SVET Markets Weekly Update (December 19–23, 2022)

24 Dec 2022 by rate3

The 51st week of year 2022 becomes the third red-candle week in a row. NASDAQ opened it at 10707 and closed at 10497 sliding another 2 percent down to the South. The leading tech index is still flirting with the support zone at 10100–10300 looking weaker and weaker each time it touches it.

At the same time BTC demonstrates some resilience closing this week at almost exactly the same point (16778) as it entered it (16739). It doesn’t mean much, however. During this year we have seen many times BTC slightly outperforming NASDAQ during ‘quite’ periods only to crash spectacularly after the next portion of negativity hits the markets.

Here are details:

Building Permits (Nov): 1.342M (fact), 1.48M (prognosis);
Existing Home Sales (Nov): -7.7 percent (f), -3.0 (p);
Personal Income (Nov): +0.4 percent (f); +0.3 (p);
Durable Goods Orders (Nov): -2.1 percent (f); -0.5 (p).
Monday, December 19, we tasted the piece of bull’s happy-meal taken straight from the 2021 cooking book. The National Association of Home Builders reported Housing Market Index contraction to 31 instead of 32 expected by most analysts.

It supposed to be not a big deal as this index had been continuously falling for months from its picks (84) achieved in December 2021 to its present levels previously seen only in March 2020. On the other hand, it didn’t add much enthusiasm to players, too. NASDAQ sliding another 1.5 (from 10707 to 10546) percent during the day was a prove.

However, on dormant markets, you rarely see any action without someone skillfully orchestrating its. That exactly what happened at about 2 pm (PST) when the classical bear trap was set and masterfully executed by some rough actors.

In a matter of minutes BTC mini-crashed from 16609 to 16256 (2.1 percent) breaching its lowest (since Dec 16) support and collecting a bunch of bull’s stop-losses. Many traders, already tense after seeing NASDAQ forming a big-fat red weekly candle, sold on a small correction afterwards. Naturally, BTC reacted immediately by going North even further and reaching 16880 (3.8 percent gain for a daring player).

Building Permits continue to fall precipitately reaching 1.342 million in November as reported by the Census Bureau on Tuesday, Dec 2022. Permits, which stood on its historic highs of 1.9M in November 2021 (previous records: 2.4M in Jan 1973, 2M in June 78 and Feb 84, 2.3M in Oct 2005), tumbled for more than 11 percent during a month (1.512M in October).

It helped NASDAQ to recover from 10490, attained during the preceding week, to 10585 (+0.9 percent) on the opening hours. The leading tech index closed on 10547 despite some mid-day profit-taking. BTC, which had already experienced a small rally after Dec 19, hold itself under 17K with a brief attempt to breach it right after Permits data hit the markets floor at 6:30 AM (PST).

Wednesday’s NASDAQ took its bull energy (rising from 10592 to 10742 or 1.4 percent (while BTC have been holding its ground lingering 16700 and 16900 during the day) from the National Association of Realtors’ data showing Home Sales sharply dipping to 4.09M (7.7 percent) in November.

At the same time, 30-years mortgage rate fall to 6.34 percent continuing the down trend started in mid-October (7.14 at that period) and following 10-year Treasury bonds (slided from 4.2 in October to 3.66 in December).

As a reminder: 3rd of October marked the moment when 3-months-bonds curve crossed 10-years-bonds one — one of the classical indications of the upcoming recession (short terms risks exceed the long-term ones). Three-months yield grew from 0.05 percent (Dec 2021) to 4.2 (Dec 2022) showing 83x increase as investors saw the probability of the economic downturn growing each month since the beginning of Powell’s war against the prosperity.

The Bureau of Labor (BOL) coming out with the unexpected 216K jobless claims report (225K was the most analysts’ forecast) shook NASDAQ at Thursday’s markets opening. The index tumbled to the daily lows of 10313 registering 3.7 percent decline from its closing price of 10709 from a day earlier.

There is now the gap formed on the daily graphs. As we all know, gaps tend to be closed sooner or later. In fact, bulls tried to orchestrate the rebound during the mid-day trades but it didn’t go far enough closing NASDAQ at 10476.

The majority of crypto markets players felt themselves, instead, optimistic. They immediately bought out the resulting deep. After that BTC returned into its narrowing range of 16700–16900.

The beating Powell gave traders on Dec 14 FED Conference has its effect. Jerome spoke clearly: the upcoming recession is ours — not his concern. As a result players ignored (almost) the Monthly Durable Goods (lasting 3+ years) falling by 2.1 percent and setting the record of the past two years. ‘Recessional mood’ most heavily affected managers in transportation (orders got down 6.3 percent) and aircraft (non-defense orders fall 36.4 percent, while defense decreased by 8.6 percent) industries.

Additionally, markets were cooled down by the fact that personal incomes had been growing faster than expected in November (by 0.4 percent instead of 0.3). As a result, Friday’s NASDAQ opened at 10383 and closed at 10499 increasing only by 1.1 percent, while BTC continued to range between 16900 and 16700.

The 52nd week of the year is not for work. Everyones’ but daily retail traders mind-focus is not on graphs and prices. Nonetheless, some popular theories suggest the possibility of the Santa Claus rally happening after Dec 25th.

At the same time, it is likely that neither the Case-Shiller index update scheduled for Tuesday, December 27 nor the Pending Home Sales report coming out at Wednesday December 28 will be able to sparkle this rally.

Macroeconomic picture is bleak, to say the least. If there are some deep-pockets optimists left standing out there they will need something magical to make the winds blow to the North over markets ships drifting slowly-but-surely towards the Antarctic Continent.

S&P Case-Shiller Index, developed by the Nobel prise winners, tracks the changes of single-family homes’ prices. It has been on the rise since February 2012 following several years of moving side-wise after the mortgage-loans derivatives market crash of 2007–2008 (the index’s 2006 pick was ~207).

In June 2022 this index reached its absolute high of 315.93. During the next three months the deteriorating economic conditions and Powell’s rate hikes started to depress real estate prices brining the Index to its current (September) level of 306.9 (2.6 percent drop). Analytics expect the further reduction (of 1.2 percent) in November.

The National Association of Realtors’ (NAR) Pending Home Sales Index (PHSI) measures ‘the average level of contract activity’ in four US regions (an index of 100 is equal to the 2001 level). NAR has more than 1.5 million members nationwide and its Index is based ‘on a sample that covers about 40% of multiple listing service data each month’ (source: NAR).

October’s PHSI stood at 77.1 (Midwest: 83.5; Northeast: 68.7; West: 55.6; South: 90.6) declining a record 37 percent from its Sept readings (it fall -32 percent in April 2020). The most significant decline was registered in the West (-11.3 percent) where home byers where hit hardest by rising prices and 20-year-high mortgage rates. The next sharp drop (by 32 percent) is expected by analytics in November.

Overall, noncommittal behavior of both NASDAQ and BTC during the past week allow me to pose the question: Is the door still open for the proverbial end-of-the-year rally?