Weekly Report CFT Monday, December 18th 2023

Home 9 chart Analysis 9 Weekly Report CFT Monday, December 18th 2023

BTC and ETH paused their rally and slipped last week as the cryptocurrency market weathered a selloff earlier in the week, possibly validating the scenario of an overheating market, and digested the latest inflation and monetary policy updates along with concerns about the Ledger’s attack with BTC falling through the $41,000 and hitting a low near $40,190 on perpetual futures last Monday. BTC and ETH were trading near $41,930 and $2,220 on Friday, respectively shedding -5.1% and -5.9% over the week and bringing the YTD performances down to +153% and +85.4%, from +167% and +97% last week.

US Equities extended their rally to notch a seventh straight week of gains as markets welcomed the moderately cooling inflation CPI numbers and the Fed’s December rates decision to hold borrowing costs steady at 5.25%-5.50% and to signal it was finished raising rates. The dovish stance gave further traction to the narrative of a rate pivot and bolstered hopes of a rate cut potentially throughout the first half of 2024. Consumer price index declined to 3.1% – Core CPI 4.0% – on a yearly basis, from 3.2% in October – Core CPI 4% – in line with expectations. S&P and Nasdaq closed on Friday near 4,719 and 14,813, respectively notching weekly gains of +2.5% and +2.8% while the VIX index steadied near 12.2%, below its 200-Day MA currently at 16.3%.

US Treasury yields incurred a week of losses following the Fed’s dovish forward guidance with the 10Y yield suffering its largest decline – of -7.6% – since November 2022 despite Fed officials tempering the timing of a possible rate cut last Friday. The 10Y and 2Y yields closed near 3.91% and 4.45% on Friday from 4.23% and 4.72% the week before. The odds of the Fed keeping interest rates steady at a range of 5.25% to 5.50% in March 2024 are 75% from 43% a month ago, according to the CME FedWatch Tool.

DXY fell this past week with the Fed’s dovish remarks hampering the index’s upside potential despite the stronger US Services PMI released on Friday with December Composite PMI climbing to 51 from 50.7 the month prior – Services PMI rising to 51.3 VS 50.7 expected. DXY wrapped up the week lower, near 102.59 from 103.98 the previous week.

Oil price inched modestly higher as prices benefitted from a softening of the US Dollar although markets remain cautious with looming signs of a weakening global demand. The WTI ended the week near $71.7, from $71.2 the week before. WTI price is back above $73 today on growing concerns over the security of oil shipments following the Red Sea ship attacks.

BTC and ETH are up today, with BTC exchanging near $42,610 as markets shift their focus to this week’s agenda with Thursday’s revision of the US Q3 GDP and the Philadelphia Fed manufacturing survey followed by Friday’s release of the Personal Consumption Expenditures (PCE) for November, the Fed’s preferred gauge of inflation, set to take center stage this week. Markets will also keep an eye on the final 2023 Michigan Consumer Sentiment Index on Friday as well as on a few corporate earnings with Accenture, FedEx and Nike set to report among others. In the rest of the world, investors will look forward to the BoJ’s rate decision on Tuesday with rates expected to remain unchanged although the institution has been inching closer to ending its negative interest-rate regime.

Client Profits

We took profits on ADA and RUNE and closed our positions on ETH, BTC, and LINK at breakeven to free up some cash to have more room to better DCA our major positions (short) on SOL and AVAX.

Presently, our cash position stands at 43% of our Assets Under Management (AUM) so we could work around our big positions in case BTC was to back-test 44k or even pierce 48k by the end of the year.

BTC

BTC paused the rally and slipped last week as the cryptocurrency market weathered a selloff earlier in the week, possibly validating the scenario of an overheating market, and digested the latest inflation and monetary policy updates along with concerns about the Ledger’s attack with BTC falling through the $41,000 and hitting a low near $40,190 on perpetual futures last Monday. BTC was trading near $41,930 on Friday, shedding -5.1% over the week and bringing the YTD performances down to +153% from +167% last week.

BTC’s trend in the medium term seems to be closely linked to the outcome of potential approval of pending spot ETF applications now postponed to early 2024 by the SEC. While rumors of an application approval as early Jan 2024 picked up steam and propelled prices to 18-month highs, the recent selloff showed signs of a potentially overbought market. Other variables to take into account could be the Fed’s monetary policy and its forward guidance for next year, which may continue to drive markets in the coming weeks.

On the daily chart, BTC price has increased alongside an ascending support trend line since late October, surpassing $40,000 and hitting a yearly high of $44,765 on December 8 before retracing on signs of a growing bearish divergence on the daily RSI. It will be interesting to watch if BTC can hold on over the $40,000 mark and potentially reach $50,000 upon the approval of a spot BTC ETF in January and if a driver other than the enthusiasm around a Spot BTC / ETH ETF approval – possibly the looming halving – can maintain the momentum and extend the rally. In that respect, Bitcoin’s market dominance peaked at 55% this month, its highest in the last 30 months – and is now nearing 52%, suggesting a potential strengthening in anticipation of the halving event scheduled for April 2024.

BTC’s 30-day Historical Volatility – HV- decreased to around 45% this week, from 53% the week before.

After ending June up +11.9%, July down -4.1%, August down -11.3%, September up +4.0% October up +28.6%, BTC concluded November up +8.8% and the MTD performance for December is +10.8% currently with the YTD performance for 2023 now of +152%.

ETH

Like BTC, ETH slipped away from the $2,400 high last week, hitting a low of $2,145 and was trading near $2,220 on Friday, shedding -5.9% over the week and bringing the YTD performance down to +85.4%, from +97% last week.

ETH inched lower over the weekend and is regaining today, trading near the ascending support trend line with a low near $2,115 and currently in the process of breaking below the $2,200 while $1,900 and $1,750 further below act as main supports.

After ending June up +3.2%, July down -4%, August down -11.3% and September up +1.5%, October up +8.7%, ETH ended the month of November up +13% and the MTD performance for December is up, currently of +6.1% and the YTD performance for 2023 now of +82%.

Other markets

US Equities extended their rally to notch a seventh straight week of gains as markets welcomed the moderately cooling inflation CPI numbers and the Fed’s December rates decision to hold borrowing costs steady at 5.25%-5.50% and to signal it was finished raising rates. The dovish stance gave further traction to the narrative of a rate pivot and bolstered hopes of a rate cut potentially throughout the first half of 2024. Consumer price index declined to 3.1% – Core CPI 4.0% – on a yearly basis, from 3.2% in October – Core CPI 4% – in line with expectations. S&P and Nasdaq closed on Friday near 4,719 and 14,813, respectively notching weekly gains of +2.5% and +2.8% while the VIX index steadied near 12.2%, below its 200-Day MA currently at 16.3%.

After suffering losses of -2.2% and -2.8% in October, S&P and Nasdaq closed out the month of November up +8.9% and +10.7%. The two indices’ performances for December are currently +3.8% and +4.8%, bringing the YTD performances to +23.5% and +42.4%.

Stocks wrapped up November with strong gains, accentuating the divergence that is still visible on the charts between Stocks and Monetary Supply.

DXY

DXY fell this past week with the Fed’s dovish remarks hampering the index’s upside potential despite the stronger US Services PMI released on Friday with December Composite PMI climbing to 51 from 50.7 prior – Services PMI rising to 51.3 VS 50.7 expected. DXY wrapped up the week lower, near 102.59 from 103.98 the previous week.

DXY struggled last week, breaking below its 200-day MA as well as the 103 and 102 successively on Wednesday and Thursday to find support on its upsloping trendline near 101.7. The index closed the week at 102.59 on Friday and is currently trading near 102.44 while the 102 and 100.7 levels act as supports, before the 100-mark that could act as a psychological level and the 200-week i.e. 1000-day MA further below currently near 98.9.

The outlook could become challenging for the index as the momentum we observed in yields and robust economic data over the past months could now start to wane down and convey a different narrative for investors as inflation pressures cool down. DXY’s next potential catalyst will come out on Friday with the release of the Core PCE report, the Fed’s preferred gauge of inflation.

 

US Treasuries

US Treasury yields incurred a week of losses following the Fed’s dovish forward guidance with the 10Y yield suffering its largest decline – of -7.6% – since November 2022 despite Fed officials tempering the timing of a possible rate cut last Friday. The 10Y and 2Y yields closed near 3.91% and 4.45% on Friday from 4.23% and 4.72% the week before. The odds of the Fed keeping interest rates steady at a range of 5.25% to 5.50% in March 2024 are 75% from 43% a month ago, according to the CME FedWatch Tool.

The 10Y yield and the policy-sensitive 2Y yield are currently exchanging near 3.94% and 4.45% from 4.24% and 4.71% last week, moderately widening the inversion of the yield curve to 51 bps, from 47 bps last week. The slight widening of the inverted 2yr -10yr curve reflects the recent adjustment in investors’ expectations following the Fed’s dovish remarks.