š Weekly Market Newsletter | Edition No. 33
News Update + A Full Analysis of Major Indices Including Stocks, Crypto, Commodities, Bonds & Forex
Monday, March 6th, 2023
Hello Friends,
Iām happy to share with you all that we have officially exited the Bear Market, and have entered the Kangaroo Market.
If you're wondering what a kangaroo market is (and yes itās a real term) it's used to describe a market that's as bouncy and unpredictable as a kangaroo, hopping up and down in a frenzied fashion - doesnāt this feel familiar.
While this type of market behavior can be exciting, it can also make us investors feel like weāre on an anxiety riddled rollercoaster ride, with sudden drops and sharp turns.
As we anxiously await the Federal Reserve's decision on March 22nd, it seems that market participants are scrambling to predict and prepare for the outcome.
The prevailing sentiment appears to be that investors are hedging their bets against a potential surprise 50 basis point hike, rather than the expected 25 basis point increase that's already priced in.
This frantic speculation and positioning highlights the intense focus and uncertainty that surrounds the Fed's monetary policy decisions.
Us mere Kangarooās have been conditioned over the past 18 months to be keenly aware of the potential impact that even a slight deviation from expectations can have on the markets, and many are taking steps to protect their portfolios from further downside.
But as always, the best defense against uncertainty is a well-thought-out investment strategy and a long-term view.
By keeping a level head and avoiding knee-jerk reactions to short-term market movements, investors can weather the storm of the Federal Reserve's decision and emerge stronger and more resilient.
While Iām not expecting economic doom, I will share a chart that I feel accurately depicts my faith in any chart or market analyst who believes they know what is coming next
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But in all seriousness, we're currently in an environment that's solely driven by piece-by-piece evidence gathered from every economic release and interview that may project how interest rates will affect the appetite for risk assets such as crypto and stocks in the coming months.
To help you further understand what to look for from the US economy this week, we've outlined and explained each major event on the horizon in the "The Weekly Look-Ahead" section.
Enjoy the news recap, outlook for the week, and my chart predictions we've shared in this week's edition below.
- Matthew Fox
š° Fox MetaCapitalās Weekly News Recap
You may press the š to read more about each headline.
Major News + Crypto Headlines
š Last Weeks Economic Data Releases + their impact on the market.
š Matthewās Thoughtsā¦
Last week, the US released several economic reports, including the Core Durable Goods Order, Durable Goods Order, Factory Orders, Consumer Confidence, ISM Manufacturing PMI, and Weekly Jobless Claims.
The Consumer Confidence index reading of 102.9 was lower than expected, which could lead to reduced consumer spending and slower economic growth.
The US February ISM Manufacturing PMI rose to 47.7, indicating a possible recovery from the effects of the COVID-19 pandemic. However, the fact that the reading is still below 50 suggests that the manufacturing sector is still facing challenges and is not yet back to pre-pandemic levels.
The US jobless claims have risen by 190,000, indicating potential weakness in the labor market.
The economic reports from last week will likely be considered by the Federal Reserve in their upcoming meetings. The mixed results could cause some uncertainty and volatility in the markets as investors try to gauge the direction of the economy and the Fed's policy decisions.
Whether or not it will have been enough evidence for the FED to remain true to their 25bps interest rate hike remains to be seen.
š Come on Bitcoin, do something.
š Matthewās Thoughtsā¦
After experiencing a suspicious drawdown last week, Bitcoin has been printing an unorthodox price action pattern and ranging for several days.
Actively trading crypto right now is like walking on thin ice - it's nerve-chilling and completely uncertain.
Unfortunately, Bitcoin is the king of the crypto space and currently holding the entire crypto market hostage until it makes its next move.
What's strange is the recent decoupling of Bitcoin from the S&P500 correlation that had been running strong for a few weeks. Until the drop last week, Bitcoin had been showing a little beta vs. equities.
In my technical analysis section below on Bitcoin, there are two major fair value gaps waiting to be filled, which could be making investors nervous. Such a move would have aggressive effects on altcoins.
Conversely, Bitcoin is still riding its trendline into March FOMC, and any slight deviations below could easily trigger a whipsaw in the opposite direction. Hence, the low volatility as both bears and bulls do not want to be on the wrong side of BTC's next impulse.
We wait and see.
š No matter the current price, Bitcoin is still a remarkable technology.
š Matthewās Thoughtsā¦
Iāve been a hard critic of Bitcoin over the past few years as I believe the evolution of blockchain ought to spawn into improvements and innovation atop decentralized data networks rather than assume Bitcoin is the one-and-only-forever cryptocurrency that should be adopted.
Yet, I must applaud this testimony (video below) and his incredible articulation of explaining Bitcoin as it truly does highlight the economic opportunity that blockchain networks may gift to the world.
š On the topic of Innovation, is Capitalism on it last days?
š Matthewās Thoughtsā¦
One of my speculations on why the market feels eerie right now is the emergence of A.I and itās exponential scaling effects on the world we live in.
I heard a great quote just days ago that went to the tune of;
āThere will be two businesses in 5 years from now, those who use A.I, and those who are out of business.ā
While this may seem like a bold prediction, it highlights the growing importance of AI in the business world and the potential consequences for those who fail to adapt.
The use of AI is already transforming many industries, from healthcare to finance to retail, and the trend shows no sign of slowing down.
By leveraging the power of machine learning, predictive analytics, and other AI-based technologies, businesses can improve efficiency, reduce costs, and gain a competitive edge in the marketplace.
However, as the quote suggests, those businesses that fail to embrace AI risk falling behind their competitors and losing market share.
This is particularly true in industries where automation and machine learning can significantly impact business operations and customer service.
At the same time, the rise of AI also presents challenges and risks, particularly in terms of job displacement and ethical considerations. As machines become more capable of performing tasks that were once done by humans, many workers are at risk of being displaced or left behind in the workforce.
Moreover, there are concerns about the potential misuse of AI, particularly in areas such as privacy, security, and social justice.
As businesses and society as a whole grapple with these challenges, it's essential to ensure that AI is used in a way that benefits everyone and promotes the common good - but will it?
Is that what global investors are fearing right now?
Are we poised to enter a new world digital economy and major market players do not want their capital trapped in old ways of making profit?
Again, time will tell.
š Layoffs signal a contracting economy - or does it signal an evolving economy?
š Matthewās Thoughtsā¦
Adding evidence to my theory above, take a look at this magnificent graph.
How does it make you feel?
Weāre are evolving into a digital global economy and the signās couldnāt be more clearer.
Keep these structural shifts in mind as an investor to be forward thinking on your bias of where the world will be in 20-30 years from now.
š Ripple vs. SEC Lawsuit Update
š Matthewās Thoughtsā¦
Letās start off with a pivotal interview by Brad Garlinghouse, CEO Ripple, sharing his remarks on why the U.S is facing falling behind on the global stage with blockchain technology and why they must create regulation immediately.
In the US, the primary regulatory issue faced by fintech innovators is the lack of clear guidance from regulatory bodies on how to operate within legal limits. This lack of guidance has resulted in a regulatory landscape that can be challenging for fintech startups to navigate.
This week, a Supreme Court Justice echoed this sentiment, stating that the SEC has not provided adequate guidance to the industry, yet is using regulation by enforcement as a means of enforcement.
Ripple, a fintech company, has submitted this issue as part of their Fair Notice Defense. The defense argues that regulatory bodies must provide clear guidelines on what is and isn't legal before taking enforcement action.
It's possible that the SEC has been cautious about providing clear guidance on cryptocurrency regulation not because of the complexity of the cryptocurrency industry or the need to strike a balance between innovation and investor protection, but rather due to pressure from traditional financial institutions who stand to lose market share if cryptocurrencies gain wider adoption.
Legacy banks hold a significant portion of US citizens' money, and the rise of cryptocurrencies as an alternative asset class could threaten their dominance in the market. As such, it's possible that these institutions have lobbied the SEC to limit the growth and adoption of cryptocurrencies through regulatory uncertainty.
Moreover, the potential for fraudulent or illegal activities in the cryptocurrency space is not unique to this asset class and is present in all financial markets. Thus, the argument that the SEC's caution is solely motivated by a desire to protect investors is questionable at best.
In the end, it's possible that the SEC's cautious approach to regulating the cryptocurrency industry is motivated by a desire to protect traditional financial institutions and limit the growth of cryptocurrencies. While the public interest remains a priority, it's essential to consider the influence that these institutions may have on regulatory decisions.
š CBDCās are comingā¦
š Matthewās Thoughtsā¦
Congressman Tom Emmer's remark highlights the growing concern among some lawmakers and privacy advocates about the potential use of central bank digital currencies (CBDCs) as a tool for government surveillance.
CBDCs are digital versions of traditional fiat currencies that are backed by a central bank and operate on a decentralized ledger system.
They offer many benefits, such as faster and cheaper transactions, greater financial inclusion, and increased transparency. However, they also raise concerns about privacy and government surveillance.
The CBDC Anti-Surveillance State Act, which Congressman Emmer introduced, seeks to address these concerns by prohibiting the government from using CBDCs as a means of monitoring or tracking individuals' financial activities without a warrant.
The Act aims to preserve Americans' right to financial privacy and prevent unelected bureaucrats in Washington, DC from infringing on this right.
While the Act has yet to gain significant traction, it highlights the need for policymakers to carefully consider the implications of CBDCs for privacy and individual rights.
As CBDCs become more prevalent, it will be essential to balance the benefits of this emerging technology with the need to protect individuals' privacy and prevent government overreach.
š° Fox MetaCapitalās The Weekly Look-Ahead š
šļø Monday Events / š Economic Report Release
š Factory Orders
What is it?
Factory orders refer to the total dollar value of new orders placed with manufacturers for durable and non-durable goods. It is an economic indicator that tracks the amount of goods that businesses and consumers are buying, providing insight into the health of the manufacturing sector and overall economy.
Why does it matter to the markets?
Investors pay attention to factory orders data because it can indicate trends in demand for goods and provide clues about future economic growth or contraction.
If factory orders increase, it could indicate a strong demand for goods and suggest that the economy is expanding.
Conversely, if factory orders decline, it could indicate a slowdown in demand and suggest an economic contraction.
šļø Tuesday Events / š Economic Report Release
š ADP Non-Farm Payrolls
What is it?
ADP (Automatic Data Processing) Non-Farm Payrolls is a monthly economic report released by ADP, a global provider of human resources and payroll services. The report provides an estimate of the number of jobs added or lost in the private sector of the US economy, excluding government jobs and agricultural employment.
Why does it matter to the markets?
Investors pay close attention to ADP Non-Farm Payrolls because it can serve as an indicator of the health of the labor market and the overall economy.
Employment trends have a significant impact on consumer spending, which in turn affects corporate profits and the stock market.
A strong employment report can lead to increased confidence among consumers and investors, driving economic growth and boosting stock prices.
Conversely, a weak employment report can lead to decreased confidence and a potential economic slowdown.
š Fed Chair Powell Testimony
What is it?
Why does it matter to the markets?
Investors pay close attention to Powell's testimony remarks because they can provide insight into the Fed's thinking and future actions, particularly with respect to interest rates and inflation. The Fed's decisions can have a significant impact on financial markets, so any indication of changes in policy can affect stock prices, bond yields, and currency exchange rates.
Powell's testimony can also be used by investors to gauge the health of the US economy and identify potential risks or opportunities.
His remarks may address issues such as unemployment, consumer spending, and business investment, providing important information about the state of the economy and its future prospects.
šļø Wednesday Events / š Economic Report Release
š JOLTS Job Openings
What is it?
The Job Openings and Labor Turnover Survey (JOLTS) is a monthly economic report released by the US Bureau of Labor Statistics (BLS). The report provides data on job openings, hires, and separations in the US economy, broken down by industry, region, and other demographic factors.
Why does it matter to the markets?
Investors and analysts pay attention to the JOLTS report because it can provide insight into the strength of the labor market and the overall economy.
Job openings are a key indicator of the demand for labor, while hires and separations provide information about the supply of labor and the rate of turnover. By analyzing these trends, investors can identify potential opportunities and risks in specific industries or regions.
The JOLTS report is also closely watched by the Federal Reserve as a gauge of the health of the labor market. The Fed uses this data to help set monetary policy, particularly with respect to interest rates and inflation.
A strong JOLTS report can indicate a tightening labor market and potential wage pressures, which may lead to higher inflation and a more aggressive monetary policy response.
šļø Thursday Events / š Economic Report Release
š Jobless Claims (refer to last weeks breakdown)
šļø Friday Events / š Economic Report Release
š Non-Farm Payrolls
What is it?
Non-Farm Payrolls (NFP) is a monthly economic report released by the US Bureau of Labor Statistics (BLS) that measures the number of jobs added or lost in the US economy, excluding agricultural employment. The report provides data on employment trends by sector, industry, and demographic factors, and is closely watched by investors, analysts, and policymakers.
Why does it matter to the markets?
Investors pay close attention to Non-Farm Payrolls data because it provides insight into the strength of the labor market and the overall health of the US economy. Job growth is an important driver of economic growth, as it leads to increased consumer spending, higher business investment, and higher corporate profits.
A strong Non-Farm Payrolls report can indicate a healthy labor market and potential economic expansion, while a weak report may suggest economic contraction or slowdown.
š Unemployment Rate
What is it?
The unemployment rate is a monthly economic report released by the US Bureau of Labor Statistics (BLS) that measures the percentage of individuals who are unemployed and actively seeking employment in the US labor force. It is a widely followed economic indicator that provides insight into the health of the labor market and the overall economy.
Why does it matter to the markets?
Investors pay attention to the unemployment rate because it can indicate potential changes in consumer spending, business investment, and corporate profits.
A high unemployment rate may suggest a weak labor market and lower consumer spending, which can lead to decreased business investment and lower corporate profits.
Conversely, a low unemployment rate may indicate a strong labor market and potential economic growth.
šAverage Hourly Earnings
What is it?
Average Hourly Earnings is a monthly economic report released by the US Bureau of Labor Statistics (BLS) that measures the average hourly wage of non-farm workers in the US. It is a key economic indicator that provides insight into the level of wages and compensation in the labor market, and can have a significant impact on consumer spending, business investment, and corporate profits.
Why does it matter to the markets?
Investors pay close attention to Average Hourly Earnings data because it can indicate potential changes in consumer spending, inflation, and interest rates.
If wages are increasing, consumers may have more money to spend, which can boost economic growth and corporate profits.
However, if wages are increasing too quickly, it may lead to inflation and potentially higher interest rates.
Fox MetaCapitalās Weekly Asset Review + Technical Analysis
šš The Week Ahead in Charts
Symbols š or š = Bullish / Positive | š or š§ø = Bearish or Negative | āļø Ranging or Low Volatility
FOREX
āļø DXY(U.S Dollar) + š CAD
š¬ Matthewās Commentary, Analysis & Prediction for the Week Ahead:
Currently, the Dollar is in a consolidation phase within a range of 104-105.5, which has been established since December 22nd.
As the FOMC meeting approaches in two weeks, investors are awaiting the outcome of whether there will be a 25bps or 50bps rate hike, resulting in a tight range for the DXY.
Based on my analysis, there is a possibility that the Dollar may exceed the fair value gap and retest the daily 200MA. However, in the event that Chairman Jay Powell sings a more dovish tune on March 22nd, the Dollar may fall back into the 103's.
We will continue to closely monitor any news related to the upcoming FOMC meeting, as it will likely have a significant impact on the direction of the Dollar.
Featured Chart DXY 1D (click to enlarge photo)
The DXY, like Bitcoin in the crypto market, has a significant impact on all Forex markets including the Canadian Dollar.
Currently, the CAD is following the expected path from last week, with a projected bounce from equal lows of .73, followed by a move back to the median of .75. This forecast is awaiting confirmation from the next move for the US Dollar to close out the quarter.
As such, it will be important for investors to keep a close eye on the movements of the DXY and any related economic data, as it could have a significant impact on the Forex market as will the price of Oil for the Maple Leaf Coin.
Featured Chart CAD 1D (click to enlarge photo)
Equities
š S&P500 + š TSX + VIX āļø
š¬ Matthewās Commentary, Analysis & Prediction for the Week Ahead:
The S&P 500 has reclaimed the rising wedge formation that was lost during the whipsaw selloff in February.
In anticipation of the FOMC event, investors are on both sides of the market, with shorts and longs in a state of "max pain mode."
"Max Pain" is a term used to describe the point at which the largest number of traders would experience maximum financial loss or pain.
(It is typically used in options trading, where traders can hold positions that give them the right to buy or sell an underlying asset at a certain price (known as the strike price) by a certain date.)
For example, when the market is approaching a key resistance level, investors who are short the market may be in a state of "max pain" if the market continues to rise and breaks through the resistance level, as this would cause their positions to lose value.
Similarly, investors who are long the market may experience "max pain" if the market fails to break through the resistance level and begins to decline, causing their positions to lose value.
In both cases, the pain experienced by investors is said to be at a maximum, hence the term "max pain". It is my opinion that the S&P may retest the āmax painā daily 400MA in precise timing for the FOMC event.
This means that if the equity index squeezes shorts higher or collapses under the guise of a surprise rate hike, investors could be in for a significant change in market direction.
Featured Chart S&P500 1D (click to enlarge photo)
The Toronto Stock Exchange (TSX) is currently in the process of flipping a key resistance level from the August range high of 20,287 into a support level.
This move can potentially signal a shift in the market sentiment towards the Canadian economy and its financial markets.
The TSX is closely linked to the US stock market, as many of its listed companies have significant operations in the US. Therefore, any significant moves in the US stock market can have a ripple effect on the TSX.
Additionally, oil prices and interest rates are two critical factors that can impact the strength of the TSX. As a commodity-based economy, Canada's economy is heavily dependent on oil exports, and any significant changes in oil prices can impact the performance of the TSX.
Similarly, fluctuations in interest rates can also have a significant impact on the market as they can affect the borrowing costs for companies listed on the exchange.
My outlook for the TSX this year is bullish and I anticipate that it will re-test its all-time high by the end of the year.
Featured Chart TSX 3D (click to enlarge photo)
The VIX, or the CBOE Volatility Index, is a measure of market volatility and is often referred to as the "fear index." A higher VIX typically indicates increased uncertainty and risk in the market, while a lower VIX suggests a calmer, more stable market.
In February, the VIX had a brief rally before falling back into its previous range to close the month. Looking ahead, I expect the VIX to remain range-bound over the next two weeks as investors wait for the March 22nd FOMC event.
If the VIX were to break below its current range and fall to the 16.25 support level, this could potentially give room for risk assets to appreciate in the short term. However, it's important to keep in mind that the VIX can be unpredictable and sudden changes in market sentiment can cause it to spike rapidly.
Featured Chart VIX 1D (click to enlarge photo)
Treasuries
š US2YR & š US10YR
š¬ Matthewās Commentary, Analysis & Prediction for the Week Ahead:
With Government Treasury yields rising Investors are starting to become more cautious and are looking for safer investments such as fixed income, which is Genevieve highlighted that fixed income is becoming more attractive than stocks.
A high-yield money market fund, which invests in short-term fixed income securities, can be a good option for investors looking for a low-risk investment with a higher yield than a traditional savings account.
The primary danger within this current macro environment is that the high rising yields on the 2 and 10-year treasuries can lead to over-speculated recession that everyone has been fearing.
High yields and interest rates increase the cost of borrowing for businesses and individuals, which can reduce investment and consumption.
It can also cause problems for highly leveraged companies, such as those in the real estate sector, which may struggle to meet their debt obligations.
Featured Chart US2YR 3D (click to enlarge photo)
Furthermore, high yields can lead to a decrease in the value of bonds, which can cause investors to sell off their holdings, resulting in a bond market sell-off.
This, in turn, can lead to a decline in the stock market as investors seek out safer investments - which is arguably what investors are fearing the most right now.
But in my opinion these circumstances will not be present for much longer as rising interest rates also increase the cost of financing government debt, leading to a larger budget deficit - not something the U.S Government ought to be willing to suffer at this time in the world.
I believe we may seen one last push-up on yields before the turn over and deviate back downwards towards the range lows or āCā leg correction.
Featured Chart US10YR 3D (click to enlarge photo)
Cryptocurrencies
āļø Bitcoin & āļø XRP & āļø Total Crypto Market Cap
š¬ Matthewās Commentary, Analysis & Prediction for the Week Ahead:
The current Bitcoin price is still following a trendline that was set in motion from the initial price increase that happened at the beginning of the year when it reached over 20K.
The past few days have seen a period of daily consolidation, but a significant move is imminent.
Based on the current market conditions, it is likely that Bitcoin will either slightly break below the trendline or move up to the first target of 23.5K soon. The strength of Bitcoin at the end of the week will be the determining factor for its next move.
*Iām still keeping my caution for those two daily FVG below, they ought to be retested soon.
Featured Chart BTC 1D (click to enlarge photo)
XRP is currently testing the lower range of a falling wedge pattern ~36.5 cents.
This is an important technical level for XRP, as a break below it could signal a bearish trend continuation, while a bounce higher could indicate a bullish reversal.
However, in addition to technical factors, the outcome of the ongoing lawsuit between Ripple and the SEC is also expected to have a significant impact on XRP and the wider crypto market.
The resolution of this case could either provide clarity and legitimacy to XRP, or result in significant negative consequences for the cryptocurrency.
Featured Chart XRP 1D (click to enlarge photo)
The technical formation of the total cryptocurrency market cap is similar to that of Bitcoin's price pattern, with both holding onto the support line and awaiting daily news to unfold.
A bullish 100MA into 200MA crossover is expected to occur soon, which could indicate the potential for strength in the market.
This crossover may act as a positive catalyst for the entire crypto space, but it's important to monitor the market's reaction and sentiment towards this development.
Featured Chart TOTAL 1D (click to enlarge photo)
Commodities
š Oil + āļø Gold & āļø Silver
š¬ Matthewās Commentary, Analysis & Prediction for the Week Ahead:
My analysis for oil suggests that it has reached the upside target for the pennant resistance ~$80/barrel and the expectation is for it to move soon.
Technical Pennants can break out in either direction, but a slight deviation to the upside may occur ~$81-$82, forming a swing failure pattern.
This could create a flush back down to the support region, followed by a collapse below the range median by the end of the quarter.
It's important to keep an eye on these developments and watch for any potential changes in the market that could affect the price of oil.
Featured Chart Oil 1D (click to enlarge photo)
Gold and Silver are following my predicted path perfectly and my bias is they will continue to remain in a bullish accumulation region.
However, the movement of the US dollar index (DXY) is crucial to determine the future trend of both metals.
If the DXY rises, it could put downward pressure on the price of Gold and Silver. Conversely, if the DXY falls, it could potentially drive the price of these metals higher.
Iām leaning on a bearish DXY and bullish on metals as we transition into Q2.
Featured Chart Gold 1D (click to enlarge photo)
Featured Chart Silver 3D (click to enlarge photo)
šš¼ Hey!
Thanks for reading this week's Weekly Market Update Edition No. 033
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