Following a bearish beginning to 2024, BTC and ETH bounced back with BTC hitting a high near $43,880 as price benefitted from four consecutive days of positive net inflows from Spot BTC ETFs, a gradual slowdown in outflows from the Grayscale Bitcoin trust, and hints from the Fed regarding potential rate cuts later in the year. BTC and ETH closed out January up +0.7% and +0.05% for the month and were trading near $43,185 and $2,302 on Friday, respectively gaining +3.3% and +1.8% over the week.
US Equities experienced a notable increase last week, fuelled by strong technology stocks corporate earnings from AMZN and META and surprisingly strong job data in the wake of the FOMC rate’s decision to keep its rate steady at 5.25% – 5.5%. In a similar fashion to December’s data – 216,000, January NFP readings came in much higher than expected at 353,000 – VS 180,000, igniting a broad market optimism that overshadowed the pushback on rate cut expectations stemming from J. Powell’s guidance. These combined factors propelled the S&P to a record high of 4,975, with the Nasdaq reaching a new one-year peak, nearing 15,664. S&P and Nasdaq advanced by +1.6% and +1.0% in January and closed out the first week of February higher on Friday near 4,958 and 15,628, respectively gaining +1.4% and +1.1% while the VIX index steadied about 13%, below its 100-Day MA currently near 15%.
US Treasury yields slipped moderately last week thanks to Friday’s rebound sparked by the NFP report which offset the losses incurred from earlier in the week, the 10Y yield finding support near 3.81% and crossing 4%. The 10Y and 2Y yields closed at 4.02% and 4.37%, up from 4.14% and 4.36% the previous week. Odds of the Fed maintaining rates in March 2024 rose to 84.5%, while chances of a 25bps rate cut dropped further to 15.5%, per the CME FedWatch Tool.
DXY rose last week and continued to trade further away from its Dec 28 low of 100.61 amidst surging US jobs creation data and tempered rate cut expectations. The index reached a high of 104.04 and closed the week near 103.96, from 103.47 the previous week.
Oil closed January with gains, driven by stronger-than-expected economic growth in the U.S. and stimulus efforts in China. However, prices dropped last week due to stronger job data affecting rate cut expectations and Israel-Hamas ceasefire negotiations, despite OPEC’s decision to maintain its production cut of 2.2 million barrels per day this quarter. WTI closed the week at $72.3, down from $78.12 last week, now trading near $72.3, back within the $70-$75 range established in 2024.
BTC and ETH are advancing today, with BTC exchanging near $43,000 as investors shift their focus to this week’s agenda starting with Monday’s S&P final U.S. services PMI followed by updates on weekly claims consumer credit and Dec trade deficit on Wednesday followed by a revised yearly CPI seasonally adjusted 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 Alibaba, Disney, Ford, McDonald’s, PayPal, PepsiCo, and Uber set to report among others.
Client Profits
We initiated a few shorts on LINK, and ETH and continued our day trading approach with recent trades on TIA, AVAX, and INJ.
Our outlook for Q1 remains bearish as BTC seems to be validating the scenario of a healthy corrective phase, requiring additional catalysts to sustain the positive momentum into 2024.
BTC
Following a bearish beginning to 2024, BTC bounced back and hit a high near $43,880 last week as price benefitted from positive Spot BTC ETF net inflows coinciding with a progressive slowdown in the Grayscale Bitcoin trust outflow. BTC closed out January up +0.7% for the month and was trading near $43,185 on Friday, respectively gaining +3.3% over the week.
On the daily chart, BTC price was rejected on Jan 11 from $49,000 serving as a significant resistance zone, and has found support on Jan 23 near $38,500 to bounce back near $43,000. BTC raised moderately over last week, hovering above $43,000 while support levels could push the price back higher with the $38,000 and $40,000 zones acting as main support and 50% and 38% Fibonacci retracement levels. On the upside, the 44,000 and 49,000 zones act as major resistances.
In the short to medium term, BTC seems to be validating the scenario of a healthy corrective phase, requiring additional catalysts to sustain the positive momentum into 2024. The formation of the topping tail on the weekly and monthly timeframes showed the presence of a major supply zone near $48,000, confirming our bearish sentiment for Q1. As mentioned in our last report, we can observe similar retracements after the Coinbase IPO in April 2021 and the launch of BTC futures in Dec. 2017. Other drivers to consider in 2024 include the Federal Reserve’s monetary policy and its guidance for 2024, which could remain influential in steering the markets in the upcoming weeks.
BTC’s 30-day Historical Volatility – HV- dipped moderately to around 49% this week from 55% last week.
After ending December up +12.1% and rounding up 2023 performance to +155%, BTC closed out January up +0.7% and the MTD performance for February is currently +0.04% with the YTD for 2024 being +0.8%.
ETH
ETH closed out the week with marginally smaller gains than BTC, printing +1.8% over the week with a high near $2,391 as optimism around positive net inflows from Spot BTC ETFs drove prices higher while speculations around spot ETH ETF continued to support prices. ETH was trading near $2,302 on Friday, bringing the MTD performance to +1.1%.
ETH inched lower over the weekend and is advancing today, with the price hitting a high of $2,334. ETH is exchanging near $2,290 and trading alongside its ascending support trend line near $2,280 currently with $2,150 and $1,900 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 +1.1% with the YTD for 2024 of +1.2%.
Other markets
US Equities experienced a notable increase last week, fuelled by strong technology stocks corporate earnings from AMZN and META and surprisingly strong job data in the wake of the FOMC rate’s decision to keep its rate steady at 5.25% – 5.5%. In a similar fashion to December’s data – 216,000, January NFP readings came in much higher than expected at 353,000 – VS 180,000, igniting a broad market optimism that overshadowed the pushback on rate cut expectations stemming from J. Powell’s guidance. These combined factors propelled the S&P to a record high of 4,975, with the Nasdaq reaching a new one-year peak, nearing 15,664. S&P and Nasdaq advanced by +1.6% and +1.0% in January and closed out the first week of February higher on Friday near 4,958 and 15,628, respectively gaining +1.4% and +1.1% while the VIX index steadied about 13%, below its 100-Day MA currently near 15%.
After ending 2023 up +17% and +29.6%, S&P, and Nasdaq closed out January up +1.6% and +1.0% and the YTD performances are now +3.6% and +3.9%.
DXY
DXY rose last week and continued to trade further away from its Dec 28 low of 100.61 amidst surging US jobs creation data and tempered rate cut expectations. The index surpassed its 200-day MA near 103.4, reached a high of 104.04, and closed the week near 103.96, from 103.47 the previous week.
The index is now trading upward near 104.43, moving further away from its 200-Day MA currently near 103.4, and retesting its 100-Day MA near 104.3 while the ascending trendline acts as support near 102.5, before the 100-mark that could act as a psychological level and the 200-week ie 1000-Day MA further below currently near 99.0.
The recent surge in last Friday’s NFP data and the Fed’s pushback on potential rate cuts further into 2024 benefited the index. While the outlook for the index remains challenging, the momentum observed in yields and the robust economic data in recent weeks has 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 slipped moderately last week thanks to Friday’s rebound sparked by the NFP report which offset the losses incurred from earlier in the week, the 10Y yield finding support near 3.81% and crossing 4% on Friday. The 10Y and 2Y yields closed at 4.02% and 4.37%, up from 4.14% and 4.36% the previous week. Odds of the Fed maintaining rates in March 2024 rose to 84.5%, while chances of a 25bps rate cut dropped further to 15.5%, per the CME FedWatch Tool.
The 10Y yield and the policy-sensitive 2Y yield are currently exchanging near 4.17% and 4.48% from 4.14% and 4.36% last week, moderately increasing the inversion of the yield curve to 29 bps, from 22 bps last week. The slight increase of the inverted 2yr -10yr curve is reflecting 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.