SVET Markets Weekly Update (September 5, 2022)

06 Sep 2022 by rate3

The first week of September promises to be a continuation of the previous one in terms of down-to-side-way actions on the BTC prices front and in view of uncertainties surrounding expected results of the upcoming FED board meeting (to be held at Sept 20–21).

Those uncertainties had already dragged NASDAQ down for almost 9 percentage points during the 6 days-period starting 26 of August until 1st of September. As a result the Composite Index reached 11546 at its most recent bottom wiping out all its mid-August gains and returning to late July levels.

Overall, in short to medium-term, only technical upward corrections from key resistance levels are expected. Together with some important events / upgrades on a protocol level — e.g. the upcoming Ethereum network merge — those short-term corrections are mostly prompted by sell-side traders take profits and some daring strategic long-term holders step in periodically using lover prices to add to their bags.

Sure we’ve seen minor up-ticks in some important macroeconomic parameters causing the August rally but the abruptness with which it was stopped by few words, which Powell muttered during his Jackson Hall address, proved bulls traders lack of conviction. Who can blame them? Faced by growing risks derived from an entanglement of major fundamental factors they might only repent.

Just to remind myself :) those factors include:

the Ukrainian War, which appears to have no visible end to it with invaders preparing to use the winter-brake for amassing more troops while heroic defenders are facing a growing reluctance of EU politicians to get from words to actions by supplying much needed rocket artillery and other war heavy machinery;
continuing oil and food shortages, prompting violent street protests in a number of countries (in some of them — e.g. Latin America — those uprisings were already followed by sudden political shifts either to the far-right or to the far-left in governance ideologies, as in another — e.g. EU — a new-old black-to-red-spectrum generation of radicals are preparing to enter their state officialdom sooner than many expect);
the lagging Chinese economy, which seems to get from one economic upheaval — an unprecedented interruption of business activities across a number of geographical regions populated by ten of millions of peoples, to another one — a slowing industrial production (it dropped from 7.9 yearly percentage growth in Jan 2022 to a negative 2.9 in April and after followed by a sharp rise to 3.9 — a on post-opening boom — now reduces again to 3.8 in July) accompanied by a real-estate crunch, which was instigated by central authorities stubbornly pursuing uneconomical fast-track regional development plans;
persisting supply chains and revenue streams disruptions periodically reinforced by good-wishing politicians which seek to defend their nation-states interests by prompting more and more stringent artificial barriers to free move across the borders of peoples and goods;
the mid-term US elections in November, which results (according to most prognosis, thought, not too reliable as we already know) might only increase a White House inability to react promptly and adequately on major macroeconomic and political challenges facing today all societal niches;
Powell led FED’s distasteful policy, which can’t address any of the above issues and only aggravates all of them by mindlessly following a ‘mandate’ issued more than a hundred years ago by a handful of the socialist type, central-plan-based economy adherent politicians pursuing their party short-term agendas.
and, of course, a cherry on the top — the US (following by the World’s) economy entering into the big-time recession, which might last from 2 to 5 years, no one really knows how long.
Having all of doom-and-glooms in mind it appears to be highly unlikely that three notable US macroeconomic indicators updates coming out this week — ISM Non-Manufacturing PMI for August (Tuesday September 06 at 10.00 AM), Balance of Trade for July (Wednesday September 07 at 8:30 AM) and, more importantly, Initial Jobless Claims for September (Thursday September 08 at 08:30 AM) — might alter a bear-shape of the BTC mid-term price curve.

Nonetheless, as scheduled, I will briefly cover each of its in the rest of this SVET weekly update:

After ISM Services PMI increased to 56.7 in July from 55.3 in June and beat market forecasts of 53.5 many expect it get back to 55 in August as a new wave of pessimistic expectations flooded all markets. In a previous PMI update it was noted that (QUOTE) faster increases were seen for production (59.9 vs 56.1) and new orders (59.9 vs 55.6) while employment fell less (49.1 vs 47.4) and price pressures eased (72.3 vs 80.1). On the other hand, inventories fell at a faster pace (45 vs 47.5). (EQ)

The traditional US trade deficit, financed by FED’s unrestrained ‘printing’ of paper fiat backed by ‘a trust’, narrowed by $5.3 billion (on a monthly basis) to $79.6 billion (a six-month low) in June. With that (quote) total exports were up 1.7% to an all-time high of $260.8 billion, prompted by sales of nonmonetary gold; natural gas; foods, feeds, and beverages; and travel and transport services. Meanwhile, imports went down 0.3% to $340.4 billion, dragged down mainly by passenger cars. The goods deficit widened with China ($-36.9 billion) and Mexico ($-11 billion) but narrowed with the EU ($-18 billion) and Russia ($-0.6 billion) (eq). US trade deficit is expected to shrink a bit to 70 billion in August on a slowly cooling economy.

On this example we see the economic forces still at work despite politicians ruinous deeds. Regardless multiple misguided attempts to get ‘critical productions’ back to home, China only increases its supplies of US consumers and manufacturers. At the same time, neighboring countries with shortened delivery roots stepping in to replace those which proved to be disturbed by war or unreliable.

As to the Americans filing new claims for unemployment benefits it continue to astonish analytics by decreasing 5000 (to 232000) in August. (quote) notable declines being recorded in Connecticut (-1,816), Missouri (1,370), Oklahoma (-1,334) and Georgia (-1,069). On the other hand, applications increased the most in New York (4,754) and Massachusetts (3,079) (eq) Most forecasters expect a further decline to 230 thousands claims in September (according to the initial report).

This strange combination of the recession accompanied by the inflation (the deflation) and rising employment might be explained by the fundamental regional differences: while blue collars are finding more jobs during a brief post-opening period, the educated work-force on both Coasts are loosing their shirts because of the predatory, outdated economic and financial policies pushed on us by old peoples in expensive government suits which are not suited for the twenty first century economy.