Are We There Yet?

Crypto

Weekly Review

The U.S. Securities and Exchange Commission (SEC) has surprised market participants by prematurely delaying its decision on several spot bitcoin Exchange-Traded Fund (ETF) applications. Prominent candidates affected by this delay include BlackRock, Invesco, Bitwise, and Valkyrie.

In an unexpected move, the SEC's recent postponements occurred two weeks ahead of the originally scheduled deadlines between October 16 and 19. The regulatory authority's decision seems to be influenced by concerns related to the potential U.S. government shutdown, which may disrupt financial regulations and other federal operations.

The likelihood of a government shutdown depends on Congress's ability to reach an agreement on various funding bills necessary to sustain government activities. Presently, both the House and the Senate are deadlocked, heightening uncertainty within the financial sector.

This isn't the first time the SEC has deferred decisions on spot bitcoin ETFs. A similar situation arose in late August, causing a chain reaction of delays that has left applicants and investors feeling uneasy. The regulator now faces a deadline in mid-March to make final determinations on these applications.

It is anticipated that other applicants like Fidelity, VanEck, and WisdomTree will encounter similar delays.

BTC/USD

1-Day Timeframe

With BTC taking out the swing highs of September 19 and August 29, and developing a higher high - higher low pattern, the consolidation mentioned last week may already come to an end. For a temporary uptrend to continue, price should stay over 26k$, and after another higher low, ideally around 27 - 27.5k$, the dealing range EQ of 28.3k$ can be broken. If this will be the case, a further increase towards at least 30k$ can be anticipated. 

For those not already in long positions, it could be worth considering to scale into some exposure if we see a price pullback towards 27 - 27.5k$, with invalidation at <26k$. As previously mentioned, once BTC starts running again in this relatively low liquidity market environment, it will be designed to leave anyone not already in a position behind. 

A safer entry, or addon orders, could be sought after a confirmed break of the dealing range EQ at 28.3k$, while watching lower timeframes (h1 - h4) for signs of any breakout that occurs to be a liquidity raid (fakeout) instead.

If on the other hand price retraces back under 26 - 26.1k$, making a lower low from here, we may continue the consolidation, and a liquidity raid under 24.8k$ would not be out of the question.

ETH/USD

1-Day Timeframe

Like BTC, ETH price has also tapped above the swing high of August 29. The next hurdle will likely be 1,797 - 1,800$, as long as the price can stay above 1,565$. Any pullback ideally will find support for a higher low at least at around 1,640$. Any candle closes beneath 1,634$ may lead for the lows of 1,530$ to be revisited.

Legacy

Weekly Review

Rising oil prices raised concerns about the potential challenges central banks might face in controlling inflation, leading to a bond sell-off during the week. As the week progressed, the growing likelihood of a U.S. government shutdown may have also negatively influenced investor sentiment. The yield on the 10-year U.S. Treasury note reached a peak above 4.6% on Wednesday (bond prices and yields move in opposite directions). Nevertheless, 10-year Treasury yields saw a slight decline following the release of encouraging inflation data for both the eurozone and the United States. Tax-exempt municipal bonds and high yield bonds also faced selling pressure.

The S&P 500 experienced its fourth consecutive weekly decline as increasing interest rates seemed to weigh on investor confidence. Within the index, utilities saw the most significant losses, while energy stocks outperformed. On the other hand, the S&P MidCap 400 and the small-cap Russell 2000, which have notably lagged behind large-cap stocks this year, managed to secure slight gains.

In August, the core Personal Consumption Expenditures (PCE) index, closely monitored by the Fed and excluding the volatile food and energy categories, rose by 3.9% compared to the same period last year. This marked the lowest annual inflation rate in approximately two years but remained above the central bank's target of 2%. This latest reading represented a moderation from the upwardly revised 4.3% annual inflation rate recorded in July. On a month-over-month basis, core PCE inflation increased by 0.1%, falling short of expectations. When including all items, monthly inflation accelerated to 0.4% from July's 0.2%, primarily due to higher energy prices.

Despite recent manufacturing surveys indicating weakness in new orders, durable goods orders and shipments saw month-over-month growth in August. 

The Conference Board's measurement of U.S. consumer confidence dipped to a reading of 103.0 in September, falling below expectations and down from the upwardly revised reading of 108.7 in the previous month. The survey recorded an uptick in respondents who believed a recession was "somewhat" or "very likely", reversing a trend of decline observed in August.

S&P 500 

1-Day Timeframe

The S&P 500 last week dipped south of the fib key retracement zone which we have been watching over the last few months. On Friday it then pushed up again but failed to go beyond the swing low we had been watching prior to the break of structure. Now with the lower low in, we should watch for a potential rejection at around 4,400 - 4,423$ for a lower high. If what we see will continue to develop into a 5-wave corrective move, the most likely target is the 0.5 fib retracement level at 4,155$. Alternatively we could also be looking at a stop raid and push back into the key retracement range. The reaction at the above mentioned price area will tell us more in the coming days.

DXY 

1-Day Timeframe

DXY continued its push up above the 0.702 fib retracement level as expected. My base case for the time being still is that we will see DXY rise into the daily fair value gap between 108.442 - 109.452, with the swing highs 107.195 and 107.993 in between. 

Weekly Schedule

In the United States, this week is expected to be quite eventful, marked by various significant events, including the possibility of a government shutdown, the expansion of the UAW strike, numerous speeches by Federal Reserve officials, and the release of the Non-Farm Payrolls (NFP) report, which could potentially reveal a decline in hiring to its lowest levels since early 2021. It is anticipated that the September jobs report will indicate a slowdown in hiring, dropping from the previous pace of 187,000 to around 163,000 jobs added. Despite the labor market showing signs of relaxation, there is an expectation that the unemployment rate will decrease slightly to 3.7%.

During the week, the Federal Reserve will have nine of its members making public appearances. On Monday, Chair Powell and Harker will engage in a roundtable discussion with business owners and community leaders in Pennsylvania, while Williams and Mester will speak at separate events on the same day. Tuesday will feature a speech by Bostic, and on Wednesday, Bowman will address a banking conference, and Goolsbee will participate in the Chicago Payments Symposium. Thursday will see Mester speaking at the Chicago Payments event, and Daly will address the Economic Club of New York.

In contrast, the Eurozone's agenda for this week appears to be relatively quiet, with a collection of tier two and three economic releases, primarily consisting of final Purchasing Managers' Index (PMI) data. Additionally, ECB President Lagarde's appearance on Wednesday will be of particular interest, especially in light of the September inflation figures.

Written by: Gunter Lackmann