to crisis-era policy by the end of the year.

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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4.6 stars on average, based on 464 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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Week in Review

Week in Review: Where’s the Volume? 

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It has been a slow grind higher for cryptocurrency prices. After four consecutive weekly declines, the market is showing signs of recovery, though tepid trading volumes are limiting gains across the digital asset class.

The stock-market picture brightened this week, as tech shares led the Nasdaq Composite Index to three consecutive record highs.

On the the political front, leaders from the Group of 7 nations touched down in Quebec, Canada on Friday for the first of a two-day meeting that could exacerbate growing trade tensions between the United States and its allies.

Cryptocurrencies Stabilize in Low-Volume Trade

Digital currencies stemmed losses this week, as bitcoin avoided a major technical reversal and the major altcoins stabilized following a month of volatility.

The total value of all cryptocurrencies rose by $15 billion over the past seven days, the first weekly gain in over a month. At the time of writing, the total market was valued at $342 billion.

Bitcoin successfully defended the $7,000 support level as the world’s largest cryptocurrency recovered near $7,600. The bulls are now eyeing a breakthrough of the $7,800 resistance for confirmation of further upside.

Among the majors, EOS and bitcoin cash were the biggest weekly gainers. Each currency added double digits compared with seven days ago.

Despite the gains, the crypto-market uptrend was severely limited by declining trade volumes. Daily market turnover ranged between $14 billion and $18 billion all week long, according to CoinMarketCap.

A Record-Setting Week for the Nasdaq

The technology sector carried the U.S. stock market higher this week, with the Nasdaq Composite Index notching three consecutive record closes.

Tech shares continue to outperform the broader market by a wide margin. The S&P 500’s information technology index has returned 13.5% this year, compared with 3.6% for the broader market.

The CBOE Volatility Index, commonly known as the VIX, touched its lowest level in over four months as calm returned to Wall Street. However, that optimism could be short-lived as the Federal Reserve eyes multiple interest rate hikes in the second half of the year.

G7 Summit Begins

Protests were underway Friday morning in Quebec as leaders of the powerful G7 nations began their two-day meeting.

U.S. President Donald Trump is outnumbered on key issues ranging from trade to environmental policies. Those differences came to light in a Twitter spat between Trump, French President Emmanuel Macron and Canada’s Justin Trudeau.

“Please tell Prime Minister Trudeau and President Macron that they are charging the U.S. massive tariffs and create non-monetary barriers. The EU trade surplus with the U.S. is $151 Billion, and Canada keeps our farmers and others out. Look forward to seeing them tomorrow,” Trump tweeted on Thursday.

In a follow-up message, Trump called Prime Minister Trudeau “indignant” by invoking Canada’s long-standing relationship with the United States while failing to acknowledge the country’s unfair trade practices.

Trump will depart the G7 meeting early Saturday and quickly shift his focus to North Korea.

The Week Ahead

President Trump and North Korea’s Kim Jong-un will meet in Singapore on June 12 for high-level talks on denuclearization. The historic face-to-face meeting could signal the beginning of bilateral talks between the two adversaries in pursuit of a comprehensive peace treaty for the Korean peninsula.

On the same day, the U.S. Federal Open Market Committee (FOMC) will kick off its two-day policy meeting in Washington. On Wednesday, the Fed is widely expected to raise the benchmark interest rate for the second time this year. The official rate statement will be accompanied by a revised summary of economic projections covering GDP, unemployment and inflation.

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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4.6 stars on average, based on 464 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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