GroundStone Holdings Morning Newsletter

Weekly Market Research - Santa makes a brief appearance on Wall Street

US: S&P 500 Index +1.86%, Dow -1.63%, Nasdaq +2.34%
Europe: STOXX Europe 600 +2.13%, German DAX +1.98% France CAC 40 +1.25%, U.K. FTSE 100 +1.54%
Asia: Japan Nikkei -2.26%, China Shanghai Composite +0.84%, Korea KOSPI -1.51%
Rates/Commodities: 10-Year Treasury yield -6 basis points to 2.66%, WTI crude oil +3.90%, COMEX gold: +0.22%

A Friday rally that saw the U.S. equities spike more than 3% helped the S&P 500 Index kick off the New Year with its second straight weekly advance. The energy sector outperformed as oil continued to rise off its December 24 low, while interest-rate sensitive utilities and REITs were the only two sectors that failed to finish higher. Elsewhere, the dollar weakened against most major currencies, which, along with persistent volatility, sustained gold’s ascent.

Drilling down, the late-week surge was an abrupt reversal that followed a Thursday selloff triggered by disappointing U.S. manufacturing data and an announcement from the world’s largest smartphone maker that its fourth-quarter revenue would fall short of Wall Street’s expectations, fueling simmering global growth concerns.

The announcement out of China spurred a 2% rally in the Shanghai Composite and Hang Seng that lifted both indexes into positive territory for the week, but data showing its manufacturing sector contracted last month for the first time since 2016 kept gains in check. In Europe, stocks followed a similar pattern to U.S. equities despite economic data that showed both manufacturing and services sector activity for December barely expanded to cap off 2018.

Moving along to the week ahead, trade will garner the bulk of global investors’ attention, as a U.S delegation will travel to Beijing to resume trade talks with Chinese officials. On the economic front, investors will be keen on consumer price data in the U.S. after this week’s surprise increase in wage growth. In the Eurozone, December’s consumer confidence, retail sales, and third-quarter final Gross Domestic Product data is scheduled to be released. Turning to Asia, consumer and producer prices are due out of China.
 
Morning Technical Newsletter - Oil Rises on Production Cuts, Renewed Trade Talks

Oil Rises on Production Cuts, Renewed Trade Talks
Oil prices were higher during Monday’s Asian trading session after trade talks started up again between Washington and Beijing and traders felt renewed optimism that a deal would be formed. The talks will be taking place in Beijing on Monday and Tuesday and will have participants from the Office of the U.S. Trade Representative, the Treasury Department, and the Agriculture, Energy, and Commerce Departments.

U.S. WTI futures were trading at $48.89 per barrel as of 3:04 p.m. HK/SIN, up 1.94 percent, while Brent crude futures were up 1.68 percent to $58.02 per barrel. Also supporting prices were supply cuts implemented by OPEC and its oil-producing partners after the start of the new year, whose goal was to reduce the global supply gut and keep prices high, especially in the face of a global economic slowdown.

The next deadline in the trade war will be in March, after which point, U.S. President Donald Trump has threatened additional tariffs on Chinese goods if a deal is not struck. Trump has specific demands for the current talks, many of which focus on his discontent with Chinese forced technology transfers, ownership of American companies in China, and alleged Chinese theft of intellectual property. Trump is especially keen to convince China to agree to his terms as Chinese trade problems have long been one of his primary issues. As Trump struggles with record low approval ratings, a three-week government shutdown, and a lack of progress with the Mexican border wall, another one of his key campaign issues, a victory related to Chinese trade has become even more crucial.

Asian stocks headed broadly higher on Monday in light of the renewed optimism, with Japan’s Nikkei 225 enjoying the largest gains, up 2.44 percent in the mid-afternoon. The Shenzhen Composite saw a 1.68 percent increase, while South Korea’s Kospi was up 1.34 percent. The Shanghai Composite gained 0.72 percent.

DXY:

Intraday target: $96.70
Long-term target: $100



EUR/USD:

Intraday target: 1.1350
Long-term target: 1.0800



APPLE:

Intraday target: $140
Long-term target: $100



SPX:

Intraday target: $2413
Long-term target: $2000



GOLD:

Intraday target: $1280
Long-term target: $1183



WTICOUSD:

Intraday target: $46.00
Long-term target: $27.00



BITCOIN:

Intraday target: $3615
Long-term target: $2000



ETHEREUM:

Intraday target: $130
Long-term target: $60

 
Daily Macro View - U.S.-China negotiations kick off

Daily Insights

U.S.-China negotiations kick off. Investors are cautiously optimistic as the U.S. and China kicked off fresh negotiations ahead of the March 1 deadline imposed by President Trump to get a deal done, particularly after Chinese Vice Premier Liu He-the top economic advisor to Chinese President Xi Jinping-made an unexpected appearance. His presence suggests China is placing a high importance on the talks, which come on the heels of data last week that showed China’s manufacturing sector contracted for the first time since 2016. Over the weekend, President Trump said the recent weakness in China’s economy have given Beijing an impetus to negotiate, while Friday’s payroll data painted a more upbeat picture of the U.S. economy. We continue to expect the two sides to find common ground, though a full-blown deal this week is very unlikely.

China forex rose in December, though capital still fleeing.China’s foreign currency reserves rose for a second straight month, which on the surface suggests concerns about capital flight and a slowing economy may be overdone; however, a report from Bloomberg noted that much of the gains were due to positive currency valuation effects. When removed, reserves would actually have fallen by a notable amount, indicating that capital outflows remained substantial, though well below those seen in 2015.

Eurozone sentiment hits four year low. The investor sentiment index for the region fell for the fifth consecutive month in January to its lowest level since December 2014. A so-called hard Brexit, political unrest in France, and Italy’s budget struggle with the European Union are among the issues weighing on investors. Also adding to angst were data that showed German factory orders fell for the first time in four months during November. The dip compares with an increase in the prior month and is likely to renew concerns that trade tensions and an overall loss of momentum are now weighing on the Eurozone’s largest economy.

In today’s Weekly Market Commentary we gauge the opportunity from lower valuations. The significant drop in stock market valuations in recent months, based on the S&P 500 Index price-to-earnings ratio, may portend above-average stock market performance based on history. Stocks also look attractively valued relative to bonds at still-low interest rate levels when comparing the earnings (or income) generated by the two investments. Finally, though it is difficult to think long-term when markets are volatile, consider that stock valuations have historically been closely tied to future long-term stock market performance.

Economic week in review. Investors are understandably anxious these days, and they’re scouring recent economic reports for signs of an upcoming recession. In today’s Weekly Economic Commentary, we review last week’s economic reports, which whipsawed U.S. stocks, and provide our thoughts on common themes we see in current data.

The week ahead. Trade will garner the bulk of global investors’ attention this week, as a U.S delegation is in Beijing today and tomorrow for trade talks with Chinese officials, including Chinese Vice Premier Liu He. On the economic front, investors will be keen on consumer price data in the U.S. after December’s increase in wage growth reported last week (note that factory orders and durable goods data are among the releases being delayed by the government shutdown).
 
Morning Technical Newsletter - Stock, Oil Markets Moved by Trader Hopes

Stock, Oil Markets Moved by Trader Hopes
Oil prices were higher on Tuesday, buoyed by renewed trader optimism that the United States will reach a trade deal with China, and by continued production cuts by OPEC and its oil-producing partners. U.S. WTI futures were trading at $48.53 per barrel, up 0.02 percent, and Brent crude futures were up 0.03 percent, to $57.35 per barrel. Though the movements were modest, they reflected traders’ hope that a trade deal would be met in the near future. On Monday afternoon, U.S. Commerce Secretary Wilbur Ross said that Beijing and Washington could reach a trade deal that “we can live with”, following the first day of meetings between the countries’ trade representatives. The negotiations will continue on through Tuesday.

Asian stocks were trading mixed, with Chinese markets lower on fears that the deal might not be in China’s best interests. The Shanghai Composite was down 0.20 percent as of 1:50 p.m. HK/SIN, and the Shenzhen Composite was down 0.18 percent. Japan’s Nikkei 225 rose 1.28 percent by the early afternoon, and Australia’s ASX 200 gained 0.69 percent. All three major Wall Street indexes closed higher on Monday following the first day of trade talks in Beijing.

The dollar index was up 0.22 percent to 95.88 .DXY, as traders found new reasons to favor the dollar. The greenback advanced against the yen, gaining 0.11 percent to 108.81. The dollar also gained against the euro, pound and Australian dollar. Also supporting the dollar were some words from the Federal Reserve indicating that the U.S. central bank may only raise interest rates once in 2019. The dollar index has eased around 2 percent since mid-December, though the dollar still managed to end 2018 up 4.3 percent.

DXY:

Intraday target: $96.20
Long-term target: $100



EUR/USD:

Intraday target: 1.1400
Long-term target: 1.0800



APPLE:

Intraday target: $140
Long-term target: $100



SPX:

Intraday target: $2413
Long-term target: $2000



GOLD:

Intraday target: $1280
Long-term target: $1183



WTICOUSD:

Intraday target: $46.00
Long-term target: $27.00



BITCOIN:

Intraday target: $3615
Long-term target: $2000



ETHEREUM:

Intraday target: $130
Long-term target: $60

 
Morning Technical Newsletter - Brexit Rumors No Help to Sterling

Brexit Rumors No Help to Sterling
Though currently lower, the Pound continues to trade close to a 1-week peak versus the US Dollar. Currency strategists say that the Brexit debate and Parliamentary vote which will take place next week will dominate Sterling trade until then. Analysts still feel that Theresa May will fall short of the vote needed to push her Brexit plans through to fruition. There has been some unsubstantiated reports that officials from both sides are working to extend the formal process so that the impact of the breakup will be better tolerated; the Brexit Secretary has denied this, however.

As at 11;00 am (GMT) in London, the GBP/USD was trading at $1.2759, down 0.21% and off the session trough of $1.2747. The EUR/GBP is trading at 0.8971 Pence, a loss of 0.03%; the pair has ranged from 0.89486 Pence to 0.89826 Pence in today’s session.

Markets Eye Trump Address
The US Dollar has been able to gain some traction after coming under pressure with the shutdown of the Federal Government, now in its 18th day, and a seeming pause in its hawkish outlook from the Federal Reserve. Markets are also waiting to hear what President Trump has to say in his televised address which will take place later today. The uncertainty over the end of the shutdown had resulted in a generally weaker US Dollar. The EUR/USD was trading lower at $1.1444, down 0.27%.

DXY:

Intraday target: $96.20
Long-term target: $100



EUR/USD:

Intraday target: 1.1400
Long-term target: 1.0800



APPLE:

Intraday target: $140
Long-term target: $100



SPX:

Intraday target: $2413
Long-term target: $2000



GOLD:

Intraday target: $1270
Long-term target: $1183



WTICOUSD:

Intraday target: $46.00
Long-term target: $27.00



BITCOIN:

Intraday target: $3615
Long-term target: $2000



ETHEREUM:

Intraday target: $130
Long-term target: $60

 
Daily Macro View

Daily Insights

U.S. non-manufacturing misses, but still strong. ISM’s non-manufacturing index registered a five-month low of 57.6 for December, missing consensus forecasts for 58.5. Much of the decline in the overall reading can be attributed to a drop in inventories and employment. However, an uptick in new orders, to 62.7, shows that future activity in the sector should remain robust, overall levels of business activity remain firmly in expansionary territory (>50.0), and respondents commented that the business environment is still strong.

Small business optimism elevated but qualified workers scarce. The NFIB Small Business Optimism Index was slightly lower in December but remains near cycle highs at 104.4. The decline from November’s 104.8 reading was driven by falling expectations for both real sales growth and deteriorating business conditions over the next six months. At the same time, reports of higher worker compensation remained near record levels as employers struggle to find qualified workers to help boost inventories. Overall, the data suggest optimism among small business owners is very high but finding the right people to help drive sales growth is getting more and more difficult.

Higher yields in 2019. The environment for fixed income investors has been challenging over the last several years, and recently, the struggle for yield has only intensified. However, we see a disconnect between current rates and this year’s prospects for economic growth and inflation.
 
Daily Macro View - Make it three in a row.

Daily Insights

Make it three in a row. The S&P 500 Index rose for the third day in a row for the first time since ahead of the Midterm elections. In fact, stocks haven’t closed in the red since Federal Reserve (Fed)Chairman Jerome Powell said the Fed would be ‘patient’ in regards to its interest rate policy. But just how rare has a three-day rally been? The only other times in history that stocks did this were July ’10, October ’02, right after the ’87 crash, and October ’82. All four instances came after extended weakness and marked fairly significant market lows before major rallies.

Fed minutes on deck. Minutes from the Fed’s December meeting will be released at 2 p.m. today. Investors will be looking for more context around officials’ unanimous decision to hike rates last month, even as policymakers shifted their rate projections down for 2019. However, a more hawkish tone in the minutes would likely be discounted given Powell’s more recent comments in which he said the Fed will be “patient” with monetary policy, fueling a reversal in the S&P 500 Index after it entered an intraday bear market last month. We expect the data-dependent Fed will continue to gradually hike rates, but be less aggressive than initially feared as policymakers juggle a strong domestic economy with global concerns.

Valuations supporting the rebound. Stocks have rebounded strongly-nearly 10% from late-December lows. We see further gains ahead given the fundamental foundation supporting economic growth and corporate profits, along with a Fed that appears more flexible than previously feared and improving prospects for a U.S.-China trade deal. Lower valuations are a primary reason for the bounce, which we believe have been pricing in an overly pessimistic economic and earnings outlook.
 
Morning Technical Newsletter - Dollar Shaky on Fed Comments, Asian Stocks Snap Winning Streak

Dollar Shaky on Fed Comments, Asian Stocks Snap Winning Streak
The U.S. dollar was struggling on Thursday after the release of Federal Reserve minutes which showed that the U.S. central bank may pause its interest rate tightening agenda this year. The minutes from the Federal Open Market Committee meeting on December 18-19 publicized that several Fed members are in favor of keeping interest rates steady in 2019. Specifically, Fed members acknowledged that upcoming policy is “less clear” after they approved an interest rate hike in their last meeting. The minutes showed that some Fed members were concerned about the last rate hike.

In response to these minutes, traders have been favoring riskier assets, including the Canadian dollar, which is now trading near a one-month peak. The dollar index was down 0.13 percent as of 2:06 p.m. HK/SIN, to 95.09 .DXY, after dipping 0.7 percent on Wednesday. The dollar was down 0.22 percent against the yen to 107.93. The euro soared 0.14 percent against the greenback, to trade at $1.1558. According to the most recent poll released by Reuters, two-thirds of currency strategists polled expect that a reduction in interest rate hikes will thwart the dollar’s rise against its primary trading partners. Though 2018 was the best year for the dollar since 2015, the greenback’s growth has already slowed in the new year in light of slower rate hike expectations.

Asian Market Movements
Wall Street rallied for the fourth consecutive day on Wednesday, but Asian markets weren’t able to cash in on the upswing on Thursday. Japan’s Nikkei 225 snapped its winning streak from the past few days and was trading down 1.27percent in the mid-afternoon on Thursday. South Korea’s Kospi was also trading lower, down a modest 0.09 percent. All other major Asian indexes were trading in positive territory, though without the wide movements seen in the past few trading sessions. The Shanghai Composite was up 0.05 percent, South Korea’s Hang Seng Index was up 0.10 percent, and the Shenzhen Composite was up 0.22 percent.

DXY:

Intraday target: $95.90
Long-term target: $100



EUR/USD:

Intraday target: 1.1500
Long-term target: 1.0800



APPLE:

Intraday target: $140
Long-term target: $100





SPX:

Intraday target: $2413
Long-term target: $2000



GOLD:

Intraday target: $1280
Long-term target: $1183



WTICOUSD:

Intraday target: $50.00
Long-term target: $27.00



BITCOIN:

Intraday target: $3615
Long-term target: $2000



ETHEREUM:

Intraday target: $130

Long-term target: $60

 
Daily Macro View - Resilient earnings expectations

Daily Insights

Resilient earnings expectations in developed international markets. In an environment where U.S. earnings have generally paced the globe, 2019 earnings estimates for the MSCI EAFE Index-mostly Europe with much of the rest in Japan-have actually held up better than those in the U.S. and emerging markets (EM)recently. Over the past month, despite heightened concerns about global growth, EAFE estimates have risen modestly (+0.2%), while S&P 500 Index and MSCI EM Index estimates have each fallen by 2% or more. Considering European data continues to miss expectations, this is an encouraging sign, even though we still do not believe relative valuations support investing in Europe over the U.S.

Global earnings expectations have converged. Though earnings growth is expected to be stronger in the U.S. and EM in the coming year, that gap has closed, with 6% expected in developed international markets, 7% in the U.S., and 8% in EM, according to FactSet estimates. Still, better economic growth outlooks and valuations support our continued preference for U.S. and EM in global equity allocations.

FOMC minutes sound more dovish tone. The minutes from last month’s monetary policy meeting showed that officials’ views are turning more cautious, citing market volatility and heightened concerns over global growth. Although there was general agreement that the U.S. economy is evolving as expected and further gradual rate hikes would be appropriate, the central bank could be more patient about tightening. This aligns with the expectations we laid out in our Outlook 2019: FUNDAMENTAL, and several regional Federal Reserve Bank presidents, in speeches yesterday, echoed the dovish shift in perspective.

Can the U.S. economy handle rising rates? There has been a lot of debate recently about the U.S. economy’s ability to withstand rising interest rates. However, current interest rates are historically low relative to the robust gross domestic product growth we’ve seen recently.
 
Morning Technical Newsletter - Dollar Momentum Sags

Dollar Momentum Sags
The US Dollar lost momentum versus its major rivals during Asian trade today, after the Chairman of the Federal Reserve Bank reiterated that the central bank’s policy would continue to be of a wait-and-see nature. To FX traders, that suggested that the US central bank is taking a breather from the string of rate hikes as they ponder the impact of the global slowdown on the US economy. Jerome Powell said yesterday that given that personal inflation remains stable, there is no longer any urgency to raise rates.

As reported at 10:55 am (JST) in Tokyo, the USD/JPY was trading at 108.2810 Yen, down 0.1125%; the pair has ranged from 108.252 Yen to 108.474 in today’s session. The EUR/USD is trading at $1.1523, up 0.22%, while the GBP/USD was trading at $1.2758, a gain of 0.06%.

Gains for Asian Currencies Likely Capped
Asian currencies were also moving higher against the greenback. Currency strategists say that gains for the Aussie and Kiwi Dollars are likely to be limited unless and until there is some more definitive outcome from the current trade talks between the US and China. Both countries had agreed to a 90-day truce, and half way through, analysts say there is still no concrete resolution to the problems. Nonetheless, the AUD/USD and NZD/USD were trading higher, at $0.7196 and $0.6795, respectively, a gain of 0.18% and 0.20%.

DXY:

Intraday target: $95.90
Long-term target: $100



EUR/USD:

Intraday target: 1.1500
Long-term target: 1.0800



APPLE:

Intraday target: $140
Long-term target: $100



SPX:

Intraday target: $2413
Long-term target: $2000



GOLD:

Intraday target: $1285
Long-term target: $1183



WTICOUSD:

Intraday target: $50.00
Long-term target: $27.00



BITCOIN:

Intraday target: $3128
Long-term target: $2000



ETHEREUM:

Intraday target: $110
Long-term target: $60

 
Weekly Market Research - Rebound continues on trade talk optimism, Fedspeak


US: S&P 500 Index +2.54%, Dow +2.43%, Nasdaq +3.45%
Europe: STOXX Europe 600 +1.69%, German DAX +1.11% France CAC 40 +0.93%, U.K. FTSE 100 +1.18%
Asia: Japan Nikkei +4.08%, China Shanghai Composite +1.55%, Korea KOSPI 3.25%
Rates/Commodities: 10-Year Treasury yield +4 basis points to 2.70%, WTI crude oil +10.18%, COMEX gold: +0.34%

Global stocks’ rebound continued for a third straight week, underpinned by optimism that the U.S. and China made progress in their first face-to-face negotiations in over a month, as well as speeches from several Federal Reserve officials—including Chairman Jerome Powell—that struck a more market-friendly tone than previous communications. All 11 S&P sectors advanced, led by the industrials and consumer discretionary sectors, which rose despite a mid-week battering of stocks in the retail industry following disappointing holiday sales figures from some key players.

Overseas, gains were most pronounced in Asia, but equities in Europe also rode the trade talk tailwinds. New policy measures announced by Chinese officials, including a planned increase in government spending, a cut to banks’ reserve requirements, and tax cuts for small and micro-sized businesses buoyed sentiment in the region. In Europe, gains were kept in check as traders digested disappointing manufacturing data out of Germany and France that sparked chatter of growing recession risks with Germany being Europe’s bellwether for industrial output, while France, the region’s second-largest economy, is still reeling from “yellow vest” protests that are expected to resume this weekend.

Elsewhere, money flowed out of Treasuries, pushing yields broadly higher. The U.S. dollar continued to weaken, helping gold log its fourth straight weekly gain despite investors’ continued shift back into risk assets, while Brent crude prices snapped a 10-day record-setting win streak on Friday.

Turning to the week ahead, U.S. fourth quarter earnings season unofficially kicks off with a host of large financial institutions set to report. On the data front, look for U.S. retail sales, producer prices, and several sets of housing data to garner attention, though delays due to the ongoing government shutdown are possible. Overseas in Europe, the world will be focused on Tuesday’s Brexit vote, although key inflation data will be released in the UK, France, Italy, and the composite Eurozone. The docket’s fairly light in Asia, though Japan’s core inflation is noteworthy after data this week showed wage growth picked up in November.
 
Morning Technical Newsletter - Threat of General Election Pressures Sterling

Threat of General Election Pressures Sterling
The Pound Sterling came under pressure against the greenback and Euro on speculation that the Prime Minister will face a challenge from the Labour Party in a general election vote. Theresa May has already low two crucial votes, and the looming Parliamentary vote on her proposed plans for the Brexit could be the final nail in her coffin. The head of the Labour Party, Jeremy Corbyn, is ready to call for a general election if the Prime Minister does not find enough support next week. With consideration that a Corbyn-led government would be more likely to enact policies that were viewed as “high spending,” the Pound was pushed lower by FX traders.

As reported at 11:47 am (GMT) in London, the EUR/GBP was trading at 0.9050 Pence, a gain of 0.30% and off the session peak of 0.90594 Pence; the low for the trading day was recorded at 0.90210 Pence. The GBP/USD was trading $1.2735, down 0.4738%; the pair has ranged from a trough of $1.2728 to $1.2801.

Fears of Hard Brexit Recede
The only saving grace for the Pound right now is that the government must have a back-up plan if Theresa May's vote in Parliament falls short. That vote is scheduled to take place on January 15th. Currency strategists say that the fact that the Parliament itself is taking a more assertive role in the Brexit plans should give traders hope that a hard Brexit is now less probable and that a more positive outcome can be seen in implied volatility which has been reduced drastically over the past few weeks.

DXY:

Intraday target: $96.50
Long-term target: $100



EUR/USD:

Intraday target: 1.1420
Long-term target: 1.0800



APPLE:

Intraday target: $140
Long-term target: $100



SPX:

Intraday target: $2500
Long-term target: $2000



GOLD:

Intraday target: $1265
Long-term target: $1183



WTICOUSD:

Intraday target: $46.50
Long-term target: $27.00



BITCOIN:

Intraday target: $3480
Long-term target: $2000



ETHEREUM:

Intraday target: $110
Long-term target: $60

 
Weekly Economic Review

This week will see some key activity, with central bank testimony from the ECB and the Bank of England, as well as important data releases primarily concerning the British Pound and the crucial Brexit vote, and G20 meetings at the end of the week on Thursday and Friday.

The market is likely to be most active on Tuesday and Wednesday.

Monday is a public holiday in Japan.

U.S. Dollar
It will be a relatively quiet week for the U.S. Dollar with activity only on Tuesday with a release of PPI data.

British Pound
It will be a very important week for the British Pound. On Tuesday the British Parliament will vote on whether to approve the EU’s Brexit deal offer. Wednesday will bring the release of GDP CPI (inflation) data and testimony before Parliament by the Governor of the Bank of England. Finally, on Friday we will get Retail Sales numbers.

Euro
It will be a potentially important week but slow week for the Euro, with nothing due except the President of the ECB’s testimony before Parliament on the ECB’ Annual Report on Tuesday.

Canadian Dollar
It will be a potentially important week but slow week for the Loonie, with nothing due except CPI data on Friday.

Japanese Yen
It will be a quiet week for the Yen, with nothing due except the Governor of the Bank of Japan’s speech at the G20 meeting on Thursday.
 
Morning Crypto Report

  • Bitcoin price moved into a bearish zone below the USD 3,700 support.
  • Ethereum (ETH) and ripple (XRP) broke key supports and declined heavily.
  • HC and REPO declined more than 10% today.
This past week, there was a sharp bearish turn in bitcoin below the USD 3,800 and USD 3,700 support levels. BTC/USD even broke the USD 3,620 support and spiked below USD 3,500. Many altcoins such as ethereum, ripple, litecoin and EOS followed a similar path and declined heavily. ETH/USD traded below the USD 135 support to settle in a bearish zone. XRP/USD broke the key USD 0.340 and USD 0.325 supports to start a major downward moves. At the outset, the market is consolidating (UTC 08:20 AM) losses and remains at a risk of more losses in the coming sessions.

Total market capitalization
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Bitcoin price
After trading in a range, bitcoin price declined sharply below USD 3,580 and USD 3,500. It tested the USD 3,450 support and later corrected a few points. An initial resistance on the upside is at USD 3,550, above which the main weekly resistance is at USD 3,620. A daily close above USD 3,620 and USD 3,700 is required for a decent comeback in the near term.
On the downside, the USD 3,450 support is a pivot level, below which there is a risk of an extended decline towards the USD 3,320 and USD 3,200 support levels.

Ethereum price
Ethereum price tumbled from well above the USD 140 support and declined below the USD 120 level. ETH/USD tested the USD 110 support and it is currently correcting higher.
On the upside, an initial barrier is near the USD 120 level, above which the weekly resistance is at USD 128. If there is a successful break above USD 128, the price may recover to USD 135. On the downside, the key supports are USD 112, USD 110 and USD 106.

Bitcoin cash, eos and ripple price
Bitcoin cash declined below the USD 130 and 125 support levels. BCH/USD traded close to the USD 120 level and it is currently consolidating. On the upside, the pair is likely to face hurdles near the USD 130 and USD 135 levels.
EOS failed to break the USD 2.50 resistance recently and declined below the USD 2.25 support. It is currently trading near USD 2.30 and it may soon resume its decline towards USD 2.15 or USD 2.10.
Ripple price settled below the USD 0.340 support to move into a bearish zone. XRP/USD even spiked below the USD 0.310 level and upsides near the USD 0.320 and USD 0.325 levels are likely to remain capped.

Other altcoins market today
During the past few sessions, a few small cap altcoins extended declines more than 8%, including HC, REPO, BSV, REP, QASH, STEEM, MANA and NPXS. Out of these, HC declined around 16% and REPO is down close to 12%.
Overall, bitcoin is clearly trading in a downtrend below USD 3,600 and 3,700. As long as BTC/USD is below USD 3,700, there is a risk of additional losses below the USD 3,500 and 3,400 levels in the coming days. Likewise, ethereum and ripple might drop towards the USD 105 and USD 0.300 levels in the near term.
 
Daily Macro View - Weak trade data adds pressure on China.

Daily Insights

Weak Chinese trade data, the unofficial kickoff of fourth quarter earnings season, and the ongoing government shutdown are on investors radars this morning.

Weak trade data adds pressure on China. China’s exports fell 4.4% year over year, well below the expected 2% increase, while Chinese imports significantly missed expectations slipping 3.1%. Both figures were the worst since 2016 and about 10 percentage points below the November readings. Clearly influenced by trade tensions, as well as front-loading ahead of the implementation of U.S.-imposed tariffs, this marked slowdown likely puts additional pressure on China to strike a deal, while the potential impact on global markets may increase urgency for the Trump administration.

Fourth quarter earnings gets under way this week. Over the next five days, 35 S&P 500 companies will report quarterly results, highlighted by several big banks starting today with Citigroup’s results. We expect a solid economic backdrop to support earnings in the mid-to-high teens for the quarter, while estimate cuts-in part China/trade related-have likely lowered the bar enough for corporate America to clear it. Although several high-profile companies including Apple have warned about weaker results, overall pre-announcements have been consistent with recent quarters, and profit margin trends remain positive.

A historic shutdown. The U.S. government is in its 24th day of a partial shutdown, which is now the longest in history. The closure reached an inflection point on Friday, when government workers’ first payday during this closure passed without a paycheck.

The week ahead. The kickoff of fourth quarter earnings season highlights the start of the week, with several large financials set to report. On the economic data front, look for U.S. retail sales, producer prices, and several sets of housing data to garner attention, though delays due to the ongoing government shutdown are possible. In Europe, the world will be focused on Tuesday’s Brexit vote, although key inflation data will be released in the UK, France, Italy, and the composite Eurozone. The docket is light in Asia, though Japan’s core inflation is noteworthy after data last week showed wage growth picked up in November. Also, fourth-quarter gross domestic product data from China will provide insight on the impact of U.S.-imposed tariffs.
 
Morning Technical Newsletter - Pound Higher Ahead of Vote

Pound Higher Ahead of Vote
The Pound Sterling remains close to a 7-week peak on hopes that the Prime Minister’s last-ditch attempts to gain support for her Brexit proposal will be sufficiently successful to push through on tomorrow’s vote. Analysts, however, don’t believe Ms. May will have the following in Parliament that she so desperately needs. Sterling outlook remains uncertain, with the March 29th deadline looming large. There are still likely to be some last minute wrangling including the possibility of a new referendum, or even a complete turnabout on the withdrawal decision. Without a plan, however, a disorderly exit seems to be the most likely scenario.

As reported at 11:44 am (GMT) in London, the GBP/USD was trading at $1.2867, up 0.2277%; the pair earlier hit a session peak of $1.2873 while the low was recorded at $1.2819. The EUR/GBP was trading at 0.8914 Pence, down 0.17%; the pair has ranged from a trough of 0.88959 Pence to a high of 0.89526 Pence in this Monday session.

Prime Minister to Plead with MPs
Analysts say that the Prime Minister is expected to tell the Parliamentary Ministers who are largely against her proposal that the actual withdrawal from the European Union, as approved by the citizens of Britain, is in jeopardy, given the number of Parliamentarians who are attempting to stop the process in its entirety. That would mean that rather than a hard crash out of the EU, there won’t be a crash at all.

DXY:

Intraday target: $96.50
Long-term target: $100



EUR/USD:

Intraday target: 1.1420
Long-term target: 1.0800



APPLE:

Intraday target: $140
Long-term target: $100



SPX:

Intraday target: $2500
Long-term target: $2000



GOLD:

Intraday target: $1265
Long-term target: $1183



WTICOUSD:

Intraday target: $49.70
Long-term target: $27.00



BITCOIN:

Intraday target: $3480
Long-term target: $2000



ETHEREUM:

Intraday target: $110
Long-term target: $60

 
Morning Crypto Report - Bitcoin and Altcoins Pointing Early Signs Of Recovery

  • Bitcoin price formed a support base above USD 3,500 and later recovered.
  • Ethereum jumped above USD 125 and ripple price settled above USD 0.325.
  • Augur (REP) and QKC gained more than 20% today.
After testing the USD 3,450 level, bitcoin price recovered above USD 3,500 and formed a support base. Later, BTC/USD started an upside correction and traded above the USD 3,600 and USD 3,620 resistance levels. Similarly, ethereum price formed a solid support above USD 115 and bounced back above USD 120 and USD 125. Ripple price also performed well and managed to settle above the USD 0.325 levels. These are early positive signs, but the market must recover further to overcome selling pressure. If not, there is a risk of bitcoin and altcoins moving back in a bearish zone.

Total market capitalization
dac9e70509.png
Source: coinmarketcap.com

Bitcoin price
There was a decent upward move above the USD 3,500 and USD 3,600 resistances in bitcoin price . BTC/USD even traded above the USD 3,650 level, but it failed to hold gains and later started a short term downside correction. An initial support is near the USD 3,600 level, below which the price may retest the USD 3,550 level.
On the upside, the first hurdle for buyers is near the USD 3,680 level, above which the price must settle above USD 3,700 for an acceleration towards the USD 3,800 level.

Ethereum price
Ethereum price gained more than 8% recently and moved above the USD 120 and USD 125 resistance levels. ETH/USD tested the USD 130 resistance and it is currently (UTC 08:30 AM) consolidating gains.
Buyers need to push the price above USD 130 and USD 132 for more gains towards the USD 140 level. On the downside, the USD 125 level is an initial support, below which the price may drop back to USD 120.

Bitcoin cash, eos and ripple price
Bitcoin cash price found support and recovered above the USD 125 and USD 130 levels. However, BCH/USD seems to be struggling above USD 130 and it could decline once again towards the USD 122 – USD 124 zone. On the flip side, a break above USD 130 – USD 132 could lead the price towards USD 140.
EOS rallied above the USD 2.20 and USD 2.40 levels. It traded close to the USD 2.50 resistance and later corrected below USD 2.40. The key support is at USD 2.35 and USD 2.32.
Ripple price gained traction above the USD 0.310 support and jumped above the USD 0.320 and USD 0.325 resistance levels. XRP/USD may continue higher if it surpasses the USD 0.330 resistance level.

Other altcoins market today
Many small cap altcoins gained bullish momentum and recovered more than 10%, including REP, QKC, LINK, REPO, STRAT, NPXS, MANA, WAX, MKR, THETA and DCN. Out of these, REP is up around 25% and QKC gained close to 25%.
Overall, bitcoin price recovered nicely above USD 3,500 and USD 3,600, but it must extend gains above the USD 3,700 barrier to move into a bullish zone. If BTC/USD fails to hold gains above USD 3,500, it could drag ethereum, ripple and other altcoins lower in the near term.
 
Daily Macro View - Treasury yield curve steepens, spread to investment grade widens

Daily Insights

Treasury yield curve steepens, spread to investment grade widens. The Treasury yield curve steepened over the past week despite recent data suggesting global economic activity, particularly in China, ticked lower. Instead, more dovish comments from Federal Reserve Chair Jerome Powell and other central bank officials amid the backdrop of a robust labor market, healthy wage growth, and moderate price inflation have helped to not only push longer-term rates higher, but also increase the spread between Treasuries and comparable maturity investment grade (IG) corporate debt. At current levels, we think IG valuations look attractive. Should Treasury yields continue to rise gradually while IG yields stay flat or contract, which we expect, IG returns should hold up relatively well.

Putting the good start in perspective. Today is the 10th trading day of 2019, with the S&P 500 Index up 3.0% for the year after 9 trading days. 2018 saw the S&P 500 up 4.2% on day 9 but it finished the year down 6.2%, so a good start to a year is by no means a perfect indicator for continued market strength. At the same time, historically we’ve seen good starts to a year produce solid returns. In fact, starting in 1950, when the S&P 500 was up 2.5% or more on the 5th day of the year (like 2019) the full year had been higher the previous 12 times in a row, with 2018 officially ending this streak. There are many other things that matter more for how stocks will perform during a year than how the first few days do, but it is worth noting this seemingly random indicator did have a nice record until last year.
 
Morning Technical Newsletter - Euro Slides on Growth Worries

Euro Slides on Growth Worries
The common currency Euro moved lower during London trade on Tuesday after the latest economic report out of Germany underscored investors' fears of a widening slump within the Eurozone. According to Germany's Statistics Bureau, industrial production unexpectedly fell to -1.9 in November (month-over-month), well below the anticipated improvement to 0.3%. With Germany the economic driver for the Eurozone, and it is now becoming evident that the trade disputes which have been driven by the Trump administration are ultimately having a negative impact on the global economy.

As reported at 11:46 am (GMT) in London, the EUR/USD was trading at $1.1428, down 0.37%; the pair has ranged from a low of $1.14234 to a high of $1.14897 in today's session. The EUR/JPY is trading at 124.0320 Yen, down 0.03%, while the EUR/GBP was trading at 0.8898 Pence, down 0.16%.

German Data Disappoints
Besides industrial output, it was reported that Germany GDP had slowed to 1.5% last year, a dismal rate not seen since 2013. The slowdown in the Euro-area is also causing concern among investors on the impact it might have on the European Central Bank's outlook. The ECB is already in the process of reining in the quantitative easing measures it has taken over the past several years and news such as this might have the ECB rethinking that policy.

DXY:

Intraday target: $96.50
Long-term target: $100



EUR/USD:

Intraday target: 1.1350
Long-term target: 1.0800



APPLE:

Intraday target: $150
Long-term target: $100



SPX:

Intraday target: $2500
Long-term target: $2000



GOLD:

Intraday target: $1265
Long-term target: $1183



WTICOUSD:

Intraday target: $49.70
Long-term target: $27.00



BITCOIN:

Intraday target: $3480
Long-term target: $2000



ETHEREUM:

Intraday target: $110
Long-term target: $60

 
Daily Macro View - No deal

Daily Insights

No deal. Yesterday was another bump in the road for Brexit after more than two-thirds of the U.K. Parliament voted against British Prime Minister Theresa May’s separation deal. Market participants had been largely positioned for Parliament’s rejection of May’s deal, especially after several Brexit-related political resignations and a delayed vote. However, the path to a Brexit is less clear now, and there is a growing chance that May will be ousted after such a large defeat.

Beige Book release. The Federal Reserve’s (Fed) Beige Book, a survey of economic conditions in the 12 Fed regions published eight times per year, is scheduled to be released this afternoon. While the Beige Book is normally not a market-moving report, it could provide crucial context on a surprisingly swift decline in U.S. manufacturing over the past few months. December data released yesterday showed the Empire Manufacturing Index, which gauges manufacturing conditions in the New York area, posted its worst two-month slide since June 2011. Other local Fed manufacturing indices, such as the Kansas City and Philadelphia gauges, dropped precipitously through the end of 2018 as well. To us, the recent decline in U.S. manufacturing is a sign that the intangible effects of trade tensions are still weighing on corporate demand. However, we still feel encouraged by the bulk of U.S. economic data we’ve seen over the past few months.

China continues economic support measures. In its latest move to prop up its cooling economy, the Peoples Bank of China injected a net 560B yuan ($83B) into the financial system overnight, the largest single-day liquidity shot on record. Government officials cited peak season for tax payments, which tends to drive increases in interbank rates, as well as ensuring ample liquidity ahead of the Lunar New Year holidays as reasons for the move. However, despite the PBOC’s official stance being one of prudent monetary policy, it continues to ease in the face of weakening data, most recently evidenced by the biggest drop in the country’s exports and imports since 2016.
 
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