Bear PA to Condition Bulls?

Crypto

Weekly Review

JPMorgan analysts are increasingly of the opinion that the Securities and Exchange Commission (SEC) may soon be pressured to swiftly grant approval to applications from various asset management firms seeking to establish exchange-traded spot Bitcoin funds.

This perspective from JPMorgan, a prominent financial institution, was highlighted in a report released on Friday. The report delves into the consequences of a recent federal court ruling regarding Grayscale's attempt to convert the Grayscale Bitcoin Trust (GBTC) into an ETF.

In recent weeks, there has been a surge in applications for spot Bitcoin ETFs in the United States, a market sector historically viewed with skepticism by the SEC. Past efforts to introduce such products were typically rejected due to concerns about potential market manipulation. However, in 2023, there is a glimmer of optimism, largely spurred by Wall Street heavyweight BlackRock Inc.'s application. BlackRock's strong track record in navigating the ETF landscape has instilled confidence in the market, suggesting that regulatory approval may be achievable this time.

The pivotal aspect of this development revolves around a critical finding in the Grayscale vs. SEC court case. The court determined that the SEC's rejection of Grayscale's proposal was "capricious and arbitrary" because the regulatory body hadn't provided a clear rationale for treating similar products differently. Specifically, the court pointed out the SEC's inconsistent approach to futures-based Bitcoin ETFs. The court's decision emphasized that the interconnectedness of the Bitcoin spot market and the CME Bitcoin futures market blurs the lines between fraud and manipulation risks in both areas.

JPMorgan's analysis suggests that this court finding, which questions the SEC's preference for futures-based Bitcoin ETFs over spot ETFs, has substantial implications. Essentially, it challenges the SEC's stance and necessitates a review of prior approvals for futures-based ETFs. To justify its rejection of Grayscale's GBTC conversion request, the SEC would need to retroactively withdraw its approval for futures-based Bitcoin ETFs. JPMorgan is cautious about whether the SEC will opt for this retroactive revocation, as it could prove highly disruptive and embarrassing for the regulatory body.

BTC/USD

1-Day Timeframe

Another week, another short lived uptick in BTC price this time barely pushing towards 26.5k$. The order block is still holding support. RSI is still in an upwards trajectory. Feels like bulls are getting conditioned to believe that “all breakout attempts fail anyways” and the bears are waiting for 12k$. Trading wise staying sidelined until the market picks a clear direction makes sense, at least before taking on heavy exposure. One news article or rumor could cause price to spike in either direction, but if that first move will then turn into a trend needs confirmation.

ETH/USD

1-Day Timeframe

The Sunday candle on ETH closed beneath the 1,625$ level highlighted in previous weeks. If price does not manage to reclaim back above this pivotal level over the next 5 - 6 weekdays, a deeper pullback gets more likely. Especially with the mood in regards with FTX currently liquidating the rest of its crypto holdings.

Legacy

Weekly Review

Stocks closed the shortened holiday week with losses, primarily due to a rise in interest rates spurred by some positive economic indicators. Among the key trends, growth stocks performed better compared to their value counterparts, and large-cap stocks outperformed small-cap stocks by a more substantial margin. A significant factor contributing to the market's downturn was Apple's decline, as it is the most heavily weighted stock in the S&P 500 Index. The drop followed reports that Chinese government employees would no longer be allowed to use iPhones, and investors were also disheartened by news that the upcoming iPhone 15 would come with a significantly higher price tag than current models. Additionally, declines in NVIDIA and other chip manufacturers had a negative impact on the overall indices. It's important to note that the markets were closed on Monday in observance of the Labor Day holiday.

Despite a relatively light economic calendar for the week, market sentiment appeared to be influenced by generally positive surprises. The standout among economic reports was the Institute for Supply Management's August services sector activity report, which unexpectedly surged to its highest level since February. This report indicated that new orders were increasing at a faster rate, although there was a sharp drop in order backlogs, and inventories had noticeably increased. Export orders remained robust, but concerns about a significant slowdown in the Chinese economy grew during the week.

On another note, Thursday's weekly jobless claims report came in lower than anticipated, signaling continued strength in labor demand, even though the unemployment rate for August had increased modestly from 3.5% to 3.8%. Contrary to expectations of a slight increase, the number of Americans applying for unemployment benefits in the previous week dropped to 216,000, marking the lowest level in six months. Continuing claims also decreased to 1.68 million, reaching their lowest point since mid-July.

S&P 500 

1-Day Timeframe

Not much to update on the legacy front either. After the rejection at the 0.786 fib retracement level, the S&P 500 is back at its 0.702 level. First thing we can do this week is to see if we proceed to make another lower low under the swing low of 4335.31 or manage to push back above 4540.

DXY 

1-Day Timeframe

DXY is following the path mentioned last week. Now we will have to see whether a higher low will be created in either fair value gap and the uptrend towards 106.054 can continue, or the swing low at 102.936 will be taken out and we drop back towards the 0.618 fib retracement level.

Weekly Schedule

United States

This week revolves around the US CPI report and retail sales data. If the demand for goods in the US hasn't weakened significantly and inflation starts to heat up, there's a growing consensus that there might be expectations of a rate hike during the November meeting. While the inflation report may not offer a clear picture, as headline inflation is expected to rise due to surging gasoline prices, the core inflation might still show a subdued reading. The prevailing theme is likely to be a moderation in consumer spending as Americans grapple with higher energy costs, increasing debt levels, and waning confidence. In extension, investors will also closely monitor the University of Michigan's consumer sentiment report on Friday.

Lastly, it's worth noting that there will be a blackout period for Fed communication as the September 20th policy meeting approaches.

Eurozone

The European Central Bank is scheduled to convene on Thursday, and the interest decision they will reach remains uncertain at this point. Refinitiv currently indicates a 65% probability of the ECB maintaining the current rate, potentially signaling the conclusion of the tightening cycle. However, it's important to note that the ECB has not explicitly hinted at this stage that they are ending the cycle, and there are varying expectations. There is still a chance that the committee may opt for one more tightening move, although data improvements are expected regardless, making an exit strategy similar to the Fed's more challenging. Ultimately, the decision is likely to hinge on the projections that will be released alongside the policy announcement. 

Written by: Gunter Lackmann