Shutdown in the USA, Venezuelan Coup D'état And Trade Wars with China. Why You Should Not Invest in Stocks or Crypto Now

Shutdown in the USA, Venezuelan Coup D'état And Trade Wars with China. Why You Should Not Invest in Stocks or Crypto Now

The shutdown is over, the U.S. president Donald Trump temporary reopened the government. To estimate how it will affect the market we should take a closer look at underlying factors (fundamental and technical).


Fundamental factors

The U.S. economy suffered because of the shutdown. As a result, the dollar weakened. On January 25 Trump signed a measure to reopen the government for three weeks and since that time, the American economy recovered (as the government continued to collect taxes, etc.). The dollar index (DXY) is going up, and everyone is betting on U.S. dollar futures, keeps closing positions in stocks and buying up bonds and currency. The dollar strengthening will lead to tremendous assets' sell-off, particularly stocks' sell-off.

Conclusion: the dollar is beginning to consolidate which can result in a stock market crash.


2. The global community is about to start discussions on Venezuelan coup d'état and Intermediate-Range Nuclear Forces (INF) Treaty which is, according to the U.S., Russia violates. Venezuelan events are pressing the market, and this does not encourage oil prices to grow.


3. The USA and China are negotiating a trade war but have not moved much forward yet.  We doubt that they will succeed in it. In this case, the stock market will go down as it did in November 2018.



The S&P 500 Index



Technical factors

1. We could see that some big fish started gold hedging. Many investors buy gold to hedge against the decline of a currency. As a consequence, the price of gold reached its peak after consolidation. At the same time, the U.S. stock market went up. It can be linked to Venezuelan events: uncertainty makes investors buy up gold, so the gold's price increases.


Gold Price Index


2. We can see the 'double top' figure in the Standard & Poor's 500 Index (S&P500). It is a reversal pattern that is formed after there is an extended move up. It looks like the market will sink.


3. There are four 'gaps' — areas where no trading takes place — in the MOEX index. The double divergence with RSI (relative strength index) could be seen on the 4h time frame. Meanwhile, the price index hit a new record high.



Bet on a decline in stocks.

Stop loss: 2500

Target: 2390-2450

Better stay away from buying American stocks as the market signals that this February will be quite cold.


How will it impact the crypto market?

The crypto market already started plunging. At the worst, it will continue tumbling during February.

Investors' and traders' desire to decrease risky positions can affect the market in a bad way. There is a possibility that soon all will begin to discuss the bitcoin ETF approval. Moreover, February 27 is the final deadline for the U.S. SEC's decision. It may bring the market up at the end of the month but temporary. The delayed Ethereum's fork Constantinople is scheduled for the same day, February 27.