SVET Markets Weekly Update (December 5–12, 2022)

13 Dec 2022 by rate3

The prior week NASDAQ (and BTC) charts went flat, as was expected. FOMC Dec 13 session loomed heavily on traders’ minds. Making small bets, playing RSI — that was the strategy under circumstances.

On a macro-side there were the following updates to notice:

ISM Non-Manufacturing PMI for November: 56.5 (actual) vs 53 (projected);
Balance of Trade for October: USD -78.2B vs -73B;
Initial Jobless Claims: 230K vs 240K;
November’s PPI: 0.3 vs 0.3 percent
December’s Michigan Consumer Sentiment (preliminary): 59.1 vs 56.4
ISM came out with unexpectedly high PMI (56.5 vs 53) on Monday brining NASDAQ down right after the index release at 9:30 AM ET. After that BTC, which was downing 12 hrs prior to that, recovered (going over 1700) while NASDAQ continued to drop reaching below 11200 and closing at 11239.

However, most of the drama was on the oil market where crude futures fell below USD 77 from its daily high of 82.6. What sparkled that has different interpretations among analysts.

Some are pointing out on Russia today receiving the go-ahead from US and EU to sell its oil with USD 60 / barrel ceiling on it. That might relieve pressure on Indian, Chines and Turkish energy markets — the main exporters of Urals (popular Russian oil type).

Others are saying that it is the recession sign. Many countries faced by the growing USD, energy under-supplies and local economies slow-down start to cut their needs for the crude and its products.

I won’t be original saying that it was a bit of both plus daily speculators’ playing against the crowd and long-term holders. The later also explains today’s BTC diversion from NASDAQ on a daily chart. There are still a lot of overly optimistic (or daring, depending on the angle you want to put on that) crypto traders, which keep betting against FED.

Tuesday’s Balance of Trade analysts’ preliminary estimates (~USD -73B) came a bit short of what BEA announced today (USD -78.2B), showing decrease in exports (to 256.8B) and increase in imports (334.8B led by the fuel oil) but that, of course, not what moved the markets.

NASDAQ closed at 11014 (down from 11239 on Monday). It had been sliding down during six hours straight. Commentators are blaming for that heads of largest banks (including infamous Jamie Dimon) coming out with gloomy economic forecasts for 2023. However, it looks more like institutional traders’ punishing short-sighted, day-trading amateurs for the Wednesday’s (Nov 30) fake out.

Wednesday’s markets went sideways with NASDAQ ranging 10900 to 11050 (and BTC — 16700 to 16900), which forms a small ascending triangle on hourly indicating the possible technical correction after yesterday’s debacle.

Wednesday was a no-news day on the macroeconomic side.

Mortgage Bankers Association of America (MBA) updated its series of the state of the housing market’s indexes (f.e. MBA Purchase Index, which measures mortgage loan applications, went down to 175.5 from 181, which confirms the down-trend started by this index in January 2022 when it stood at ~ 310).

Additionally, Energy Information Administration (EIA) data showed US crude oil stocks decreasing from 419.084 M/barrels to 413.898 (by -5.187M, previous decrease was -12.58 and a forecast -3.305M). That is not surprising as the US internal oil production keeps growing on higher prices. Besides, oil stocks depends on many factors and its fluctuating within +/- 6M range is, historically, a pretty habitual occurrence.

NASDAQ went up about 100 points (or ~1 percent) on the Thursday’s morning session (from 11011 to 11119) while BTC doubled that going from 16829 to 17229 (2.4 percent). Today’s market bullish feeble energy was released after Department of Labor (DOL) showed that claims for unemployment benefits got higher to 230K (by 4K) during the week ending 3rd of December. Although it matched the markets expectations some players took this as a sign of the worsening labor situation (and, consequently, of the increasing probability of FED’s policy reversal) as jobless claims has been continuously (more or less) rising from ~200K in September to almost 240K in the second week of November.

Friday’s PPI report came out without major surprises increasing 0.3 percent in the October to November period (compared to 2021 producer prices were up 7.4 percent during the year). It means that the majority consensus guessed it right. With PPI staying unchanged for the third month in the row traders might expect FOMC getting more reasonable on its upcoming session the next week. However, PPI different constituents tell different story each. While prices for gasoline went down for 6 percent, cost of services increased for 0.4. The fast rise of prices charged by businesses to consumers for services is exactly what Powell likes to point out at as to one of the major causes of CPI increases. Consequently, traders were divided on this issue, which resulted in NASDAQ closing just a few clicks lower than on its opening (11038 vs 11004) with BTC going from 17156 to 17128 within the same time frame. Lets call it even for the day :)