Weekly Report CFT Monday, February 26th, 2024
Last week saw BTC and ETH heading in divergent directions, with BTC finding support near $50,600 while ETH surpassed $3,000 on a growing optimism driven by the anticipation of the upcoming ETH Dencum upgrade slated for March 13, alongside speculations surrounding the potential introduction of a Spot ETH ETF. The enthusiasm reflected in the Derivatives market where Open Interest in ETH-related contracts surged to $5.7 billion, registering an 11% increase over the course of the week. BTC and ETH were trading near $50,730 and $2,920 on Friday, respectively printing performances of -2.7% and +4.2% over the week.
US Equities extended their rally to notch a third straight week of gains as the strong Nvidia results sparked a broad market excitement over the potential of artificial intelligence, overshadowing the pushback on rate cut expectations confirmed by the release of the Fed minutes. The surge of NVIDIA, which tripled in 2023 and is up nearly 40% this year, propelled the S&P to a record high of 5,111, with the Nasdaq reaching a two-year peak, nearing 16,134. S&P and Nasdaq closed out the week higher on Friday near 5,088 and 15,996, respectively gaining +1.6% and +1.4% while the VIX index steadied about 13.5%, below its 100-Day MA currently near 14.8%.
US Treasury yields were mixed with the 10Y yield edging moderately lower while the 2Y yield rose last week amidst hawkish comments from Fed official C. Waller and minutes from the Fed, which tampered with markets’ rate cut expectations as inflation pressures remain sticky as shown by the strong January’s CPI and PPI data. The 10Y and 2Y yields closed at 4.25% and 4.69%, from 4.28% and 4.64% the previous week. Odds of the Fed maintaining rates in March 2024 dropped to 2.5%, from 46.2% a month ago while chances of a 25bps rate cut later in June are now of 52%, per the CME FedWatch Tool.
DXY declined last week following its rejection from the 105 level. The index dropped below 104 and hit a low of 103.43 despite a strong Manufacturing PMI of 51.5 VS 50.5 expected, and an encouraging decline in weekly jobless claims -201,000 tempering rate cuts expectations. The index closed the week near 103.96, from 104.28 the previous week.
Oil prices dropped last week due to concerns about slowing demand and hawkish comments- from Fed officials cautioning against rate ruts despite signs of a tightening global market and an uncertain geopolitical outlook in the Middle East. WTI closed the week at $76.54, down from $78.16 last week, and is now trading near $77.8.
BTC and ETH are trading upward today, with BTC reaching a two-year high near $54,550 and ETH exchanging near $3,150 on record high Spot BTC ETF weekly inflow of $598m according to CoinShares. Investors will look ahead to key economic data this week, starting with the release of the Shiller home price index and Consumer Confidence on Tuesday followed by updated Q4 GDP figures on Wednesday. On Thursday, investors will look for the latest PCE data, the Fed’s preferred gauge of inflation, set to take center stage this week along with PMI and ISM manufacturing for February on Friday. Investors will also keep an eye on several Fed official remarks throughout the week as well as the latest batch of corporate earnings with Lowe’s, Salesforce, and Workday set to report among others.
Client Profits
We maintained our day trading strategy, taking long positions on altcoins to hedge against our short-swing trades on BTC and ETH. This strategy was particularly relevant as BTC and ETH prices neared the $56,000-$57,000 and $3,300 marks, respectively, which are our DCA (Dollar-Cost Averaging) levels for these swing shorts.
BTC
Last week saw BTC declining and finding support near $50,600 on Friday to end the week down -2.7% near $50,730 before regaining over the weekend with a high near $51,960. However, BTC surged today with price surpassing $54,000 and reaching a two-year high near $54,550 as Spot BTC ETF weekly inflow spiked to $598m last week according to CoinShares report Digital Asset Fund Flows Weekly published on Feb. 26. The inflow coincides with a progressive slowdown in the Grayscale Bitcoin trust outflow and growing adoption from institutional clients.
On the daily chart, BTC price has now surpassed its $49,000 rejection level from Jan 11 on Feb 12 and managed to consolidate and find support near the $50,500 zone on Feb 24 before bouncing back and surpassing the $54,000 lately. BTC is hovering near $54,400 while support levels could push the price higher with the $50,000 and $49,000 zones acting as main supports. On the upside, the $58,000 zone acts as major resistance.
In the short to medium term, the growing ETF inflow seems to act as a strong catalyst to sustain the positive momentum into 2024. Other drivers to consider in 2024 include the ETH update slated for March along with BTC’s anticipated halving in April and the Federal Reserve’s monetary policy with its guidance for 2024, which could remain influential in steering the markets in the upcoming weeks.
BTC’s 30-day Historical Volatility – HV- dipped to around 32% this week from 38% last week.
After rounding up 2023 performance to +155%, BTC closed out January up +0.7% and the MTD performance for February is currently +27.9% with the YTD for 2024 being +28.9%.
ETH
Unlike BTC, ETH rose and surpassed the $3,000 mark on Saturday, Feb 24, benefitting from a growing optimism driven by the anticipation of the upcoming ETH Dencum upgrade slated for March 13, alongside speculations surrounding the potential introduction of a Spot ETH ETF. A reflection of this optimism was seen in the derivatives market, where open interest in ETH-related contracts surged to $5.7 billion, marking an 11% increase over the course of the week. ETH was trading near $2,920 on Friday, gaining +4.2% over the week.
ETH moved higher over the weekend with a high near $3,120 on Sunday and is extending the rally today, with the price currently trading at a high near $3,196 and above its ascending support trend line of about $3,025 currently with $3,000 and $2,750 zones further below acting as main supports.
After rounding up 2023 up +90.6%, ETH closed out January up +0.05% and the MTD for February is currently at +40.1% with the YTD for 2024 of +40.1% as well.
Other markets
US Equities extended their rally to notch a third straight week of gains as the astonishingly strong Nvidia results sparked a broad market excitement over the potential of artificial intelligence, overshadowing the pushback on rate cut expectations confirmed by the release of the Fed minutes. The surge of NVIDIA, which tripled in 2023 and is up nearly 40% this year, propelled the S&P to a record high of 5,111, with the Nasdaq reaching a two-year peak, nearing 16,134. S&P and Nasdaq closed out the week higher on Friday near 5,088 and 15,996, respectively gaining +1.6% and +1.4% while the VIX index steadied about 13.5%, below its 100-Day MA currently near 14.8%.
After ending 2023 up +17% and +29.6%, S&P, and Nasdaq closed out January up +1.6% and +1.0% and the MTD performances for February are now +4.8% and +5.5% with YTD performances of +6.5% and +6.6%.
DXY
DXY declined last week following its rejection from the 105 level. The index dropped below 104 and hit a low of 103.43 despite a strong Manufacturing PMI of 51.5 VS 50.5 expected, and an encouraging decline in weekly jobless claims -201,000 tempering rate cuts expectations. The index closed the week near 103.96, from 104.28 the previous week.
The index is now edging lower near 103.78, trading below its 100-Day MA near 104 acting as resistance and moving closer to its 200-Day MA currently near 103.6 acting as support while the ascending trendline acts as support near 102.8, before the 100-mark that could act as a psychological level and the 200-week ie 1000-Day MA further below currently near 99.2.
Despite strong economic data and record corporate earnings pushing the Fed to push back on potential rate cuts, the outlook for the index remains challenging. The momentum observed in yields and the robust economic data in recent weeks have raised the prospect of a ‘no landing’ scenario. This presents a different narrative compared to the anticipated slowdown of the US economy.
US Treasuries
US Treasury yields were mixed with the 10Y yield edging moderately lower while the 2Y yield rose last week amidst hawkish comments from Fed official C. Waller and minutes from the Fed, which tampered with markets’ rate cut expectations as inflation pressures remain sticky as shown by the strong January’s CPI and PPI data. The 10Y and 2Y yields closed at 4.25% and 4.69%, from 4.28% and 4.64% the previous week. Odds of the Fed maintaining rates in March 2024 dropped to 2.5%, from 46.2% a month ago while chances of a 25bps rate cut later in June are now of 52%, per the CME FedWatch Tool.
The 10Y yield and the policy-sensitive 2Y yield are currently exchanging near 4.28% and 4.72% from 4.28% and 4.65% last week, moderately increasing the inversion of the yield curve to 44 bps, from 37 bps last week. The slight increase of the inverted 2yr -10yr curve reflects the recent adjustment in investors’ expectations following the hawkish comments and strong job data, postponing the potential timing of a Fed rate cut further into 2024.