SVET Reports
SVET Markets Weekly Update (December 26–30, 2022)
The 52nd week formed the classical ‘dragonfly’ doji on the NASDAQ weekly graph — one of the oldest market reversal signals. Such candle-patterns are often misleading. Let’s hope that this one will be the exception :)
Here are week’s day-by-day notes:
Case-Shiller Home Price Index (Oct): -0.8 percent (fact), -1.2 (prognosis);
Wholesale Inventories (Nov): +1 percent (f), +0.3 (p);
Pending Home Sales (Nov): -4 percent (f); -0.9 (p);
Initial Jobless Claims (Dec): 225K (f); 220K (p).
There was no stocks trading on Monday, Dec 26 and BTC, left without guidance, was doing its usual ups-and-downs within 16600–16900 range.
Tuesday’s Case Shiller Index dropping 0.8 percent (1.2 was expected) together with Wholesale Inventories increasing by 1.0 percent (to USD 933.6B while 0.3 was projected) shilled down NY traders in the morning session. It led NASDAQ from 10462 on the opening to the day’s lowest mark of 10340 (-1.16 percent). The index closed on almost the same levels (10353) ignoring unconvincing attempts on the recovery organized by optimists during the later part of the day.
BTC performed accordingly by decreasing from 16771 to 16592 (-1.06 percent). However, after the stock market closed for the day, crypto-traders used the reactionary bullish momentum to bring prices a little higher (to 16703, or +0.6 percent).
Overall, on the week’s opening, NASDAQ extends its downward movement, edging closer to the two-months low of 10262 while BTC keeps probing the strong resistance level set by whales at 16600.
NASDAQ started the Wednesday session at 10339 and closed at 10213 (-1.2 percent), while BTC, which was trying to recover during the night time (PST), followed, edging from 16652 to 16518 (-0.8).
The economy continues to deteriorate with November’s Pending Home Sales sliding 4.0 percent (-0.9 was expected) and bulls abandoning their defensive positions — most recently the one set on 10260. Additionally, there was a new line found in the latest National Association of Realtors report: “contract signings declined in all four major U.S. regions” (source: NAR).
We have not seen that for a while, as the October data showed that monthly Home Sales got up by 3.3 percent in Midwest (decreased 6.6% this time) while it dropped 4.3 and 6.4 percent in Northeast (-7.9) and South (-2.3), correspondingly. Western Sales declined by 0.9 percent (-11.3 previously) to 55.1 (55.6).
After FOMC slowed down a bit, the mortgage rate curve started to bend inward slightly (f.e. the 30-years rate subsided from over 7 percent in Oct to under 6.3 in Dec). We can reasonably expect that the NAR’s January reporting will show home sales growing a bit. However, that might only make the situation worse for bulls as all premature signs of the recovering real estate market will strengthen Jerome’s resolve to carry stocks (and BTC) deeper in the red.
At Thursday’s session we saw the Santa Clause rally simulation. NASDAQ opened (10321) with the morning gap and then gained 1.5 percent rising to 10478 during the day (+2.6 total). By the mid-day Tesla received about +7 percent, Netflix and Meta landed +5 each while Amazon grabbed +3. Consider it the EOY gift.
It’s tough to tell why such a sudden enthusiasm might have been inspired by the Department of Labor’s reporting initial jobless claims rising to 225K (with 220K projected). FOMC’s acknowledgment of the upcoming recession was already priced in. Otherwise, with all those red-inked financial statements, plankton-firings (only Meta slushed 10K jobs) and the upcoming Warren-spirited regulations, Big Tech has not much to look forward to in 2023.
Most likely, this ‘rally’ was started by the trading systems reacting on the oversold signals (~10250 is the monthly low). Then this momentum was carried on by day-traders. Plus, some funds have already started their portfolio’s end-of-the-year re-balancing. BTC, unabated by this sudden commotion, was still flowing between 16500–16700 yardsticks. Obviously, no one wants to re-balance BTC :)
Friday’s NASDAQ was guided by institutional algorithms, again. After a bench of novices bought into Thursday’s pseudo-rally, technical indicators showed a weakness and corporate traders sold the Index on the after-hours trading session (that is where infamous ‘dark-pools’ come into the picture).
Naturally, when amateur bulls woke up on Friday morning and crawled back to their home-stations most of them found stop-losses activated. Because nowadays everyone knows that gaps are to be filled, the buying frenzy began shortly after 9:30 EST increasing corporate traders profits.
As a result NASDAQ jumped from 10324 (day’s low) to 10418 within an hour (+0.9 percent), then retracted a bit on an early profit-taking and winded up the day at 10466 (+1.4), closing the gap almost perfectly. Since 2021 institutions have been dominating the BTC trading. Especially during no-news days.
Basically, the same flock of experienced amateurs keeps trading against professionals both NASDAQ and BTC, simultaneously. It results in BTC often shadowing NASDAQ on vacant markets. Dec 30, 2022 is not an exception — BTC went from 16463 on the lowest to 16585 on the highest, adding 1.3 percent (Friday’s Chicago PMI showing 7.7 points increase (to 44.9) didn’t have any effects on markets).
The first week of 2023 most traders will be waiting for Wednesday’s (Jan 4) ISM Manufacturing PMI data (Dec prognosis is 48.5), Job Openings (Nov — 10M) and, most importantly, for the FOMC Minutes release (on after-hours). Also, Friday’s (Jan 6) Non Farm jobs expected to increase by 220K in December, after showing a sudden rise to 263 in November. Market forecasters do not see it affecting the unemployment rate, which is likely to stay at 3.7 percent the third month in the row.
This week institutional macro analytics have been publishing their traditional prognosis for the next year. Their consensus is that 2023 will not be an easy year for traders :)
However, because institutions do not like to deliver less than optimistic projections to their clients (not good for business, you see), many of them attempted to come out with long lists of micro-positives while keeping the hard-core truth in their analytical papers’ backyards.
Some corporate prognosticators (coincidentally, those closest to FOMC) keep insisting, despite all facts, that ‘the US should narrowly avoid recession’ while EU economies will fall into it. From their perspective Mr. Powell will execute this miracle by gently growing his rate to 5–5.25 right up to the fall-winter period of 2023. He’s expected, then, to pause.
At that time, most companies are supposed to get back on track (including growing PMI and earnings) with inflation not going far above its present levels. This school of corporate thought is, obviously, biased and gives too much credit to FOMC’s ability to properly understand and to ‘manage’ the economy.
Others — a larger group of market diviners (mostly from smaller, non-affiliated institutions) — believe that FOMC forcing job markets into the contraction might drive the economy into a prolonged recession. They argue that Powell makes a big mistake by holding the core CPI (or services wages-driven industries) responsible for the rising inflation.
They note that the job market’s growth comes from new job openings — not from rotations on old positions. New employment opportunities were created by technological innovations — not by the expanding monetary mass. This argument Powell chooses to ignore.
In fact, Jerome’s opponents insist, growing indebtedness of major companies, the reshoring (returning the production to the company’s original country) and rising energy costs are the long-term trends. In sum, the world’s economic paradigm is shifting from the global to local growth models.
Accordingly, the ‘developing countries’ (‘emerging markets’), whose economies have been already ‘reset’ by deleveraging (equity depreciation) during the preceding decade and which had started to actively embrace innovations, have better internal growth perspectives in 2023 than USA and EU.
[China stands alone in those projections as its growth is expected to be negatively affected by increasing geopolitical tensions, ideologies, aging population and overheated real-estate markets]
Now, how will all of that affect crypto?
BTC (and the rest of crypto assets) are treated by corporate investors as growth-orientated tech-stocks. We can’t realistically expect those investors to come back until the economy shows definite signs of growth. It might not happen within the next year.
At the same time, if emerging markets ‘re-emerge’ as predicted it will boost the crypto adoption outside of US and EU, specially, across the broad range of financial services.
Overall, there is too much macro-freakishness to make a quality prognosis. On the other hand, the fledgling crypto-industry (specially, DeFi) still stands fighting against so many adversaries at once.
We must be proud of ourselves :)