SVET Markets Weekly Update (January 17–20, 2023)

This week was a rollercoaster ride for NASDAQ. On Tuesday, it opened at 11070, feeling a bit sluggish, as if it had just woken up from a weekend nap. As the week progressed, NASDAQ didn’t gain much momentum and by Friday, it closed at 11140, after experiencing a nose-dive on Wednesday. As a result, it made less than a percentage of total gain. Meanwhile, BTC was a better performer this week. It opened at 20872 and by Friday, it had reached 22846, growing almost 10 percent, leaving NASDAQ far behind.

On the macroeconomic side, we have seen a notable decrease in PPI while its core part still keeps crawling up bit by bit. At the same time, general economic conditions continue to deteriorate but at a slightly slower pace than expected, with NAHB Housing and Philadelphia Fed Manufacturing Indexes showing +35 and -8.9 respectively, against expected 31 and -11. Still, the jobs market remains relatively strong despite the growing joblessness in the tech sector.

Week’s Updates:

• NY Empire State Manufacturing Index (Jan): -32.9 (fact), -9 (prognosis);
• Producer Price Inflation (Dec): -0.5 percent (fact), -0.1 (prognosis);
• Core PPI (Dec): 0.1 percent (fact), 0.1 (prognosis);
• NAHB Housing Market Index (Jan): 35 (fact), 31 (prognosis);
• Building Permits, Preliminary (Dec): 1.33M (fact), 1.37M (prognosis);
• Philadelphia Fed Manufacturing Index (Jan): -8.9 (fact), -11 (prognosis);
• Initial Jobless Claims (Jan): 4.02M (fact), 4M (prognosis);

On Tuesday, with NASDAQ barely moving (o: 11070, c: 1195) and BTC lingering roughly where it was three days ago (o: 21235, c: 21390), traders appeared to be just hanging out there waiting for Wednesday’s PPI. Meanwhile, the NY Fed’s general business conditions index fell to -32.9 in December (-11.2 in November) — the largest decline in two years.

Substantial reductions are seen in new orders and shipments. Also, employment growth stalled across 200 surveyed companies. The index, which shows the difference between “increase” and “decrease” responses in percentages, almost certainly won’t bulge the FED at January 31st, but might have been priming the pump a bit for bulls at January 17th.

Traders appeared to be in a holding pattern, with little activity in the markets on Tuesday. NASDAQ was barely moving, with the opening price of 11070 and closing price of 1195. Bitcoin was also relatively stagnant, with the opening price of 21235 and closing price of 21390. This lack of movement could be attributed to traders waiting for Wednesday’s Producer Price Index (PPI) report, which could provide insight into the direction of the markets.

Wednesday’s markets have been set for a technical correction by the previous week’s excessive growth. NASDAQ went down 1.9 percent (o: 11170, c: 10957) and BTC by 3.1 percent, dropping from 21.4K to 20.7K during the day session. We can argue whether the multiple macroeconomic releases on January 18th contributed or not to this downturn.

For instance, PPI decreased by 0.5 percent in December, exceeding by far analysts’ expectations of 0.1. However, it might be almost fully credited to the contraction in goods’ prices, specifically to a 13.4-percent decline in gasoline costs. Prices for services continue to edge up (by 0.1 percent in December compared to 0.2 in November).

Ironically, despite wholesale gasoline getting cheaper, the main contributor to that increase are prices charged to us at gas stations (+17.6 percent). Obviously, gigantic monopolies, shielded from competition by the excessive governmental regulation of that sector, are not playing on the consumers’ side.

On the other hand, December’s Retail Sales went down 1.1 percent to USD 677.1 billion as reported by the Census Bureau (it showed a 1.0 percent decline in November). Overall, Wednesday’s sell-off was one of those “take-the-profit” events which are difficult to prevent by less than upbeat reports.

Thursday’s negative Weekly Unemployment Report, released by the Labor Department at 9:30AM (ET), didn’t add much to markets ‘correctional’ sentiments despite jobless claims falling to 190K — below 4-weeks moving average of 206K and notably lower analysts’ expectation of 214K.

NASDAQ was zig-zagging between 10,910 and 10,850 (o: 10,890, c: 10,852), after it gapped downside on opening. At the same time, BTC showed some resilience (o: 20,776, c: 21,090) and continued to hold on despite some negative news (including Genesis filing for Chapter 11).

It showed that the initiators of this big-players’ rally are still there and will try to push for a continuation, which is theoretically possible until at least the midst of the following week, when a fresh wave of macroeconomic data might disrupt it again. However, consolidation is what we often see in markets under present conditions and one week prior to the FED’s meeting.

Friday’s NASDAQ, gaining 1.9 percent (o: 10,924, c: 11,140) was spectacularly outperformed by BTC jumping 5.6 percent during the day’s session (o: 1553, c: 1640). On after-hours, BTC rushed through 22,000, reaching 22,792 at its peak.

Whales were feasting on short squeezes on January 20th. Also, existing-home sales falling for the eleventh month in a row (to 4.02 million) might have served as a trampoline for market players. However, in the evening, volumes started to subside a bit, indicating traders’ growing weariness. Additionally, NASDAQ closed inside of its Wednesday’s candle — a classical sign of a weakening trend.

To sustain its growth through the weekend, BTC needs more fuel to be added to the bulls’ engines. It might not be possible until the beginning of the next week, when more people are expected to FOMO into crypto as news about this run continues to spread.

Next week will be the one preceding the FOMC meeting, so traders will be anticipating the Personal Consumption Expenditure Price Index (PCEPI) issued by the Bureau of Economic Analysis on Friday, January 27.

SIDE NOTE: the Consumer Price Index (CPI) is a measure of the change in prices of a basket of goods and services that are typically consumed by households, while the PCEPI measures the change in prices of all goods and services that are consumed by households, including those that are not included in the CPI basket.

PCEPI had been more or less steadily increasing for the past decade before accelerating after the 2020 debacle. This index is closely watched by the FED and it is unlikely that bulls will continue to push the market up with the same vigor as they did at the start of the year until the Index’s release.

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