Patience is a Virtue
The 8EMA remains key for me here. So far every recent close below the 8EMA was followed by a push back above it the next day. Once that is not the case anymore I will get more cautious.
Binance, after joining the crypto market in 2017 amidst tough competition, gained an edge by strategically taking advantage of international gray areas in crypto regulations. Operating without a fixed headquarters, imposing minimal Know Your Customer (KYC) requirements, and enabling US users to trade gave Binance an advantage over other exchanges that prioritized regulatory compliance. However, this regulatory maneuvering proved to be a risky tactic. Last year, both the US Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) filed lawsuits against Binance. Additionally, the US Department of Justice investigated potential sanctions violations involving customers from Russia, Iran, and other countries. The settlement amounting to $4.3 billion and potential legal consequences for founder Changpeng Zhao (CZ) seemingly resolved the criminal proceedings initiated by the public prosecutor's office. This settlement clears the path for Binance to operate as a regulated trading platform. Analyses indicate that the equivalent Tether (USDT) amount has already been converted into fiat money through blockchain transactions. Richard Teng, previously holding key roles at Abu Dhabi Global Market (ADGM), Singapore Exchange (SGX), and the Monetary Authority of Singapore (MAS), will take over as the new CEO.
The SEC's crackdown on the crypto industry persists. Six months ago, the SEC sued Kraken, a heavily regulated crypto exchange, for providing a staking service, alleging these offerings violated US securities laws. While Coinbase contested similar claims in court, Kraken agreed to a $30 million fine, which apparently didn't appease the SEC. Subsequently, the SEC filed another lawsuit last week, this time for allegedly illegally operating an exchange, acting as a broker, trader, and clearinghouse. The SEC's argument centers on the assertion that most cryptocurrencies should be categorized as unregistered securities. Kraken is gearing up for a legal battle in response.
In Argentina's recent presidential election Javier Milei emerged victorious. Milei aims to abolish Argentina's central bank as a primary campaign goal and proposes a return to the dollar, endorsing a private form of money, physical Gold and Bitcoin. As the incoming president, set to take office on December 10, Milei's expressed support for Bitcoin sparks hope among some market participants. They anticipate the cryptocurrency's potential adoption as legal tender, similar to the model implemented in El Salvador. However, the resistance from the Bitcoin-skeptical International Monetary Fund (IMF) could pose a significant challenge. Argentina holds a substantial debt of over $31 billion to the IMF, and their previous credit line came with conditions to discourage the country's already significant crypto adoption. Consequently, passive backing of the industry through lenient regulations appears more probable than direct support. Time will tell.
BTC continues to mostly hold daily 8EMA support, with the RSI slowly creeping towards its 50 level. I continue to maintain long exposure to both BTC and some altcoins but have mostly secured my positions with an SL at break even or in profit. The 8EMA remains key for me here. So far every recent close below the 8EMA was followed by a push back above it the next day. Once that is not the case anymore I will get more cautious. As long as the consolidation around (mostly on) the 8EMA continues I still anticipate another leg up towards $40k - 42k.
ETH price so far has failed to break above the $2,141 and also to maintain a price above the HTF trendline we have been following for months. These two levels together with the 8EMA will give us hints over the next few days about where price is heading.
In the U.S., stocks ended the week higher during a quiet trading period due to the Thanksgiving holiday closure on Thursday and an early closure on Friday. NVIDIA, a significant player in AI chipmaking and currently the world’s sixth-largest company by market value, experienced a decline in its shares despite surpassing earnings and revenue expectations. This was due to cautious guidance stemming from export restrictions to China. Consequently, the Nasdaq underperformed, while growth stocks surpassed value stocks.
Throughout the holiday week, there were some notable economic updates. The Commerce Department reported a 5.4% drop in durable goods orders in October, primarily driven by a sharp decline in volatile civilian aircraft orders. Excluding aircraft and defense purchases, which are indicative of business investment, orders also slightly decreased for the second consecutive month.
S&P Global's release of business activity estimates in November showed an increase in the services sector, compensating for a larger-than-anticipated slowdown in manufacturing. However, subdued demand conditions and declining backlogs prompted firms to reduce their workforce, marking the first decline since June 2020.
In Europe, ECB policymakers emphasized their commitment to combating inflation and clarified that there were no immediate plans to cut interest rates. ECB President Lagarde suggested that rates might remain stable for the upcoming few quarters, a sentiment echoed by France and Belgium. Additionally, the minutes of the ECB’s October meeting highlighted policymakers' stance on keeping the possibility of another rate hike on the table, despite not being part of the primary scenario.
A purchasing managers’ survey by S&P Global revealed a continued decline in eurozone business activity for the sixth consecutive month in November, signaling an impending recession. The HCOB Flash Eurozone Composite PMI Output Index reading was 47.1, up slightly from October's three-year low of 46.5, but noteworthy that readings below 50 indicate a contraction.
The S&P 500 Index continued to move according to our outlook over the last week, breaking above the 0.786 fib retracement level once again. The next upcoming potential resistance hurdle is the wing high of $4,607. We will have to see where the potential wave A tops out, and wave B bottoms out before we can bet on longs aiming for a new all-time high. As always we will keep an eye out for market structure shifts and negative divergences forming on the RSI in overextended territory.
My base case for DXY is still a slight pullback to the upside, before a drop at least under 103, potentially even another retest of the 0.618 fib retracement level. If the value drops under 103 before a push to the upside, we will have to reassess the chart again.
Following October's steady consumer price inflation, markets are anticipating Thursday's U.S. inflation report to strengthen the argument for the Fed to halt rate hikes. The preferred inflation indicator for the Fed, the Personal Consumption Expenditures Price Index, is projected to show a 0.2% increase in November, following a 0.3% rise in September, aligning with August's increase.
The core reading, excluding food and fuel costs and regarded as a more accurate measure of underlying inflation, is anticipated to show a 3.5% year-over-year rise.
Throughout the week, other economic data will be released, including November's consumer confidence index, which declined for a third consecutive month in October. Additionally, the revised third-quarter GDP, new home sales figures for October, the weekly jobless claims report, and the Fed’s Beige Book will become available.
There are indications that the U.S. stock market's surge is expanding beyond mega-cap growth and tech companies, generating investor optimism for a year-end rally. The S&P 500 has notably climbed around 10% in the past three weeks, driven by declining Treasury yields and moderating inflation figures signaling a potential conclusion to Federal Reserve rate hikes.
Further inflation and consumer confidence readings are anticipated during the week, but stronger-than-expected data might trigger a Treasury selloff, pushing yields higher.
The Eurozone plans to release inflation data on Thursday, expected to indicate a renewed easing of price pressures in November. Consumer price inflation is predicted to grow annually at a rate of 2.8%, slightly down from 2.9% the previous month, while underlying inflation is estimated to slow to 3.9%.
Despite signs of a cooling inflation trend, European Central Bank President Lagarde had cautioned that borrowing costs would need to remain restrictive for a prolonged period.
Recently, the minutes from the ECB’s latest policy meeting revealed an agreement among officials to be prepared for additional rate hikes if necessary.
It's projected that inflation will only return to the ECB’s 2% target in the second half of 2025.
Written by: Gunter Lackmann
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