Mati Greenspan, Senior Market Analyst at FX broker eToro, has provided his daily commentary on traditional and crypto markets for December 18, 2018.
Highlights include:
- Crypto Bounces Back: As global stocks dropped, the crypto market make a strong push off the floor. The rebound was likely due to a short squeeze that took out a few high-risk traders. While it is possible that bitcoin could dip lower, this bounce off of support at $3,000 is a sign that a bottom could be forming.
- Fed Meeting to Ease Markets? The US Fed begins their two-day meeting today ahead of an expected rate hike. They could bring much-needed relief to markets, which are nearing year-to-date lows.
- Dollar Reaches Breaking Point: As the VIX volatility index moves upwards, the US Dollar is pushing highs. Depending on the Fed’s language around the expected rate hike, the Dollar could break out in either direction.
- Crypto Pioneer Passes Away: Tim May, the Godfather of the Cypherpunk movement — a precursor to bitcoin — passed away. His writings from more than 25 years ago echo modern sentiments around crypto.
Traditional Markets
The global sell-off in the stock markets continues. For a brief moment after the bell rang at the New York Stock Exchange, it did seem like there would be some sort of bounce, but by the end of the session, the major indices were back at the lows.
The S&P500 index fell within a single point of its lowest rate this year (yellow line).
The negative sentiment has carried through into Asia, but it seems the Europeans are a bit more optimistic today, especially in Germany where the DAX is in green.
The feeling is that we could be getting some much-needed relief from the US Federal Reserve as they head into their two-day meeting today. So things might calm down as we approach the announcement tomorrow evening.
Breakout Time
Looking at some of the other assets out there, volatility has increased over the past few sessions. Here we can see the VIX volatility index making a move to the upside over the last few days along with the selloff in the stocks.
With that, it pays to take a look at the US Dollar, which continues to push the highs with some upward facing consolidation. This will be critical going into the Fed meeting, where they are largely expected to raise rates.
However, since the rate hike is expected to be dovish, we could just as easily see a downward breakout. Watch this space.
Gold is also looking for a breakout of the psychological barrier at $1,250 an ounce.
Ever avantgarde, crude oil has already broken below $50 yesterday, a staunch indication that the oversupply issues aren’t quite behind us.
Just for good measure we’ll add in the USDJPY as well here. Especially if the dovish rate hike does indeed do the Dollar in, and Asian traders look for saftey in the Yen, we could see 112.22 give way.
Crypto Bounce Acquired
Yesterday, on the 1-year anniversary of Bitcoin’s all-time high, we did manage to see a strong push off the floor. Though it’s not clear what exactly caused the bounce, it does appear to be a short squeeze that took out a few of the high-risk traders.
Ever since the break below $5,000 we’ve been talking about light support at $3,500 and heavy support at $3,000, so this bounce off the $3,000 level couldn’t be more picture perfect.
The biggest winner emerging from this move was EOS, which rose a total of 29% within a few short hours. Yet still nowhere near its all-time high of $23.33.
Though it is possible that we do continue downward from here, this type of movement is very encouraging for technical analysts and may just end up creating a bottom for this battered market possibly even giving way to a bullish trend in 2019. Who knows… maybe we’ll get a Santa Claus Rally after all.
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