BTC and ETH wrapped up the third week of January with losses as prices continued to fall back from last Thursday 11’s high of $49,046 and consolidated following the approval of the BTC Spot ETFs by the SEC last week. BTC price hit a low near $40,258 last Friday, validating the scenario of a “sell the news” event, along with growing concerns over the momentary depeg of Fiat-backed stable coin TrueUSD down to $0.97 on Wednesday. BTC and ETH were trading near $41,620 and $2,490 on Friday, respectively shedding -2.9% and -1.4% over the week.
US Equities saw a notable upswing last week, fuelled by optimism surrounding potential rate cuts. This positive trajectory was bolstered by a bullish momentum in technology stocks and a substantial increase in the Consumer Sentiment Index, reaching 78.8 – its highest level since July 2021- followed by the one-year inflation outlook dipping to 2.9% – from 3.1% in December. These combined factors propelled the S&P to a record high of 4,842, with the Nasdaq also reaching a one-year peak, nearing 15,310. S&P and Nasdaq closed out the week higher on Friday near 4,839 and 15,311, respectively gaining +1.2% and +2.3% while the VIX index picked up moderately with a high near 15.4%, reconnecting with its 100-Day MA currently at 15%.
US Treasury yields rose last week, with the 10-year yield resuming its 2024 upward trend, finding support near 3.94% and crossing 4%. Factors contributing to this increase included a surprise drop in jobless claims to 187,000, strong December retail sales (+0.6%), and hawkish comments from Fed official C. Waller cautioning against rate cuts, which tempered expectations for a rate reduction in the first quarter of 2024 and propelled both yields and the US dollar higher. The 10Y and 2Y yields closed at 4.13% and 4.39%, up from 3.94% and 4.15% the previous week. Odds of the Fed maintaining rates in March 2024 rose to 53%, with a 46% chance of a 25bps rate cut, per the CME FedWatch Tool.
DXY rose this week and traded further away from its Dec 28 low of 100.61 amidst encouraging US economic data and tempered rate cut expectations. The index reached a high of 103.69 and closed the week near 103.24, from 102.44 the previous week.
Oil prices inched up, hovering just above their 200-week or 1000-day moving average, currently at $70.6. WTI closed the week at $73.4, a slight rise from the previous week, and is trading near $73, still within the $70-$75 range started in 2024. The challenge to gain upward momentum is attributed to a stronger dollar and market worries about the global demand outlook, fuelled by China’s lower-than-expected growth data at +5.2%.
BTC and ETH are retracing today amidst a broader crypto market downturn possibly validating the scenario of a healthy correction in the wake of the Spot ETF’s approval. BTC is currently trading near $40,700 as the possibility of a nosedive to $38,000 looms while investors shift their focus to this week’s agenda starting with the release of the U.S. leading economic indicators on Monday followed by US PMI Services and Manufacturing on Wednesday and Thursday’s preliminary estimate of US Q4 GDP and Friday’s PCE data, the Fed’s preferred gauge of inflation, set to take center stage this week – Headline and Core YoY expected at +2.6% and +3%. Lastly, Investors will also keep an eye on the continuation of the earnings season with AT&T, Comcast, IBM, Intel, Netflix, and Tesla set to report among others.
Client Profits
In response to the inherent volatility associated with the approval of spot ETFs, we have strategically transitioned our approach to day trading. This adjustment is designed to capitalize on intraday market opportunities, allowing us to navigate the dynamic market conditions until the impact of the ETF approval news stabilizes.
BTC
BTC wrapped up the third week of January with losses and continued to fall back from last Thursday 11’s high of $49,046 and consolidated following the approval of the BTC Spot ETFs by the SEC last week. BTC price hit a low near $40,258 last Friday, validating the scenario of a “sell the news” event, along with growing concerns over the momentary depeg of Fiat-backed stable coin TrueUSD down to $0.97 last Wednesday. BTC was trading near $41,620 on Friday, shedding -2.9% over the week.
On the daily chart, BTC price has been rejected from $49,000 serving as a significant resistance zone, and is now trading near $40,000 with a low near $39,345 on CME Futures. BTC traded below $40,000 for the first time since the launch of the Spot BTC ETFs on Jan 11 while support levels could push the price back higher with the $38,000 zone acting as the main support and 50% Fibonacci retracement level.
In the short term, BTC seems to be validating the scenario of a healthy corrective phase, requiring additional catalysts to sustain the positive momentum into 2024. Interestingly, 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.
On the weekly and monthly timeframes, we can notice the formation of a topping tail which could indicate a potential decline in the momentum of the uptrend and signal the likelihood of a forthcoming pullback or a bearish reversal in the weeks ahead.
BTC’s 30-day Historical Volatility – HV- picked up to around 52% this week.
After ending December up +12.1% and rounding up 2023 performance to +155%, BTC’s MTD and YTD performances are now -5.2%.
ETH
ETH closed out the week with moderate losses compared to BTC as speculations around spot ETH ETF that sparked after the SEC’s approval of BTC spot ETFs mitigated some of the decline. ETH was trading near $2,490 on Friday, shedding -1.4% over the week.
ETH inched lower over the weekend and is falling today, with the price hitting a low of $2,304. ETH is exchanging near $2,340 and inching closer to its ascending support trend line near $2,245 currently with $2,100 and $1,900 further below acting as main supports.
After ending December up +11.1% and rounding up 2023 performance to +90.6%, ETH’s MTD and YTD performances are now of +2.2%.
Other markets
US Equities saw a notable upswing last week, fuelled by optimism surrounding potential rate cuts. This positive trajectory was bolstered by a bullish momentum in technology stocks and a substantial increase in the Consumer Sentiment Index, reaching 78.8 – its highest level since July 2021- followed by the one-year inflation outlook dipping to 2.9% – from 3.1% in December. These combined factors propelled the S&P to a record high of 4,842, with the Nasdaq also reaching a one-year peak, nearing 15,310. S&P and Nasdaq closed out the week higher on Friday near 4,839 and 15,311, respectively gaining +1.2% and +2.3% while the VIX index picked up moderately with a high near 15.4%, reconnecting with its 100-Day MA currently at 15%.
After ending December up +4.4% and +5.5 with yearly 2023 performance of +17% and +29.6%, S&P, and Nasdaq’s MTD and YTD performances are now +1.7% and +2.3%.
DXY
DXY rose this week and traded further away from its Dec 28 low of 100.61 amidst encouraging US economic data and tempered rate cut expectations. The index reached a high of 103.69 and closed the week near 103.24, from 102.44 the previous week.
The index is now trading near 103.34 reconnecting with its 200-Day MA currently near 103.4 and inching closer to its 100-Day MA near 104.43 while the ascending trendline acts as support near 102.4, 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.
Recent hawkish remarks and robust economic indicators have altered the storyline, postponing the potential timing of a Fed rate cut further into 2024, thereby benefiting the index. The index’s outlook remains challenging, as the momentum seen in yields and strong economic data in recent months may begin to diminish, presenting a different narrative for investors as inflationary pressures ease in the later part of 2024.
US Treasuries
US Treasury yields simultaneously rose last week, with the 10-year yield resuming its 2024 upward trend, finding support near 3.94% and crossing 4%. Factors contributing to this increase included a surprise drop in jobless claims to 187,000, strong December retail sales (+0.6%), and hawkish comments from Fed official C. Waller cautioning against rate cuts, which tempered expectations for a rate reduction in the first quarter of 2024 and propelled both yields and the US dollar higher. The 10Y and 2Y yields closed at 4.13% and 4.39%, up from 3.94% and 4.15% the previous week. Odds of the Fed maintaining rates in March 2024 rose to 53%, with a 46% chance of a 25bps rate cut, per the CME FedWatch Tool.
The 10Y yield and the policy-sensitive 2Y yield are currently exchanging near 4.11% and 4.39% from 3.94% and 4.15% last week, moderately increasing the inversion of the yield curve to 28 bps, from 24 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 economic data, postponing the potential timing of a Fed rate cut further into 2024.