5 Things to Watch Next Week: NASDAQ, Cryptocurrencies, China, Euro & Trump

1. Will the NASDAQ carry stocks higher again?

The schizophrenic state of the US market continued to dominate trading this week, with the tech sector clearly emerging as a leader on Wall Street, while the S&P 500 and small caps kept on dragging the broader indices lower. While Apple, Amazon, and a few other names in Europe names are still pushing higher, a lot of stocks are much weaker, and usually, these situations resolve in the direction of the majority. That said, with no major economic releases coming out, the low volatility period could definitely last longer, but the market seems vulnerable to negative triggers.

2. Will the cryptocurrency correction continue?

Bitcoin and Litecoin are under pressure this weekend and the other majors are also struggling, with the exception of the relatively strong Ripple and NEM. Asian demand has been driving prices higher lately, while the growing attention from the broader investment public also helped the broad rally in the coins. We have seen several such euphoric periods in Bitcoin, but the recent rally in coins is unprecedented. It’s very hard to guess if the current correction will be a sustained one, but next week could prove crucial.

3. Have we seen the top in the Euro?

The common currency got a huge boost from the French election, as Macron is good news for those fearing the worst after the Brexit vote. That said, the structural problems that the Eurozone faces are here to stay, and the “natural” trend of the Euro is bearish compared to the USD. The speculative positions against the EUR have been significantly reduced in recent weeks, and that might mean that the market will soon run out of buyers. The unknown factor in the equation is the ECB, which routinely lags the Fed with its interest rate policies, so a late hawkish turn in the central bank’s approach could push the currency even higher.

4. What’s next for the Chinese market?

Shanghai Composite Index, 4-Hour Chart Analysis

Chinese stocks dropped further in the beginning of the week after the scary period in April, but as the interbank market settled down a bit, the local stock market recovered most of its losses and finished virtually unchanged. Does that mean that the country’s problems are fixed? Of course not, but the short-term trend might have turned. Credit crises usually are slow processes, as the market realizes the extent of the problem, so several sentiment waves are likely to form before a full-fledged crunch. This week might decide if we only saw a brief stop in the sell-off or a longer “relief-period” has started.

5. Will Trump drop another bomb?

The new POTUS fired FBI director Comey this week, and the surprising move caused a small dip in risk assets, but it didn’t change the underlying trends. It seems that these kind of unusual decisions are the new normal, with investors still not putting a huge weight on the political scandals. Having said that, there are several areas which could still have a large impact on investor portfolios globally. That is especially true or the North Korean situation that can escalate any time, despite the recent quiet period.

In Focus: Cryptocurrencies

Monthly performance comparison of the major cryptocurrencies, Hourly Chart

The cryptocurrency market didn’t even blink as it crossed the $55 billion mark this week, and the total capitalization now grew 10% more to $55 billion. Bitcoin, even after its epic rally, accounts for a mere $30 billion out of that, showing how quickly the other players have been expanding lately. Ripple has definitely been the winner of the recent period, as it overtook Ethereum regarding capitalization, as it recovered quickly after the early-week correction. Litecoin was the second most active coin thanks to the huge price swings throughout the period, while trading volumes increased across the board, as the market exploded higher. Ethereum, Dash, Monero, and Ethereum Classic were lagging both in volume and performance, while NEM got close to Litecoin regarding market value.

Key Economic Releases of the Week