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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.

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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

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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 Market Loses Steam While Stocks Finish Strong

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The cryptocurrency market pivoted lower this week, as bitcoin and most major altcoins experienced a broad correction. Though experts have struggled to pin-point an exact reason for the decline, profit-taking and declining trade volumes appear to be at least partly responsible.

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Meanwhile, U.S. stocks finished a rocky week on a positive note as investors turned their attention to Jerome Powell’s first Congressional update next week.

Cryptocurrencies Face Broad Reversal

It was a volatile week for cryptocurrencies, as bitcoin and the major altcoins struggled to build off the previous week’s momentous rally. The total market cap for all cryptocurrencies bottomed at $417.6 billion on Thursday as trade volumes also dipped. The market recovered near $443 billion on Friday, but was still down 7.8% for the week and 14.6% from last Saturday’s high of $518.1 billion.

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Bitcoin had an especially volatile week as profit-taking took prices from a high near $11,800 to a low of around $9,650. At the time of writing, the cryptocurrency was trading at $10,040.

Litecoin was also hit by turbulence this week, with prices fluctuating between five-week highs and nine-day lows. The world’s fifth-largest cryptocurrency briefly traded above $300 on Tuesday before falling more than $120 over the next three days. At the time of writing, Litecoin was valued at $204.13.

Prior to the latest reversal, Litecoin was riding a wave of momentum stemming from the announcement of the LitePay payment network. Prices also received a boost following a hard fork of the Litecoin blockchain last Sunday. The fork, which was unaffiliated with the original Litecoin, produced a new cryptocurrency called Litecoin Cash (LCC).

Stocks End on a High Note

U.S. stocks ended a rocky week on a positive note Friday, with the S&P 500 and Dow Jones Industrial Average rallying for a second straight week.

The large-cap S&P 500 Index climbed 1.6% to close at 2,747.30 on Friday. For the week, the index added 0.5%.

The Dow Jones Industrial Average climbed 357.51 points, or 1.4%, to 25,309.99. The blue-chip average ended the week on a gain of 0.4%.

A measure of implied volatility known as the CBOE VIX declined sharply in the final session of the week, closing at its lowest level since Feb. 1. Wall Street’s preferred measure of investor anxiety declined 11.9% to finish at 16.49, on a scale of 1-100 where 20 represents the historic mean. Vol has now fallen 55% from its multi-year settlement high of 37.32 on Feb. 5.

Fed Minutes Point to March Rate Hike

The minutes of the Federal Reserve’s most recent policy meeting gave a strong indication that interest rates could rise faster than previously expected. In deciding to hold interest rates steady last month, Fed officials said stronger economic growth and stronger inflation may require a quicker response from policymakers.

“A majority of participants noted that a stronger outlook for economic growth raised the likelihood that further gradual policy firming would be appropriate,” the summary of the Jan. 30-31 Federal Open Market Committee (FOMC) meeting revealed Wednesday.

“Almost all participants” saw inflation moving up to the Fed’s 2 percent inflation goal over the “medium term” as growth “remained above trend and the labor market stayed strong.”

The FOMC is planning to hold its next policy meeting on Mar. 20-21, where the likelihood of a rate hike is 83.1%, according to CME Group’s FedWatch Tool.

The Week Ahead

Following a series of volatile swings, the cryptocurrency market will be looking for new direction this week. Even with the latest reversal, the technical outlook remains favorable, with the marketing recording bottom-to-top gains of up to 15%.

In economic data, a series of GDP reports will make headlines next week, with the Eurozone, United States and Canada expected to produce Q4 results.

On the policy front, Federal Reserve Chairman Jerome Powell will deliver his first congressional testimony to the House Financial Services Committee. The semiannual policy address is scheduled for Tuesday at 10:00 a.m. ET. On Thursday, Powell will testify before the Senate Banking Committee.

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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4.5 stars on average, based on 165 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: Billions Flow Back into Stocks and Cryptos as Recovery Deepens

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Stocks, commodities and cryptocurrencies all rose this week, rebounding from a sharp selloff that had triggered a severe bout of risk aversion. In the crypto sphere, concerns of an imminent ban on trading continued to recede, leading speculators back into the market.

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Despite the recent gain, the outlook on so-called riskier assets remains tainted by economic and financial risks, not to mention the loss of technical momentum.

Crypto Market Gains Momentum 

Cryptocurrencies bounced back sharply this week on technical trading and reassurance that South Korea has no intention to ban digital currency exchanges.  The market cap for all coins rose sharply for the week as bitcoin topped $10,000 for the first time in over two weeks.

At the time of writing, the total value of all cryptocurrencies in circulation was $485 as the market overcame a brief intraday correction. With the gain, the market has now added more than 16% over the past seven days.

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Some of the week’s most notable movers included Litecoin and Ripple, which benefited from positive business news.

Litecoin announced it will launch its LitePay payment platform later this month, making it easier for e-commerce businesses to accept cryptocurrency payments in real time.

Ripple’s native XRP token also gained traction this week after Western Union confirmed it will pilot the xRapid platform. In doing so, Western Union becomes the second major money transfer system to work with xRapid.

Stocks Bounce Back

Wall Street staged a massive relief rally this week, as the benchmark indexes regained more than half of what they lost in early February. The s&P 500 Index posted its biggest weekly gain since 2013 even as the rally faltered on Friday. The benchmark average closed at 2,732.22, having gained 4.3% on the week.

The Dow Jones Industrial Average mounted a six-day winning streak through Friday, where it closed at 25,219.38. The blue-chip index bottomed at 23,860.46 on Feb. 8.

Meanwhile, the technology-heavy Nasdaq Composite Index closed at 7,239.47 for a weekly gain of 5.3%.

The CBOE VIX Volatility Index closed right around the historic mean Friday, as the market overcame a severe bout of risk aversion. Wall Street’s so-called “fear index” closed at 19.46 on a scale of 1-100 where 20 represents the historic mean. Even though it fell this week, the volatility gauge has risen more than 76% since the start of the year.

Stocks settled well off session highs on news that special counsel Robert Mueller indicted 13 Russian nationals for allegedly meddling in the 2016 U.S. presidential election.

Oil Prices Rebound as Dollar Crumbles

Crude prices bounced back this week from their biggest loss in two years,  as strong demand drivers boosted investor sentiment. The West Texas Intermediate (WTI) benchmark for U.S. crude futures finished the week at $61.68 a barrel after briefly falling below $59. Brent crude for April settlement ended Friday at $84.84 a barrel.

Commodities were aided by a renewed slide in the dollar, which fell to fresh three-year lows this week. The U.S. dollar index (DXY), which tracks the performance of the greenback against a basket of six currencies, bottomed at 88.59 on Thursday. By the end of trading Friday, it had recovered 0.6% to finish at 89.10.  So far this year, the dollar has backtracked 3.3% even as investors become increasingly convinced the Federal Reserve will raise interest rates more rapidly than previously expected.

The Week Ahead

Calm has returned to the financial markets, but it is unclear how long it will last. From the perspective of cryptocurrencies, positive reinforcement on the regulatory front may serve to reinvigorate buying interest following the most recent month-long correction. If this week was a guidepost for things to come, upward consolidation may continue in the near-term.

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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4.5 stars on average, based on 165 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: Cryptocurrencies and Stocks Fall Deeper into Correction as Volatility Spikes

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The global financial markets are wrapping up a highly volatile week of trade, with widespread losses reported across multiple asset classes. Cryptocurrencies plunged by as much as $550 billion from their record peak, while stocks narrowly avoided their worst week since the financial crisis. The narrative underpinning the Trump rally is slowly unraveling with rate-hike jitters threatening the sustainability of the global economic recovery.

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Cryptocurrencies Stabilize After Massive Correction

After a chaotic week, the global cryptocurrency market settled above $400 billion on Friday, with bitcoin and major altcoins recovering. The market’s total value bottomed near $276 billion on Tuesday, as regulatory uncertainty triggered a panic sale across virtually all major assets. This would later fuel a major technical reversal sending bitcoin below $6,000.

By Friday, bitcoin’s value recovered above $8,500, accounting for roughly 36% of the market’s total capitalization.

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The rout in cryptos immediately followed a prolonged buying frenzy that pushed the market north of $830 billion. The sharp correction has many traders searching for a bottom. Prognosticators haven’t been very helpful, with experts predicting anything from a zero-bound crash to multi-trillion-dollar gains.

On the regulatory front, U.S. securities agencies struck a cautiously optimistic tone about the future of cryptocurrency trading. In prepared testimony before the Senate Banking Committee, the heads of the Securities and Exchange Commission and Commodity Futures Trading Commission made no mention of a major regulatory shakeup.

Highly Volatile Week for Stocks Ends Positive

U.S. stocks were on track for their biggest weekly drop since the financial crisis before a late-session surge Friday pared some of the losses. Even with a 330-point Friday rally, the Dow plunged 5.2% for the week, its worst showing in two years.

The broader S&P 500 Index also lost 5.2% following a brief stint at three-month lows.

A measure of implied volatility known as the CBOE VIX spiked above 40 on Friday after reaching a high of 50 earlier this week. The spike in volatility is perhaps the clearest signal yet that smooth gains under President Trump are no longer guaranteed.

As Hacked reported earlier this week, products that short volatility shed billions this week, with the VelocityShares XIV ETN falling from $1.9 billion in assets to just $110 million.

The Wall Street selloff triggered broad declines globally, with Chinese stocks leading the declines and Japan’s Nikkei 225 falling into correction territory.

The Week Ahead

The biggest question heading into next week is whether equities and cryptos will fall deeper into correction, or whether the market will rebound from its recent bottom. The general decline of pro-growth optimism has left Wall Street worse off than it was at the start of the year.

The cryptocurrency market has also entered a period of uncertainty, as investors continue to fret about possible regulatory action against digital currency exchanges. So far, these fears have been overblown, with South Korea adopting only limited measures to control the market and the United States expressing cautious optimism about the future of regulation.

In terms of economic data, the middle of February offers up several high profile releases, including U.S. CPI and Eurozone GDP. The final batches of Q4 earnings are also expected.

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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4.5 stars on average, based on 165 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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