CFT Update Monday, November 20th
BTC and ETH paused their rally and edged lower last week, with BTC finding support near
$35,000 on Tuesday before paring some of its losses later in the week as markets dealt with slowing economic data with declining retail sales in October and rising jobless claims, despite encouraging inflation readings and the confirmation of a BlackRock spot ETH ETF filing. BTC and ETH were trading near $35,600 and $2,080 on Friday, respectively shedding -1.9% and – 5.6% over the week and bringing the YTD performances to +121% and +64%.
US Equities rallied and clinched a third straight week of gains with markets welcoming the last-minute US budget deal on Thursday to avert another government shutdown, and embracing the latest CPI update as inflation pressures eased as rising weekly jobless claims to 231,000 and October CPI data came at 3.2% – Core CPI 4%, softer than the expected 3.3% and 4.1%, reinforced the narrative of no further rate hikes in 2023 and hopes of a Fed pivot potentially throughout the first half of 2024. S&P and Nasdaq closed on Friday near 4,514 and 14,125, respectively notching weekly gains of +2.3 % and +2.4% while the VIX index edged lower to 13%, below its 200-Day MA currently near 17.1%.
US Treasury yields fell in the wake of the latest economic figures highlighting a gradual slowing of inflation and retail sales, which added to the declining Consumer Sentiment from earlier this month. The 10Y and 2Y yields closed lower near 4.44% and 4.89% on Friday from 4.65% and 5.07% the week before. While the Fed seems reluctant to indicate a peak in interest rates, the odds of the Fed keeping interest rates steady in December are 99.9% from 69.9% a month ago, according to the CME FedWatch Tool.
DXY faced a steep weekly decline with inflation softening and impacting market expectations of interest rates and the dollar’s strength while the JPYUSD picked up last week. DXY closed the week at 103.82 on Friday from 105.8 the week before– its lowest level since Sep 1, 2023.
Oil prices fell for a fourth consecutive week amid continued concerns of slowing demand, partly fuelled by the slowdown in US industrial production and the higher-than-expected jobless claims update despite ongoing pressure from the Middle conflict and Iraq supporting more production cuts ahead of the OPEC+ meeting on November 26. The WTI ended the week lower near $76.01, from $77.31 the week before.
BTC and ETH are moderately mixed today as markets look ahead to this week’s holiday-shortened agenda in observance of Thanksgiving starting with the Minutes of the Fed’s FOMC meeting released on Tuesday along with updates on the housing markets – existing home sales – followed by weekly jobless claims and the final University of Michigan’s Consumer Sentiment Index -MCSI- for November on Wednesday, which could help gauge the confidence in the US economy. Investors will also look forward to the latest batch of corporate earnings with Abercrombie & Fitch, Best Buy, Lowe’s, Hewlett Packard, Nvidia, and Zoom Video Communications set to report among others while keeping an eye on the latest S&P flash U.S. services and manufacturing PMI data releasing on Friday.
Client Profits
We kept our short positions in Solana (SOL), Chainlink (LINK), MATIC and ETH. We opened small short positions in AVAX, RUNE and NEAR.
Currently, our market exposure stands at over 60% of our Assets Under Management (AUM), with the remainder held in USD $ cash.
BTC
BTC paused its rally and edged lower last week, falling close to $35,000 on Tuesday before paring some of its losses later in the week as markets dealt with slowing economic data with declining retail sales in October, rising jobless claims, despite encouraging inflation readings and the confirmation of a BlackRock spot ETH ETF filing. BTC was trading near $35,600 on Friday, shedding -1.9% over the week and bringing the YTD performances to +121%.
BTC regained over the weekend with a high above $37,500 on Sunday and is now trading near $37,400 with $38,000 now acting as short-term resistance and $35,000 as the new support level.
While it goes without saying we are bullish on the very long term, BTC’s trend in the medium term seems to be closely linked to the outcome of potential approval of pending spot ETF applications now postponed to early 2024 by the SEC. Other variables to take into account could be the Fed’s monetary policy and the evolving and lingering situation between Israel and Palestine, which may continue to jolt markets in the coming weeks.
Now that BTC surpassed subsequently the $31,000, and $35,000 and reconnected with the $38,000 this November for the first time since May 2022, markets seem to have paused the rally in the absence of major drivers this past week. It will be interesting to watch if BTC can hold on over the coming days and if a driver other than the enthusiasm around a Spot BTC / ETH ETF approval can maintain the momentum and extend the rally.
BTC’s 30-day Historical Volatility – HV- picked up around 47% this week, from 40% the week before.
After ending June up +11.9%, July down -4.1%, August down -11.3% and September up +4.0%, BTC ended October up +28.6% and the performance for November is of +8% currently with the YTD performance for 2023 now of +126% – from +122% the week before.
ETH
ETH also paused its rally and fell back below $2,000 last week despite encouraging inflation readings and the confirmation of a BlackRock spot ETH ETF filing. The cryptocurrency wrapped up the week lower, near $1,830 on Friday, shedding -5.6% weekly losses.
ETH rebounded over the weekend, reconnecting with the $2,000 with a high near $2,020 on Sunday and is trading upward today, near the $2,050 while $1,900, $1,370 and $1,100 further below act as main supports. As mentioned in our previous reports, the 200-day MA – near $1,780 currently – is a strong indicator of the overall trend, ETH confirming above that level could fuel a move to the upside, which is currently shaping as the application for a spot ETH ETF filing from BlackRock continues to bring optimism.
After ending June up +3.2%, July down -4%, August down -11.3% and September up +1.5%, ETH ended the month of October up +8.7% and the performance for November is up, currently +13.2% – from +14.5% last week – and the YTD performance for 2023 now of +71.8% – from+73.8% the week before.
Other markets
US Equities rallied and clinched a third straight week of gains with markets welcoming the last-minute US budget deal on Thursday to avert another government shutdown, and embracing the latest CPI update as inflation pressures eased as rising weekly jobless claims to 231,000 and October CPI data came at 3.2% – Core CPI 4%, softer than the expected 3.3% and 4.1%, reinforced the narrative of no further rate hikes in 2023 and hopes of a Fed pivot potentially throughout the first half of 2024. S&P and Nasdaq closed on Friday near 4,514 and 14,125, respectively notching weekly gains of +2.3 % and +2.4% while the VIX index edged lower to 13%, below its 200-Day MA currently near 17.1%.
After suffering losses of -6.6% and -5.8% in September, S&P and Nasdaq closed out the month of October down -2.2% and -2.8%. The performances for the month of November are currently +8.1% and +10.8%, and the YTD performances of +18.0% and +36.0% – from +14.5% and +30.9% respectively as of last Monday.
Even though, over the past months Stocks have been corrected, the divergence is still visible on the charts between Stocks and Monetary Supply.
DXY
DXY faced a steep weekly decline with inflation softening and impacting market expectations of interest rates and the dollar’s strength while JPYUSD picked up last week. DXY closed the week at 103.82 on Friday from 105.8 the week before– its lowest level since Sep 1, 2023.
DXY left the narrow 105.5 mark it had been trading near and dropped -1.5% on Tuesday to settle just above 103.8 by Friday’s close. The index is carrying on with its decline today, exchanging near 103.40, below its 200-day MA- near 103.6 currently. The 102 and 100.7 levels act as supports, before the 100-mark that could act as a psychological level before the 200- week i.e. 1000-day MA further below currently near 98.7. On the upside the 105.6 and 108- marks act as nearest resistances. The index has been suffering over the past weeks with the weakening of the US Dollar and is expected to remain volatile and driven by short-term rate expectations with geopolitical risks looming in the Middle East and central banks adjusting their policies and guidance as inflation pressures ease.
US Treasuries
US Treasury yields fell in the wake of the latest economic figures highlighting a gradual slowing of inflation and retail sales, which added to the declining Consumer Sentiment from earlier this month. The 10Y and 2Y yields closed lower near 4.44% and 4.89% on Friday from 4.65% and 5.07% the week before. While the Fed seems reluctant to indicate a peak in interest rates, the odds of the Fed keeping interest rates steady in December are 99.9% from 69.9% a month ago, according to the CME FedWatch Tool.
The 10Y yield and the policy-sensitive 2Y yield are currently exchanging near 4.42% and 4.90% from 4.64% and 5.04% last Monday, moderately widening the inversion of the yield curve to 48 bps, from 40 bps last week. The continued widening of the inverted 2yr -10yr curve is reflecting the recent turnaround in investors’ expectations following the cooling inflation CPI and rising jobless claims, adding to the softer job data from earlier this month, all discounting the market sentiment that the rate could stay higher for longer.