🗞 Weekly Market Newsletter | Edition No. 23
News Update + A Full Analysis of Major Indices Including Stocks, Crypto, Commodities, Bonds & Forex
Sunday, December 11th,
Hello Passengers,
This is your pilot speaking.
We have initiated the landing gear and will be preparing for the runway as we settle into the last leg of our 2022 voyage.
Please fasten your seatbelts as we are expecting turbulence on the way down and it may be a bumpy ride as we descend.
It’s been an honour being your captain along this leg of your investment journey and for those of you staying aboard for the turnaround into 2023, please remain seated as after a quick fuel up we’ll be on our way into the new year.
- Bramwell
📰 BramwellFox MetaCapital’s Weekly News Recap
You may press the 🗞 to read more about each headline.
Major News + Crypto Headlines
🗞 A ‘minefield’ of volatility (🛬 turbulence) lies ahead this week.
💭 Bramwell’s Thoughts…
As we prepare for touchdown in 2022 we have a very important week ahead of economic data (headline risk) releases with the FOMC taking centre stage on Wednesday.
The current FED target rate is 375-400 and investors are placing bets on a 75% chance of a 50 basis point hike, with the remaining 25% probability allocated to a 75 basis point increase.
It’s important to understand that markets react worse to surprises, not necessarily the objective outcome.
Let me give you a simple visual.
If you’re a passenger in my vehicle and I’m traveling 150km per hour and needed to turn around, which would make you feel safer;
I ease onto the brakes and slowly perform a three-point turn.
I slam on the brakes, drift sideways like Vin Diesel straight out of fast & furious and swing the tail of the car 180 degrees before racing in the opposite direction
One of those options is very aggressive and unexpected, one is predictable and calm.
Markets prefer predictable and calm, and this is known as the rate of change.
Investors react to the rate of change in monetary policy expectations because it can affect the overall performance of the economy.
If the rate of change is too slow or too fast, it can lead to economic instability and uncertainty, which can impact investors' decisions about where to invest their money.
For example, if the rate of change is too slow, investors may be hesitant to invest in the economy because they are uncertain about its future performance. On the other hand, if the rate of change is too fast, it can lead to inflation, which can erode the value of investors' assets.
Therefore, investors pay attention to the rate of change in monetary policy expectations in order to make informed decisions about where to invest their money.
In addition to the FOMC meeting we also have the US CPI y/y data on Tuesday which will likely be a leading indicator on the velocity of the FED’s monetary policy decision the next morning.
The Consumer Price Index (CPI) is a measure of the average change in prices over time for a basket of goods and services. It is used to calculate inflation, which is the rate at which the general level of prices for goods and services is rising and subsequently, purchasing power is falling.
While we are praying for lower prices across all CPI metrics, it’s more important we focus on what is referred to as core CPI as this term excludes certain items such as food and energy that tend to experience more volatile price movements.
This can provide a more accurate picture of underlying inflation trends.
🗞 Technicals set aside, will corporate earnings propel us into a bull market Q1 23’? Goldman Sachs is doubtful.
💭 Bramwell’s Thoughts…
It’s often an underrated practice as an investor to step away from the charts and simply go window shopping for the day.
may you be asking “but le why?”
Well first let’s remember that the capital markets prefer to flow liquidity into yield producing instruments, like stocks.
In order for a particular stock to vacuum up liquidity, it requires both a positive investor sentiment and outlook alongside a strong balance sheet ie. earnings & profits.
Second, we are in the heat of consumer spending season with the holiday’s emptying the wallets and racking up the credit cards as we stuff stockings and exchange gifts for those we tolerate best love.
Which means that at the end of the month all of these huge .inc corporations will tally up their monies and share their performance with investors in the Q1 reports of 2023.
Which means, a wise investor may gather leading indications of how these companies may perform by window shopping the crowds at a local mall, asking employees how busy their stores have been, monitoring inventory levels and keeping an eye out for headlines detailing the frenzy of Christmas spending.
Third, you may look under your own tree or at your recent bank statement and ask yourself if your budget this year was higher or lower than previous years.
Putting this all together, we can gather intel on the expectations of how wall street may perform.
If you complete this activity and you’re shaking your head in dismay, it may be wise to expect the markets to do the same in Q1 which means corporate earnings may be lower than anticipated, stocks may fall and we may see a continued crash in equities until the macroeconomic environment levels out. The opposite holds true as well, should you be smiling at the end of the month with your bank accounts full, your consumer debt low and Santa validating that you’ve been a great human all year, perhaps the big box stores have a profit jubilee and we’ll all be rocking around the Christmas tree.
Let’s ho ho hope.
🗞 Cryptic Advice from David ‘Joel Katz’ Schwartz, CTO of Ripple
💭 Bramwell’s Thoughts…
The timing of this tweet was fascinating to me given the Ripple vs. SEC lawsuit has an open ended settlement or judgement day that could occur at any moment.
It’s important that I share with you a short story for a moment along this note.
In April 2021 I sent a screenshot to my mother in disbelief of my own genius.
I had invested my heavily into a cryptocurrency called ‘XRP’ and turned my rainy day savings of just under $20K into 3/4 million dollars in 6 months - I was killing the speculative crypto investing game.
One day later, David Schwartz tweeted…
But I didn’t listen.
His cryptic tweet had actually flagged the precise top of the last bull run and I was stuck holding a bag of crypto that decreased 85% over the last 18 months - a hard lesson learned.
If there is anything I’ve taken from this, it’s to listen wisely when David Schwartz tweets about crypto.
Take this information as you please.
🗞 Bank of Canada (BOC) hikes rates 50 basis points
💭 Bramwell’s Thoughts…
Many of you may not be aware of this fact, but Canada is known for three things:
Hockey
Tim Hortons
A Strong Banking System
The BOC has shown to be more dovish in recent months than the FED and has been slowing rates down at a faster pace than their US counterpart.
The most important part of this headline is the ‘opening the door to a pause in its hiking cycle’ as once again we take notice of Central Banks pivoting as we enter into 2023.
My eyes will be laser focused on a few Canadian headlines in the coming months:
I’m interested in monitoring the volatility of energy costs given the global climate change narratives, the RUS v. UKR feud + OPEC+ and Putin’s response to Oil price caps.
I’m interested in monitoring the real estate market, particularly housing prices and new home sales as it may directly relate to the credit crisis I’ve been speculating to slam the financial markets.
I’m interested in monitoring how the Liberal government responds to the Elon Musk Twitter Files as it’s unveiling the corruption and collusion of social media big tech
in bed withinfluence over mainstream media narratives.I’ll be watching CPI, Unemployment and GDP data.
In my opinion these factors will help predict the direction of BOC’s monetary policy decisions and how capital market reactions to Canada’s economic outlook.
🗞 Ripple v. SEC Lawsuit Predictions
💭 Bramwell’s Thoughts…
The moment we have all been waiting for has arrived - the countdown to XRP clarity in the U.S, or the countdown to a prolonged court appeal process that may drag this SEC v. Ripple lawsuit further into 2024 or beyond.
Unofficial #XRPCommunity Lawyer Jeremy Hogan has been documenting the trial dockets for the past 2 years and has released his final video outlining the probability of a Ripple victory, an SEC victory or a wild card play in the case.
It’s extremely important as an XRP investor that you watch this video and prepare for all scenarios.
In the event of a Ripple win, the speculation alone may drive the token value to new highs and it’s important you have tokens prepared to take profit.
In the event of a Ripple loss, the crippling effects of this legal precedent may shock the entire crypto ecosystem and further capitulation of 60-80% drawdowns are extremely possible for alt-coins given their pseudo-security-claimed nature by the SEC. If you’re overexposed, you may want to consider lowering the risk of your portfolio in advance of a headline.
In the event of a ‘what-does-this-mean’ outcome, both sides are in play both bullish or bearish - again it’s important to assess your exposure to crypto as the entire space is still an unregulated technology.
BramwellFox MetaCapital’s Weekly Market Review & Technical Analysis
📈📉 The Week Ahead in Charts
Symbols 📈 or 🐂 = Bullish / Positive | 📉 or 🧸 = Bearish or Negative | ⚖️ Ranging or Low Volatility
FOREX
📈 DXY(U.S Dollar) + 📉 CAD
💬 Bramwell’s Commentary, Analysis & Prediction for the Week Ahead:
The DXY is following the path I built in last weeks edition.
With the S&P500 at a critical resistance in addition to consumer spending season there was no doubt in my mind the the USD would be in high demand from sale of stock and consumer purchases.
On the technical side, the DXY was overextended on the RSI and bullish divergences appearing across most indicators, the rise last week was an easy call.
Below you’ll notice in the 6-hour chart I have a Head & Shoulders pattern predicted with local highs under 107.5 directly laid over Wednesday (FOMC Dec 14th) as I expect volatility as markets shuffle liquidity.
Below the 6HR chart I have a secondary option, slightly more aggressive to the upside for DXY tapping range highs of 108 < 109 mid-week before a pullback and the eventual collapse towards year end further down the descending channel.
This is obviously a risky bullish bias I’m taking on equities and crypto assets, but after 18 months of down-only and the FED announcing pivots on interest rates, it’s my speculation that we’ve bottomed in the short term.
The next big move and a potential bounce on the dollar may come in March/April 23’ when Q1 results are posted and further economic conditions have become clear.
Featured Chart DXY 6HR (click to enlarge photo)
Featured Chart DXY 1D (click to enlarge photo)
Remember that the DXY is comprised of a basket of currencies including the $CAD.
When demand for the USD increases, as it certainly may if rates increase this week, it would mean a dip on CAD/USD.
Will it last, unlikely in my opinion.
A sweep of the .725 - .7275 lows around the .618-.702 fib retracement zone and I believe the CAD will be setup to attempt a breakout over its recent highs of .756.
Featured Chart CAD 1D (click to enlarge photo)
Equities
📉 S&P500 + 📉 TSX + ⚖️📈VIX
💬 Bramwell’s Commentary, Analysis & Prediction for the Week Ahead:
As expected, the S&P rejected from ~4100 breaking down from its recent rally and we have two primary zones of interest to target.
The first zone being a bounce from Nov 1 high of 3900, and the latter being the bullish OB ~3750.00
A further breakdown from these levels and we will begin assessing the environment for a liquidation cascade to occur and further collapse of US equities into 2023, signalling a recession is in full force to commence the year.
If we do experience a bounce from these levels accompanied with no surprises from the FED, i’ll be looking for the S&P to break above its bear market descending resistance and for conditions to favour a return to risk to start the year.
Featured Chart S&P500 12HR (click to enlarge photo)
The TSX may follow the investor sentiment of their southern cousin with a dip into 19500 range before a bounce is expected as typically the TSX and S&P have a similar correlation.
Featured Chart TSX 1D (click to enlarge photo)
It’s the VIX which will be interesting to watch this week.
If the VIX experiences a surge to the upside taking out anything above 24/25 it may be signalling the strength of the bears on the S&P.
Should the VIX remain lazy and simply fall over, it may show us that any volatility mid-week is meant to be faded and bulls are standing their ground on the market.
Featured Chart VIX 12HR (click to enlarge photo)
Treasuries
⚖️ US2YR & ⚖️ US10YR
💬 Bramwell’s Commentary, Analysis & Prediction for the Week Ahead:
Both the US2YR and 10YR are in falling wedge formations which signal to traders a breakout to the upside may occur.
Looking at the macro environment it doesn’t surprise me that these charts show a potential reversal on yields at the FOMC largely dictates investor interest in treasuries.
I’m leaning bearish on yields and speculating that the FED decides to not leave coal in the stockings of investors and decides on a 50 basis point hike, lower or a surprise pause on rates given a potential bullish headline for CPI on Tuesday.
This may mean a slight fake-out to the upside on yields followed by an aggressive free fall downwards.
Featured Chart US2YR 1D (click to enlarge photo)
Featured Chart US10YR 1D (click to enlarge photo)
Cryptocurrencies
⚖️📉 Bitcoin + ⚖️ 📉 XRP + ⚖️📉 Total Crypto Market Cap
💬 Bramwell’s Commentary, Analysis & Prediction for the Week Ahead:
Bitcoin’s path is tricky.
Typically a rising triangle is bullish which would propel us into the first of two supply regions (red) and following the green path. I’d expect this path to be of low probability unless smart money front runs the bullish news on CPI + FED.
This path would see highs of 18.5 before a pullback and a wave top reaching low 19’s before a re-test of the mid 17’s to confirm support for this price level.
It’s more likely that BTC takes out the lows in the mid-high 16’s before pushing up above resistance. The mid-week dip may draw a cup and handle formation and produce the liquidity we need for fuel to the upside.
Featured Chart BTC 1D (click to enlarge photo)
It’s important to remember that BTC is still in a downtrend and that the weekly 400MA is eagerly anticipating any negative sentiment to crash the price into the 10K-12K range.
Keep this formation in mind.
Featured Chart BTC 1W (click to enlarge photo)
Bitcoin will dominate the market this week absent of any positive Ripple v. SEC news.
If so, we can expect XRP to take out the high .37 range (at the time of writing it began its sweep of those lows) and the worst case scenario while remaining bullish a visit to sweep the lows of .33-35
Featured Chart XRP 12HR (click to enlarge photo)
The total crypto market cap has been holding up yet tightly constricted in a range with low volatility.
Periods of low volatility are typically followed by high volatility.
We will be watching for TOTAL to visit the demand range below in green before a further continuation to the upside.
Featured Chart TOTAL 1D (click to enlarge photo)
Commodities
📉 Oil + ⚖️ Gold
💬 Bramwell’s Commentary, Analysis & Prediction for the Week Ahead:
Who else is buying the dip on Oil?
I finally feel satisfied to fill up my SUV vs. my $20 dollar cost averaging strategy on fuel since February.
Oil is overextended on most indicators and due for a bounce.
I’m expecting sideways action for a few weeks / months with a dip into the high 60’s before further macroeconomic conditions become clear as we make way into 2023.
Featured Chart Oil 1D (click to enlarge photo)
Gold has experienced a nice rally and likely will consolidate just under $1800 per oz. A dip into the low 1700’s may occur to provide the liquidity for its next leg up targeting just shy of $1900 by Q1 23’.
Featured Chart Gold 1D (click to enlarge photo)
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