LAST WEEK, BTC and ETH put a halt to the downtrend and managed to edge higher this past week, with BTC hitting a high near $30,210 on Tuesday before settling near $29,500 towards the end of the week. The two cryptocurrencies were trading near $29,398 and $1,847 on Friday, ending the week both up +1.1% respectively as BTC’s 30-day Historical Volatility – HV- dipped to 16% from 23% the week before, its lowest level since November 2018.
US Equities fell last week, with S&P and Nasdaq posting their second straight weekly losses closing near 4,464 and 13,644 from 4,478 and 13,909 the week before, down – 0.3% and – 1.9% over the week as markets digested the hotter-than-expected US PPI, which rose 0.8% in July – VS 0.7 anticipated – and a moderate decrease in the US consumer sentiment preliminary numbers for August at 71.2 – from 71.6 in July. The news revived fear of more rate hikes, pushing Treasury yields higher while weighing on rate-sensitive growth Tech stocks – META, MSFT, and TSLA among others.
US Treasury yields gained last week, with the 10Y yield and the policy-sensitive 2Y yield rallying in the last sessions of the week with the release of the PPI data, offsetting the losses incurred earlier in that week. Although the consensus suggests the Fed will refrain from raising rates further this year, markets are now pricing in an 88.5% chance of no rate hike during the next FOMC meeting in September, according to CME’s FedWatchTool, from 90% before the US PPI release. The 10Y and 2Y yields were trading up near 4.16% and 4.90% on Friday – from 4.04% and 4.77% the week before.
DXY carried on its positive momentum and edged higher, confirming above the 102-mark, despite a consolidation session on Wednesday and a low near 101.7 on Thursday. The index closed the week up near 102.85.
Oil price also gained moderately to clinch its seventh-straight week of gains against a backdrop of increasing oil demand, boosted by strong summer air travel and increasing Chinese petrochemical activity, and, on the other side, a global supply tightening with Saudi Arabia and Russia voluntary production cut extensions, spurring the market price upwards. The WTI was trading near $83 on Friday, from $82 last week.
BTC, ETH and US Equities are all trading down today, with BTC and ETH down with lows near $29,050 and $1,810 despite the launch of Europe’s First Bitcoin ETF from Jacobi Asset Management this Tuesday. The news getting overshadowed by today’s hugely disappointing data in China with Retail sales, Industrial production, and Fixed asset investment rising only by 2.5%, 3.7% and 3.4% in July, way below the markets’ expectation – respectively of 4.5%, 4.4% and 3.8%.
This week, investors will look forward to the next batch of corporate earnings with major retailers Home Depot, Target and Walmart set to report as well as Tuesday’s Census Bureau’s retail sales numbers for July which could help investors assess how consumer spending held up last month. Investors will also keep an eye on Wednesday’s minutes of the latest FOMC meeting and housing market data – NAHB Index for August, housing starts, Building permits – as well as the latest inflation and GDP readings from the U.K., the Eurozone, and Japan.
CLIENT PROFIT
We kept our short positions on BTC and ETH
The exposure to the market is 14% of the AUM, the rest being in cash.
BTC
BTC put a halt to the downtrend and managed to edge higher this past week, hitting a high near $30,210 on Tuesday before settling near $29,500 towards the end of the week. BTC was trading near $29,398 and $1,847 on Friday, ending the week both up +1.1% respectively.
BTC carried on consolidating in a tight range of $29,000-$30,600 for the past weeks, briefly testing its MA-50 near $29,890 – on Tuesday and Wednesday before retracing and confirming below for the rest of the past week. As explained in our previous reports, the $30,000 acts as a major level and keeping BTC above this level could play a key role in the bullish continuation. It is also a psychological level, whereas confirming below this level could pave the way to more selling pressure in the market, especially if the bearish divergence we mentioned in our last reports this month between money supply and US Equities starts to affect Stocks and subsequently BTC prices.
It goes without saying we remain bullish on the very long term but remain however bearish on the medium and short term. There is a risk of a dropback if BTC doesn’t find the momentum to break through to the upside with major supports near $27,900, $25,000 and $24,000 further below.
BTC’s 30-day Historical Volatility – HV- dipped to 16% from 23% the week before, its lowest level since November 2018.
After ending June up +11.9% and July down -4.1%, BTC’s performance for August is currently flat with the YTD performance for 2023 being +76.6%.
ETH
ETH also regained this past week, edging higher +1.1% over the week, settling near $1,850 on Friday.
ETH breached below $1,800 on Monday before reversing the trend the next day with a high of $1,875 on Tuesday and edging lower in the remaining trading sessions, yet in positive territory by the end of the week. Price is still evolving between the 50-MA near $1,875 and the 200-day MA near $1,815. The 200 MA is a strong indicator of the overall trend, if ETH breached below that level, the price could move downwards towards its next support near $1,790 and $1,370 further below.
After ending June up +3.2%, and the month of July down -4%, ETH is still in negative territory with the performance for August currently of -1.4% with the YTD performance for 2023 being +52.9%.
OTHER MARKETS
US Equities fell last week, with S&P and Nasdaq posting their second straight weekly losses closing near 4,464 and 13,644 from 4,478 and 13,909 the week before, down -0.3% and – 1.9% over the week as markets digested the hotter-than-expected US PPI, which rose 0.8% in July – VS 0.7 anticipated – and a moderate decrease in the US consumer sentiment preliminary numbers for August at 71.2 – from 71.6 in July. The news revived fear of more rates hikes, pushing Treasury yields higher while weighing on rate-sensitive growth Tech stocks – TSLA, META, MSFT among others.
S&P and Nasdaq’s performances for the month of August are now of -2.7% and -4.9% and the YTD performances are +16.3% and +30.4% – from +17.7% and +33.6% 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 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 widened over the past week with the latest inflation data and corporate earnings propelling prices upwards.
DXY
DXY carried on its positive momentum and edged higher, confirming above the 102-mark, despite a consolidation session on Wednesday and a low near 101.7 on Thursday. The index closed the week up near 102.85.
DXY is currently near 103.2, confirming above its 50-day MA respectively near 102.3. The 50-day MA acts as support and below 100.7 before the 100-mark could act as a psychological level before the 200-week ie 1000-Day MA is further below currently 98.3. In the upside, the 200-day MA is currently being tested currently near 103.4. The index rallied this past week but is expected to remain volatile as other central banks could adjust their policies later in the year.
US TREASURIES
US Treasury yields gained last week, with the 10Y yield and the policy-sensitive 2Y yield rallying in the last sessions of the week with the release of the PPI data, offsetting the losses incurred earlier in that week. Although the consensus suggests the Fed will refrain from raising rates further this year, markets are now pricing in an 88.5% chance of no rate hike during the next FOMC meeting in September, according to CME’s FedWatchTool, from 90% before the US PPI release. The 10Y and 2Y yields were trading near 4.16% and 4.90% on Friday – from 4.04% and 4.77% the week before.
The 10Y yield and the policy-sensitive 2Y are currently exchanging near 4.22% and 4.96% from 4.10% and 4.78% last Monday, increasing the inversion of the yield curve to 74bps, from 68 bps last week. An inverted 2yr-10yr curve is seen in the market as a sign of a possible incoming recession. However, if signs of a potential soft landing in the US economy gain further credit, this spread should tighten and could turn positive later in the future.