Weekly Market Outlook (4/10/23)
FOR THE WEEK OF APRIL 10, 2023
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Price came just below daily supply at 4177.50, but bulls were able to defend 4100 on the pullback. The supply zone above starts at 4177.50 and will not be cleared until 4204.75 with the next strong supply sitting above at 4233.25.
Bear Case: Bears will need to continue defending the supply zone at 4177.50. Price has not tested this zone yet, so keep an eye on if price breaks through the high at 4171.75. Bears will want to bring price back down below 4100 where the next strong daily demand is at 4013.50.
What’s Moving The Markets?
May Interest Rate Predictions
Friday’s jobs report showing the labor market remains solid has increased investors’ expectations that the Federal Reserve will raise interest rates at its next meeting in May.Investors believe there is now a roughly 70% chance that the Fed will raise rates by 25bps at the Fed’s meeting in May and think that this will be the last interest-rate increase before the end of the year. The Fed-funds futures recently indicated that investors think there is a 91% chance that the fed-funds rate will be at 4.5%-4.75% or below by the end of the year.
OPEC Back With A Bang
A group of large oil producers led by Saudi Arabia said Sunday that they would collectively cut 1.66 million barrels of oil output a day starting in May, catching the market off-guard. Saudi Arabia and Russia are taking the largest hit, 500,000 barrels a day each, while seven other countries are adjusting output by smaller amounts. The production cut will hit an oil market that was widely seen as tightly balanced between supply and demand, meaning it could lead to a longer-term rise in prices. If higher prices last, they could stoke inflation and complicate decisions for central bankers, who are caught between trying to tame rising prices and propping up a teetering banking system.
Lithium Prices Falling
Prices for lithium are down more than 30% this year, ending the two-year run that pushed up the value of the key battery material by a factor of 12, taking prices back to more sustainable levels. The falling prices are due to slowing demand for electric vehicles, particularly in China, and volatile markets that are making traders cautious. Prices for other metals that go into batteries, such as cobalt and nickel, are also sliding. Lower prices for battery materials could provide some relief for auto makers and consumers, although many people in the industry believe that this pullback will be short lived as adoption for EVs is becoming more prevalent.
Crypto ETFs Are The Top Performing Class
Cryptocurrency ETFs have produced strong returns so far this year, making them the top-performing ETF class so far in 2023. The outperformance of these ETFs come as the year-to-date price of bitcoin is up 72%, and the year-to-date price of Ethereum is up 52%. Investors are now reassessing crypto ETFs as the industry rebounds because they see long-term opportunity. Many investors believe that the prices of bitcoin and crypto-related equities have bottomed after the collapse of FTX and that it is now a good time to participate in the future of this emerging marketplace. Although these ETFs are the top-performing ETF class thus far in 2023, they are extremely volatile and many are still down a substantial amount from their all time highs.
Binance’s Bank Struggles
The U.S. affiliate of global crypto exchange Binance has struggled to find a bank for its customers’ cash after the failure of Signature Bank left it without a key banking partner. In the meantime, Binance.US has been storing customer cash via a crypto-services and financial technology firm, Prime Trust LLC. Because money is held at this “middleman bank”, it has slowed down the process of sending and moving funds. While some banks have picked up crypto clients in the wake of the Silvergate and Signature blowups, bankers say they are being selective about which clients they choose to take on. Among the reasons that some banks were reluctant to do business with Binance.US was concern over regulatory risk stemming from last month’s lawsuit by the CFTC for allegedly evading U.S. regulations and violating rules designed to prevent illicit financial activity.
EARNINGS RELEASE CALENDAR
FOR WEEK OF APRIL 10th
Expert Insights and Predictions
“Disney (DIS) is a stock I have been a long-term supporter of and I was thrilled to add shares at 85 this year. There are two main reasons I chose to include DIS in today’s write up. The first being the DIS weekly chart. Technical analysis of the chart above shows that the DIS weekly chart has the opportunity to form a bullish inverse head and shoulders pattern.
If we add in the daily chart, we can see that during last week’s trade, DIS likely underwent some form of option premium compression as it flagged below $100 every session last week. The second reason DIS has landed itself on this write up is the options activity.
From the options activity above, we can easily see that some participants on Wall St are feeling very bullish on DIS for the coming 5 weeks of trade. The activity offers both a mix of:
- Near term OTM (This week’s 104c)
- Mid-term OTM (May 12 110c)
- Near term ATM (this week’s 99c)
This to me says Wall St expects DIS to either:
- Trend higher starting this week into mid-May
- Find an expansion of volatility in the near-term followed by a period of difficult-to-read trading that trends higher into May
The net gamma (r) positioning for DIS tells us that longs will not be forced offside unless $95 is lost. It also shows that as long as DIS is able to reclaim 100, longs should remain patient enough to await a move higher that benefits the 110 strike.”
“SPY has also been caught in a 378 to 420 range of continuous up and down pounding to a beat of its own since December. This is indicative of ongoing uncertainty as buyers and sellers are both trading sides equally and neither has been particularly excited about declaring a winner longer term.
Seeing the “Why”
In early 2022, before the substantial move down, we were overbought, and the MACD lines were starting to collapse. On the monthly time frame, that is a massive signal to predict the future and it was right. Fast forward to today, and you can see that the MACD lines are still parallel and down meaning there is still a lot of negative selling activity overall. In turn this is reflected in the price action as we’ve kept within range.
Where do we go from here?
As at this writing futures are flat into tomorrow with the MACD hugging the zero line like it just found its Mom. See Figure 5 below. I want the market to pick a side before I commit capital, using the same rules I outlined in the figures above.
From a fundamental’s perspective, we should turn bearish as the credit crunch hasn’t gone anywhere, debt is still at historic levels, unemployment is rising, things are still more expensive, and more people have crapped out of their savings to afford to live. But hope dies last, and the retail trader hopium has SPY still intact and strong on the longer time frames to continue up. My expectation is that it will, near term at least, still be within our range. Medium term, fundamentals typically win.”