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Analysis

Weekly Analysis: Stocks and Cryptocurrencies Surge as the Eurozone is Saved (For Now)

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Weekly Recap

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Current Value Weekly Change
2380 1.30%
12470 2.11%
49.19 -1.45%
1269.50 -1.71%
1318 7.85%
1.0898 1.63%

 

Traders could almost hear the collective sigh of relief in the financial world, as the French election removed the risk of an imminent political crisis in the Eurozone. Global stock indices surged to new bull market and all-time highs in the aftermath of the referendum, with the European indices understandably leading the way higher. The NASDAQ also continued to outperform the other majors, boosted by corporate earnings, while the Nikkei ignored the pronounced weakness in Chinese stocks, as Japanese traders celebrated the decline in the Yen. The markets held up well throughout the week, although a lot of stocks failed to join the party, and the weak economic numbers in the US caused a dip towards the end of the week.

Not surprisingly European currencies were the strongest this week, but on an interesting note, the Pound fared better excluding the Monday morning gap higher. The currency remains in a robust short-term uptrend since the announcement of the snap elections in June. The Dollar index remains near its 5-month lows, thanks to the recent strength in the Euro, although the Yen was heavily sold this week, as the demand for safe-haven assets dwindled. Gold was also the victim of the positive sentiment, but it remained relatively strong and gained ground near the end of the period, following the slightly dovish meetings of the European Central Bank and the Bank of Japan. Oil remained under pressure despite the rally in risk-on assets and finished the week near the $49 support after several days of choppy trading.

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Dollar Index, Daily Chart Analysis

Cryptocurrencies

The cryptocurrency market had another blowout week, as not only did Bitcoin hit a new all-time high, but several other currencies experienced fierce break-outs. The change in the value of the market reflected the buzz, as the sum of the coins’ market capitalization topped $34 billion, just a few weeks after reaching $30 billion for the first time. Ethereum, Ethereum Classic, and NEM were among the notable winners of the week, as all of them surged to new highs. Towards the end of the week, even the previous laggards among the majors, such as Ripple, Monero, and Dash rallied strongly. Ripple and Dash are flying high so far in weekend trading as well, being up by more than 30%, and 20% respectively. Litecoin failed to rise above last weekend’s highs but it remains just below those levels after a choppy consolidation week.

Economic Numbers

The US economy provided another round of reality check for bulls, as almost all of the major releases posted significant negative surprises. Although the numbers themselves were not terrible by any means (excluding the three-year low in GDP growth), the string momentum that carried the Trump-rally to new highs earlier on this year seems to be fading. While markets don’t expect a rate hike on next week’s Federal Reserve meeting, the additional tightening steps could also be in danger should these tendencies continue. The German IFO index as among the positive surprises, boosting the Euro on Monday, but the British GDP reading also missed expectations, with only the Eurozone inflation number providing evidence of growth.

Technical Corner

S&P 500, 4-hour Chart Analysis

The S&P 500 finished the week slightly lower following the negative GDP surprise, but the “election-gap” is still well below the current levels. As the strong rally in the NASDAQ couldn’t carry the index above its prior high, it seems likely that it will test the 2355 level in the coming days. The long-term picture remains bullish despite the current weakness, and with strong support zones found near 2332 and just below the 2300 level.

Key Economic Releases of the Week

Day Country Release Actual Expected Previous
Monday GERMANY IFO Business Climate 1.26 million 1.25 million 1.22 million
Monday CANADA Wholesale Sales (monthly) 1.22 million 1.25 million 1.30 million
Monday US FOMC’s Kashkari speaks 0.50% 0.50% 0.0%
Tuesday UK Public Sector Borrowing 1.50% 1.50% 1.50%
Tuesday US CB Consumer Confidence -1 million -2.2 million
Tuesday US New Home Sales 22.0 25.6 32.8
Wednesday AUSTRALIA CPI (quarterly) 244,000 241,000 234,000
Wednesday CANADA Core Retail Sales
Wednesday US Crude Oil Inventories 0.50% 0.60% 0.50%
Thursday JAPAN Monetary Policy Satement -0.10% -0.30% 1.70%
Thursday EUROZONE Base Interest Rate -3.6 million -1.1 million -1 million
Thursday EUROZONE Monetary Policy Satement
Thursday US Core Durable Goods 0 0 0
Thursday US Initial Jobless Claims (weekly)
Thursday US UOM Consumer Sentiment -0.20% 0.40% 0.50%
Friday UK Prelim GDP 257,000 241,000 244,000
Friday GERMANY Retail Sales 0.30% 0.40% 0.60%
Friday US Advance GDP 0.10% 0.10% 1.80%

 

The Story of the Week: Volatility and Short-Interest Near Record Lows on Wall Street

 

Volatility minimums and market tops in the S&P 500

The Volatility Index (VIX) which is one of the simplest measures measuring fear among investors is close to its multi-decade lows. Several commentators draw the conclusion that this has to mean that investors are too bullish, and participants are all in on the long side, so a market decline is inevitable. While the logic might be intriguing, and, in fact, several other measures point to a way overvalued market in the US, don’t fall into the trap of this simple conclusion. Looking at the history of the VIX, we can see that it did a poor job in forecasting the previous two bear markets, and you could even argue that according to this indicator, we are still in for years and years of advances.

On another note, short interest is also hitting record lows, as bears seemingly capitulated after 8-years of gains, and this week’s post-French-election euphoria delivered another blow for the remaining short sellers. The $1 million dollar question is, of course, that are these extremes any indication of a long-term top or not? The correct answer is the usual maybe… Trying to find the “ultimate indicator” (look at this great article on the infamous Hindenburg Omen) is generally a bad idea, but every once in a while all indicators will nail the top. This doesn’t mean that the current overvaluation and these signs of capitulation together shouldn’t be taken seriously, but using more robust methods, like trend analysis should be your primary tools, even if they won’t point out the exact tops and bottoms.

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Analysis

Long-Term Cryptocurrency Analysis: Bitcoin Flirts with $8000 as Altcoin Bull Persists

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Bitcoin’s swift recovery was the main topic of the week, as the most valuable coin not just regained its steep losses, but hit a marginal new high towards the end of the period. The entire segment is experiencing capital inflows as the total value of the coins climbed above $230 billion for the first time ever after finally leaving the vicinity of the $200 billion mark.

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BTC breached the $8000 level before turning slightly lower on Friday, but despite the severely overbought daily chart, it is still trading near its all-time highs. As the long-term picture still suggests a deeper correction, investors should wait with opening new positions and traders should also control position sizes here. Key support levels are found at $7700, $7000, and $6700, while the recent key break-out level at $5000 still hasn’t been re-tested.

BTC/USD, Daily Chart Analysis

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Dash is still the most bullish altcoin from a technical standpoint, despite this week’s short-term correction, as the coin is trading above its prior all-time high, and this weekend, it looks ready to test the break-out high near $500. Support levels are still found at $400, $360, and $330, and as the long-term picture is approaching overbought territory, investors should only hold on to their positions here.

DASH/USD, Daily Chart Analysis

The other major altcoins are also mostly in bullish setups, with some of them already in the latter stages of this cycle, like Monero and IOTA, but elsewhere in the segment, there are still opportunities for both traders and investors. Let’s see the detailed long-term view.

(more…)

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Analysis

Technical Analysis: Litecoin and NEO Jump as Bitcoin Trades near $8000

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The cryptocurrency segment continued its bullish run, as the total value of the coins climbed above $230 billion for the first time ever, while Bitcoin also posted marginal new highs. The most valuable currency is still overbought regarding the long-term picture, and we continue to expect a deeper correction in the coming period, despite the recent strong rally. Support levels are still found $7700, $7000, and $6700 while the $8000 level is ahead as a major obstacle.

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BTC/USD, 4-Hour Chart Analysis

Litecoin has been the most active major besides Bitcoin, as it rallied strongly after breaking out above the key $64 resistance and it breached the next target at $75 before heading below $70 again. The coin remains in bullish long- and short-term patterns, and we expect a move above the major resistance zone ahead with the next target found at $82.50.

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Litecoin/USD, 4-Hour Chart Analysis

NEO is showing strength in the second half of the session, while Monero is recovering well from a short-term dip, similarly to IOTA and Ethereum Classic. Ethereum continues to represent stability in the segment, while Ripple failed to build up momentum so far after yesterdays spike higher. With still most of the altcoins being in bullish setups, let’s see the short-term charts.

(more…)

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Analysis

XRP Looking to Make a Significant Rally

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The XRP/USD pair went into a deep correction after hitting 0.29490 a month ago. It nosedived to the major support level of 0.19052. The pair consolidated for a few weeks which gave the market the legs to test resistance at 0.22924.

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Technical indicators show that the pair was ready to breach its immediate resistance, which it did this morning. Now that resistance has broke at 0.22924, it’s time to buy. This successful breakout will take the pair to 0.23997 first and 0.26563 next before hitting the target of 0.26796 which is coincidentally a major resistance level.

Technical indicators hint that the market would most likely be overbought by the time it hits 0.26796. Should it respect the major resistance level, the likelihood of the market turning extremely bearish increases. Therefore, it is recommended to closely watch your trail stops to preserve your gains.  

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Summary of Strategy

Buy: As close to 0.22924

Support: 0.22224 and 0.20081

Target: 0.26796

Stop: If the market breaches 0.20081 as next reliable support is 0.19052

 

Disclaimer: The writer 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.

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