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Market Overview

Worthless Pieces of Paper

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Many of you probably recall the situation we had on November 8th of 2016 that had billions of people in a panic and genuinely worried about the future. No, I’m not talking about the election of Donald Trump. I’m talking about something that actually affected people’s lives, the demonetization of India.

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In the span of 50 days, citizens were asked to deposit all of their largest bank notes. Virtually overnight all 500 and 1000 Rs notes were made illegal. At the time, it was estimated by Prime Ministere Modi’s team that about one third of all cash in the country would disappear.

They hypothesized that rich people with ill gotten gains who were hoarding massive amounts of undeclared cash would not dare to digitalize their fortunes and instead would be left with “worthless pieces of paper.”

Well, that didn’t exactly happen.

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Of course the rich found ways to deposit their wealth. Many gave it to family members or brokers to deposit on their behalf, or they paid their workers for several months in advance. People with this type of money are much better at hiding it than the government is at finding it.

On the other hand, people who have little or no money were much more inconvenienced than the rich. Many of whom had to get by on much less for a long period of time, wait in ridiculously long lines at the bank, and some have even died due to the suddenness of the change.

In a report that came out yesterday the Reserve Bank of India estimated that 99% of all the newly illegal notes were indeed deposited into the Indian banking system.

Though this may be a big blow to Modi in the short term, this story is not yet over. Now that all the money is in digital form the government is working hard to process the data and find a few likely culprits. We can probably expect some arrests to be made in the coming weeks.

Meanwhile, this story has had a noticeable effect on Bitcoin trends. In November of last year (red circle) we can see a large spike in Indian Bitcoin volumes, which seems to have sparked a trend of higher transaction amounts there.

@MatiGreenspan
eToro, Senior Market Analyst

 

Please note: All data, figures & graphs are valid as of August 31st. All trading carries risk. Only risk capital you’re prepared to lose.

Market Overview

Yesterday it was reported that the United States had grown a remarkable 3% in the second quarter of 2017.

Billionaire investor Warren Buffet has already commented on these figures saying that “this doesn’t feel like a 3% economy.

In this interview with CNBC Uncle Warren pointed out some flaws in the way that they calculate the numbers and shared his intuition which says that we’re probably growing at about 2% per year, which is still pretty good.

Stocks rose sharply in the United States and in Europe with the tech sector leading the way. Asian stocks do not seem to be enjoying the enthusiasm though and are down a bit on the day.

Party at the White House!

This better than expected growth is in large part due to the confidence of investors and small business owners who feel that profits will rise sharply in the next few years once Trump is able to reduce the corporate taxes.

Speaking of which, the Tax Reform agenda that was released yesterday was a bit light on details. Still, the new plan is a step up from the last release that contained only a single piece of paper with several bullet points.

Indeed, this was more of a “rally the troops” speech than a detailed plan of action. At the end of the day, if the president really wants to paint a picture he will only be able to draw the broad strokes and leave the detailed work to Congress.

Redrawing Gold Lines

The price of gold dipped briefly to $1300 this morning before making a recovery. The precious yellow metal has been one of the best performing assets (with the exception of cryptocurrencies) since the beginning of the year.

Though we might be in for a slight pullback, the technicals are looking really strong after the recent surge in price.

In this graph, we can see the spike (blue circle) from the night of the US election. A sudden rise and subsequent fall as investors rushed to price in more aggressive monetary measures of the Trumpean era.

If we look at January 1st until today, we can see a very apparent ascending channel (yellow lines). The chanel was broken once to the upside and once to the down side but overall seems very consistent.

@euanmaca seems to agree and is predicting that we retest $1325 shortly. He’s currently buying gold with 7.29% of his portfolio and has a Take Profit level of $1844.

What Else?

Some fair numbers out of China this morning with the PMI inflation reading a bit better than expected. Later today we’ll get some CPI numbers from Europe as well as bunch of other potentially market moving data from the economic calendar.

Tomorrow is the Non-farm Payrolls in the USA, which is always much anticipated, and usually has a fair amount of influence on market movements.

The Crypto market is also chugging along nicely. Over the last 24 hours, the value of all cryptos has gone up by more than $2 Billion despite a massive yet temporary pullback.

Have an awesome day ahead!

This content is provided for information and educational purposes only and should not be considered to be investment advice or recommendation.
The outlook presented is a personal opinion of the analyst and does not represent an official position of eToro.

Past performance is not an indication of future results. All trading involves risk; only risk capital you are prepared to lose.

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: No Questions Answered

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Thursday Market Recap

Asset Current Value Daily Change
S&P 500 2718 0.97%
DAX 12,468 0.31%
WTI Crude Oil 62.61 2.02%
GOLD 1332.00 0.52%
Bitcoin 9780 -8.00%
EUR/USD 1.2324 0.26%

It was a strange day indeed in equity markets, with mixed signals popping up across the board after yesterday’s crazy quasi-FED day. An ugly overnight session, followed by a strong pre-market rally, an early-day pump, and a late-day dump. That is the summary of the day, but under the surface, there is a real struggle between market forces, with still an edge for bears in the battle for control.

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NASDAQ 100 Futures, 4-Hour Chart Analysis

It seems that the Nasdaq is still the key, as the relative strength of the tech benchmark is the most reliable gauge of the market direction, at least regarding the intraday trends. That said, at the end of the day, the Nasdaq closed in the red 4 times in a row, at least as far as the normal trading day is concerned, and still, the major indices are trading not far off last Friday’s top, despite the downward drift.

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Forex Markets and Commodities

Adding to the confusion, the Dollar corrected lower after a positive period, and with Treasury yields trading all over the place, investors were left scratching their heads yet again. The Japanese Yen was the clear winner of the day among currencies, as the primary safe-haven got bid heavily during the Asian session, and it remained throughout the up-and-downs of the day, despite the strong bounce in stocks and risk-on currencies.

USD/JPY, 4-Hour Chart Analysis

The EUR/USD pair had a very active and volatile session, but the common currency remained above the lows from two weeks ago, while also halting below yesterday’s highs, so all-in-all, no technical conclusion to draw. As in stocks, the next clear directional day will be crucial, as the tug of war is getting tenser and tenser.

EUR/USD, 4-Hour Chart Analysis

The Canadian Dollar plummeted during the day, thanks to the dismal Retail Sales figures, but it finished well off its lows, boosted by the stock recovery and the jump in the price of crude oil. The Black Gold was pushed higher by the surprisingly bullish US inventory data, and the WTI contract closed back above $62.50 per barrel.

USD/CAD, 4-Hour Chart Analysis

Gold continued to follow the Euro, finishing the day slightly higher, but the precious metal showed notable relative strength during the Asian session, and that could be the precursor of a move to new rally highs, should the bearish scenario play out in equities.

Cryptocurrencies

The segment had another bearish session, and the bleeding continued after the US session, with BTC leading the way lower this time around after a long period of relative strength. A crucial test might be ahead of the most valuable coin, as the $9000-$9200 support zone would be a perfect target for the current correction, to keep the uptrend going. That said, that zone is still almost 50% above the prior low, leaving plenty of room for the coin to bottom out.

BTC/USDT, 4-Hour Chart Analysis

With all of the major altcoins also sporting significant losses, bulls would like to see more of the early relative strength that some coins have been showing, to establish a leadership that can guide the segment out of the plunge. For now, the crash lows are way below the current levels, and the bullish long-term scenario remains intact.

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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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Analysis

Pre-Market: Bulls Try to Fight Back after Ugly Overnight Session

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Following the steep late-day downturn on Wednesday, which followed the not-to-hawkish FED meeting minutes, Asian markets and US equity futures continued lower with a vengeance. The very active overnight trading is another sign of the regime change in traditional financial markets that we have been monitoring for the last two weeks, ever since the “Black Monday of 2018”.

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Dow Futures, 4-Hour Chart Analysis

EUR/USD Changing Behavior

The European session brought about an oversold bounce that stabilized markets from stocks to currencies. The EUR/USD pair that has started acting “normally” considering its relationship with US Treasury yields lately, is headed south once again, trading only 0.5% above its recent correction lows after clearly breaking below the rising trendline.

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EUR/USD, 4-Hour Chart Analysis

The bull-trap that we identified a few days ago was the start of the current leg lower, and if the regime change will be persistent, the most traded forex pair could be back to the role of the “risk-on/risk-off” indicator that has been the privilege of commodity currencies in the last couple of weeks.

USD/JPY, 4-Hour Chart Analysis

The Japanese Yen is showing notable strength after its overbought dip, and the primary safe-haven currency could be in for more gains, should the risk-selloff continue. The Yen also gained ground on the common European currency, following the dovish ECB meeting accounts and the misses in the German IFO business climate indicator and the British GDP, which all question the European growth-monetary tightening narrative.

Canadian Dollar in for a Wild Ride

USD/CAD, 4-Hour Chart Analysis

With the Canadian retail sales report and the US crude oil inventory data coming out soon, forex traders should expect sizeable moves in the recently weak currency, while the USD should also be very active during the US stock market session.

All eyes are on Treasury yields again, with the slight correction today helping the bounce in stocks and other risk assets. The Nasdaq could be the motor of a stronger rally on Wall Street, but we wouldn’t bet the house on that, as the short-term technical setup remains bearish, and a re-test of the correction lows is still the most likely scenario for the coming weeks.

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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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4.7 stars on average, based on 109 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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Market Overview

Play that Funky Market

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There’s only one way to explain what’s happening in the markets right now.

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It’s FUNK!

@MatiGreenspan
eToro, Senior Market Analyst

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Today’s Highlights

  • More Market Funk
  • No way but Right?
  • More Crypto Vol

Please note: All data, figures & graphs are valid as of February 22nd. All trading carries risk. Only risk capital you can afford to lose.

Traditional Markets Funk

Everything was going fine on Wall Street, they came back from lunch in a buying mood, but somehow things started to turn sour. By about an hour before the close things started to get downright ugly and by now we’re more than 500 points off the peak of that yellow circle and we’re now 3.82% from the all-time high.

Once again, the movement began in the bond markets, with the yields on the 10 Year spiking to a new high of 2.94% by the end of the day.

And of course, volatility can be seen with the VXX shooting up into the close.

Italian Splinters

It’s been five days since Italy stopped publishing opinion polls ahead of the national elections on March 4th in order to stop them having an influence on polling day itself.

That said, as we learned in Brexit and the Trump elections, polls can’t always predict what’s going to happen and in Italy, even less so. And this one is set to be even more interesting than usual.

Nevertheless, some analysts have come to the conclusion that the only party with an actual shot of winning an outright majority is Forza Italia, led by Silvio (I can’t believe I’m even writing this) Berlusconi.

This is still anyone’s game though, and even though there are 945 seats across two Houses of Parliament, alliances are so fractured that candidates are now battling for every single voter.

For the markets it’s still not clear what the effects might be, but as Europe’s 4th largest economy, and with the EU’s 1st largest economy still in a political deadlock, I’m looking squarely at the Euro.

In this chart, we can see the effect that a decisive election had on the EURUSD on April 23rd (yellow circle). Notice the large gap up that seemingly took the market from flat to flying in a single weekend when it became clear that Marine Le Pen had no chance of victory.

Crypto Volatility Continues

When Wal-mart’s stock dropped 10% on Tuesday it was a really big deal but when Bitcoin dropped an equal percentage on Wednesday, somehow it just doesn’t seem all that significant.

On that thought, here’s a meme I made yesterday. 🙂

That’s just the level of volatility that we’ve come to expect from this market. So please be aware that when I say cryptos are volatile, what I mean is they’re extremely volatile.

One thing that I keep noticing in the crypto-market is that when things are going up, we can expect to see different levels of returns in different coins and general divergence. However, when things are going down the correlation gets stronger and everything falls together.
You should be able to see that in this chart pretty clearly…

As always, let me know if you have any questions or if you need anything further.

Have a groovy day!!

This content is provided for information and educational purposes only and should not be considered to be investment advice or recommendation. The outlook presented is a personal opinion of the analyst and does not represent an official position of eToro. Past performance is not an indication of future results. All trading involves risk; only risk capital you are prepared to lose. Cryptocurrencies can widely fluctuate in prices and are not appropriate for all investors. Trading cryptocurrencies is not supervised by any EU regulatory framework.

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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