Weekly Report CFT – Tuesday 5, September 2023 – Bitcoin | Stocks | $ Dollar New Update
LASTWEEK
BTC and ETH edged lower last week despite a strong rally on Tuesday where BTC spiked to a daily high near $28,200, as investors cheered a U.S. Court ruling in favor of the Grayscale application for its Bitcoin ETF. The momentum reversed however amidst conflicting signals regarding the ETF approval in the later part of the week with the two cryptocurrencies trading near $25,800 and $1,630 on Friday, down -0.9% and -1.5% over the week.
US Equities advanced this past week, with S&P and Nasdaq ending the week near 4,515 and 14,031, notching gains of +2.5% and +3.2% as investors digested the latest inflation and job market data ahead of the long holiday weekend – in observance of the Labor Day. Core PCE from July was up +4.2% year over year, in line with markets’ expectations whereas NFP data for August beat estimates: the US economy adding 187,000 jobs VS 170,000 expected, supporting expectations that the Fed will pause interest rates at its September meeting, despite average hourly earnings increasing more than anticipated – +0.2% for the month and +4.3% from a year ago VS 0.3% and 4.4% expected. Lastly, the unemployment rate came in at a surprising 3.8% for August – highest level since February 2022, from 3.5% in July, the U.S. Bureau of Labor Statistics reported last Friday.
Treasury yields dropped following the mixed job market data. The 10Y and 2Y yields were trading near 4.18% and 4.88% on Friday – from 4.24% and 5.08% the week before. Markets are now pricing in a 94% chance of no rate hike during the next FOMC meeting in September, according to CME’s FedWatchTool, from 78.5% the past week.
DXY managed to eke out gains despite a volatile week for the index, dropping to a low of 102.94 and testing its 200-day MA on Wednesday before paring its losses and regaining the 104 in the latter part of the week. The index closed the week up near 104.26.
Oil price ended its series of 2-week losing streaks and surged this past week with the WTI closing near $85.98 from $79.97 the previous week. The rally was fuelled by China’s property stimulus, the latest US inventory numbers – confirming the strong demand from the US – and most importantly the possibility of further output cuts from Russia and Saudi Arabia gaining further traction ahead of the next OPEC+ meeting.
BTC and ETH are close to flat today as markets enter what should be a calmer week with the PMI numbers for August taking the spotlight on Wednesday. Markets will also keep an eye on some Fed officials’ allocutions throughout the week and the release of the Beige book on Wednesday which could provide some guidance on the resilience of the U.S. economy and the Fed’s intentions at its September meeting.
CLIENT PROFIT
We took partial profits on our long positions on some of our Altcoins when BTC neared $28,000 (MATIC, ADA, LTC, DOT).
We kept the rest of the long positions on Alts, including XRP, that we opened when BTC broke below $26,000.
The exposure to the market is now 11% of the $AUM, the rest being in cash.
BTC
BTC edged lower last week despite a strong rally on Tuesday where price spiked to a daily high near $28,200, as investors cheered a U.S. Court ruling in favor of Grayscale application for its Bitcoin ETF. The momentum reversed however in the later part of the week with BTC trading near $25,800 on Friday, eventually down -0.9% over the week.
BTC is evolving near the $26,000 level, a level that has been tested many times since August 17 2023. Price is currently showing a bear flag on the daily timeframe so BTC could potentially drop further in the coming days or next week.
It goes without saying we remain bullish on the very long term but remain however bearish on the medium and short term. Bitcoin hit a 2023 high near $31,818 on July 13 but has struggled to reclaim its $30,000 level since July 23. There is a risk of a drop further below if BTC doesn’t find the momentum to bounce back to the upside with major supports near $25,000 and $20,000 further below.
BTC’s 30-day Historical Volatility – HV- increased up to 40% this week from 30% the week before.
After ending June up +11.9% and July down -4.1%, BTC ended August down -11.3%. BTC’s performance for September is currently slightly negative: -0.1% with the YTD performance for 2023 being +55.3% – from 57% the week before.
ETH
Like BTC, ETH dropped this past week, ending the week near $1,630 on Friday, down -1.5% over the week.
ETH price spiked early in the week, hitting a high near $1,745 on Tuesday but like BTC, ETH reversed the trend in the following trading sessions, losing -3.5% on Thursday to settle back to the $1,630 level. Price is still evolving well below the $1,700 with the $1,550, $1,370 and $1,100 further below acting as main supports. As mentioned in our previous reports the 200- day MA – near $1,800 currently – being a strong indicator of the overall trend, ETH confirming below that level could put more downward pressure and fuel a move to the downside.
After ending June up +3.2%, and the month of July down -4%, ETH ended the month of August down -11.3% and the performance for September is currently of -0.9% and the YTD performance for 2023 being +36.3% – from+37.5% the week before.
OTHER MARKETS
US Equities advanced this past week, with S&P and Nasdaq ending the week near 4,515 and 14,031, notching gains of +2.5% and +3.2% as investors digested the latest inflation and job market data ahead of the long holiday weekend – in observance of the Labor Day.
Core PCE from July was up +4.2% year over year, in line with markets’ expectations whereas NFP data for August beat estimates: the US economy adding 187,000 jobs VS 170,000 expected, supporting expectations that the Fed will pause interest rates at its September meeting, despite average hourly earnings increasing more than anticipated – +0.2% for the month and +4.3% from a year ago VS 0.3% and 4.4% expected. Lastly, the unemployment rate came in at an impressive 3.8% for August – the highest level since February 2022, from 3.5% in July, the U.S. Bureau of Labor Statistics reported last Friday.
S&P and Nasdaq ended the month of August down -1.8% and -2.2%. The performances for the month of September are currently of -0.3% and -0.1% and the YTD performances +17.1% and +33.9% – from +15.5% and +30.8% respectively as of last week.
As mentioned in our previous reports this month, the comparison between the rallying US Equities and the contracting Monetary supply M2 could have put in perspective the timing of a possible correction in stock markets considering the divergence currently occurring in 2023 as we can see in the graphs below. The divergence observed over the past weeks seems to have reduced with Stocks correcting this month of August.
DXY
DXY managed to eke out gains despite a volatile week for the index, dropping to a low of 102.94 and testing its 200-day MA on Wednesday before paring its losses and regaining the 104 in the latter part of the week. The index closed the week up near 104.26.
DXY is currently near 104.12, back above its 200-day MA – near 103.05 – acting as support and below, the 102 and 100.7 levels, before the 100-mark that could act as a psychological level before the 200-week ie 1000-Day MA further below currently near 98.4. In the upside, the 104.7-mark acts as the nearest resistance and could be tested in the coming days. The index edged slightly higher this past week but had a volatile week and is expected to remain volatile as other central banks could adjust their policies later in the year.
US TREASURIES
Treasury yields dropped following the mixed job market data. The 10Y and 2Y yields were trading near 4.18% and 4.88% on Friday – from 4.24% and 5.08% the week before. Markets are now pricing in a 94% chance of no rate hike during the next FOMC meeting in September, according to CME’s FedWatchTool, from 78.5% the past week.
The 10Y yield and the policy-sensitive 2Y are currently exchanging near 4.19% and 4.88% from 4.21% and 5.05% last Monday, reducing the inversion of the yield curve to 69bps, from 84 bps last week. An inverted 2-year -10-year curve is seen by the market as a sign of a possible incoming recession. The reduction came as the recent job market and economic data gave investors hope the Fed could pause its rate hike cycle to sustain the economy.