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Analysis

Yellen Speech Sparks Rally in “Everything” as Fed Sees Risk Again

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Wednesday Market Recap

Asset Current Value Daily Change
S&P 500 2439 0.59%
DAX 12641 -1.64%
WTI Crude Oil 45.30 0.52%
GOLD 1221.00 0.53%
Bitcoin 2370 0.20%
EUR/USD 1.1425 -0.37%

Investors might have felt quite a bit of nostalgia today, as Fed Chair Janet Yellen followed the tradition Alan Greenspan and Ben “Helicopter” Bernanke when she voiced her concerns about the future of the economy. While we agree with her on the risks regarding growth, but we can’t help but wonder if her words were more a reaction to the recent correction in the NASDAQ than anything else. After all, the Federal Reserve supposed to be data-dependant regarding its decisions, just it looks like not economic rather market data dependant.

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Jokes aside, all major stock indices jumped higher after the speech, and the DOW got very close to its all-time highs on the process, with the NASDAQ also recovering above crucial resistance, possibly signaling another rally attempt from the broader market. On an interesting note, and confirming the European Central Bank’s role in following the Fed, the Euro actually fell against the Greenback after Yellen’s testimony and that might signal a durable correction in the most important currency pair.

The Canadian Dollar is also rallying after the BOC’s expected rate hike, and we have to wait and see if the new lows will be durable or a sell-the-news will eventually follow.Commodities are also higher with gold finally leaving the vicinity of the $1200 level, and possibly starting a new upswing after the post-Fed decline. Oil also jumped on the news that US inventories declined by more than expected, while Yellen also gave a boost to the whole segment.

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Gold Futures, 4-Hour Chart Analysis

Cryptocurrencies

The crypto market settled down after the strong moves on Sunday and Monday, with the majors all rallying off their lows amid the declining volatility. Ethereum recovered above the $200 level once again, and although it’s yet to pass any major technical hurdles, the long-term picture still suggests that a tradable low is already in. Small cap coins are also trading slightly higher yesterday’s levels, but compared to the recent decline, the bounce is relatively weak, and the short-term resistance levels still hold back the currencies.

Ethereum, 4-Hour Chart Analysis

Technical Picture

The NASDAQ is at a critical point after the Yellen-rally, as it got up to the declining trendline that defines the current correction in the tech benchmark. The 5800 resistance is also just ahead of the index, end that could provide a good entry point for traders who expect a deeper correction, as the short-term MACD indicator is also approaching oversold territory.

NASDAQ 100 Futures, 4-Hour Chart Analysis

Key Economic Releases on Wednesday

Time, CET Country Release Actual Expected Previous
10:30 UK Average Earnigns 1.8% 1.8% 2.1%
10:03 UK Unemployment Rate 4.5% 4.6% 4.6%
16:00 CANADA BOC Rate Decision 0.75% 0.75% 0.5%
16:00 CANADA Monetary Statement
16:00 UK Janet Yellen Testifies
16:30 US Crude Oil Inventories -7.6 mill -3.2 mill -6.3 mill

Key Economic Releases on Thursday

Time, CET Country Release Expected Previous
Tent. CHINA Trade Balance 273 bill 282 bill
3:36 SWITZERLAND PPI Index 0.0% -0.3%
14:30 CANADA NHPI 0.2% 0.8%
14:30 US PPI Index 0.0% 0.0%
14:30 US Initial Jobless Claims 244,000 248,000

 Featured image from Flickr (credits: DonkeyHotey)

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Analysis

Daily Analysis: Dow Leapfrogs 23,000 as IBM Beats Estimates

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Wednesday Market Recap

Asset Current Value Daily Change
S&P 500 2560 0.13%
DAX 13043 0.35%
WTI Crude Oil 52.02 0.29%
GOLD 1284.00 -0.23%
Bitcoin 5435 -3.15%
EUR/USD 1.1793 0.23%

IBM surged higher today, as the company beat analysts’ expectations across the board, pushing the company’s shares up by more than 10% and helping the Industrial Average to a new all-time high yet again. The other major US indices kept on grinding higher as well for most of the day, despite the strong overvaluation, with the Volatility Index (VIX) still hovering around the 10 level. The NASDAQ and the S&P 500 finished virtually unchanged after a late-session sell-off, while small caps outperformed in the mixed environment.

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DOW 30 Index, Daily Chart Analysis

Global stocks also edged higher, with the Nikkei still leading the way, although the momentum of the move is still weak. The Yen’s weakness was the most apparent trend in currency markets, while the Pound rebounded well, despite the persistent Brexit worries, with the Dollar giving back some of its recent gains compared to its major peers. Gold also remained under pressure after retreating back below $1300 this week, while crude oil rallied on a bigger than expected, hurricane-related decline in US production.

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Gold 4-Hour Chart Analysis

Cryptocurrencies

The major coins had a hectic and bearish session, especially in early trading, as Bitcoin’s overbought conditions coupled with Ripple’s sudden downturn led to a segment-wide decline. Ethereum continued to slip, as the Byzantium-related optimism faded away, but it remained well above the $285 level, and recovered above $300 towards the end of the session. NEO and IOTA still have a negative correlation with the rest of the market, as the two coins surged higher in early trading and gave back their gains during the late-day rebound.

BTC/USD, 4-Hour Chart Analysis

Technical Picture

The DAX closed on a marginal new all-time high again, but the lengthy momentum divergence in the MACD indicator suggests that the steep uptrend continues to be in jeopardy. The low-volatility drift carried the benchmark above the 13,000 level, but a correction towards at least the 12,850 level is likely in the coming days, with another support level at 12,650 serving as a longer-term target. As the long-term uptrend is clearly intact, bears shouldn’t go all-in here but bulls should consider exiting their positions and wait until a correction to trade the long side again.

DAX, 4-Hour Chart Analysis

Key Economic Releases on Wednesday

Time, CET Country Release Actual Expected Previous
3:30 EUROZONE Mario Draghi Speaks
3:30 UK Average Earnings 2.2% 2.1% 2.1%
14:30 UK Claimant Count 1,700 3,200 -2,800
14:30 UK Unemployment Rate 4.3% 4.3% 4.3%
16:00 CANADA Manufacturing Sales 1.6% -0.1% -2.6%
14:30 US Building Permits 1.22 mill 1.25 mill 1.27 mill
16:00 US Housing Starts 1.13 mill 1.18 mill 1.18 mill
15:45 US Crude Oil Inventories -5.7 mill -4.7 mill -2.7 bill

Key Economic Releases on Thursday

Time, CET Country Release Expected Previous
2:30 AUSTRALIA Employment Change 15,200 54,200
2:30 AUSTRALIA Unemployment Rate 5.6% 5.6%
4:00 CHINA GDP 6.8% 6.9%
4:00 CHINA Industrial Production 6.4% 6.0%
10:30 UK Retail Sales -0.1% 1.0%
14:30 US Unemployment Claims 245,000 243,000
14:30 US Philly Fed Index 22.2 23.8
15:45 US Chicago PMI 58.6 58.9

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Analysis

Technical Analysis: Bitcoin Dumps and Pumps amid Broad Volatile Correction

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The crypto segment has been in turmoil today, as the most valuable coins turned significantly lower, leading to a mini-panic, but they rallied strongly off their slows as buyers stepped in the second half of the session.

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Bitcoin fell as low as $5100, for a 15% correction top-to-bottom, but it is now trading near the prior short-term support at $5400. As the long-term picture remains overbought, investors shouldn’t open new positions here, but traders could play a likely move towards the $6000 level, although we still advise small sizes, as correction risks remain elevated.

BTC/USD, 4-Hour Chart Analysis

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The other majors were also declining in early trading, led by Ripple, with only NEO and IOTA, holding up well during the sell-off.  Both of the latter coins faded away as the rest of the market recovered, but Ripple continued to suffer. For now, the long-term bullish picture is unchanged for the segment, but BTC’s overbought correction could still cause volatility in the coming period. Let’s see the short-term charts after the busy session.

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Analysis

Daily Analysis: Dollar Rally Continues amid Fed Chair Confusion

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Tuesday Market Recap

Asset Current Value Daily Change
S&P 500 2554 -0.09%
DAX 12995 -0.07%
WTI Crude Oil 51.53 -0.66%
GOLD 1287.00 -1.22%
Bitcoin 5652 -0.86%
EUR/USD 1.1751 -0.38%

Yesterday’s trends are mostly continued in financial markets, such as the low-volatility levitation in stocks and the slightly more active trading in currencies with the apparent Dollar strength. The Great British Pound continued to be under pressure amid the amplified Brexit-related worries, but most of the other majors also lost ground to the Greenback.

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The Dollar rally has been fueled by the rise in the odds of some of the hawkish Fed Chair candidates, while overall, the “race” for the positions looks more chaotic than ever. Interestingly, the long-end of the yield curve is refusing to follow the short-term moves, and without the effects of the Fed’s QE program, the yield curve would probably be inverted by now, signaling strong recession risks.

Dollar Index (DXY), 4-Hour Chart Analysis

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The major stock indices are virtually unchanged yet again and even the previously surging Nikkei entered a consolidation, adding to the unusual October lull. Commodities have been quite active thanks to the Dollar’s vigor, with crude oil and gold both turning lower. Oil gave back most of yesterday’s gains as the Iraqi-Kurdish conflict turned out to be less violent than previously feared, and the brief rally fizzled.

WTI Crude Oil, 4-Hour Chart Analysis

Cryptocurrencies

The major coins are having a mixed session at best, as yesterday’s rebound wasn’t durable, and most of the coins turned back lower again. That said, despite the recent choppy price action, the total market cap of the segment is close to its all-time high, even as only Bitcoin is trading near its own record price level.

The optimism regarding Ethereum major Byzantium upgrade wasn’t enough to lift the second most valuable coin today, and the price of the ETH token retreated below the key $330 level after touching $350 yesterday after the upgrade’s lock-in. Ripple and NEO have been among the most active majors today, but with opposing performances, as Ripple fell significantly after yesterday’s break-out attempt, while NEO defied gravity and jumped above the $30 level after a corrective period.

BTC/USD, 4-Hour Chart Analysis

Technical Picture

The S&P 500 is grinding higher despite the overbought short-term momentum readings, and the benchmark is trading very close to its all-time high. The 2550 level is still in focus, but until volatility remains near record lows, the minuscule moves are unlikely to change the technical setup. While a sudden drop in prices could quickly negate the recent break-out, the consolidation could very well lead to further upside, as bulls remain firmly in control, despite the lofty valuation levels.

S&P 500 Futures, 4-Hour Chart Analysis

Key Economic Releases on Tuesday

Time, CET Country Release Actual Expected Previous
02:30 AUSTRALIA RBA Meeting Minutes
10:30 UK CPI 3.00% 3.00% 2.90%
11:00 GERMANY ZEW Sentiment 17.6 20.3 17
12:00 EUROZONE Final CPI 1.50% 1.50% 1.50%
15:15 US Industrial Production 0.30% 0.40% 0.20%
15:15 US Capacity Utilization Rate 76.00% 76.20% 76.10%

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