The strong Q3 earnings positively impacted the crypto market. BTC and ETH prices have increased by 7% and almost 20%, respectively, over the last week.
This crypto market analysis will provide you with various data regarding the movement of the crypto market. This data can help you see the meaning behind the movement of BTC and ETH over the past week. Apart from that, there are several important news from the crypto market that you should know about. Always remember that the goal of this weekly Market Analysis is to provide information and education, not financial advice.
Positive Q3 earnings had made both capital and crypto market shine this week, with the majority of the indexes rising. S&P earnings are currently tracking to more than 2% YoY increase. Energy sector earnings increased ahead of healthcare and now generating the biggest upside among the sectors at 12% vs 7% for healthcare.
As discussed for the past few months, the case of both the equity and crypto market bottoming out and reversing its downtrend momentum depends on how the economy responds to the monetary policy adjustment from your unconventional quantitative easing stance to a tightening stance.
The bearish case for markets continues to depend on the fact that the widely unexpected rebound in inflation over the past year has forced major banks across the world to pivot sharply from their easy monetary stance to that of tightening one, which is aimed at curbing and bringing inflation down.
Looking ahead, there’s a likelihood that markets continue their bearish stance since abrupt monetary policy reversal is likely to cause a recession, which will continue to depress valuation multiple and earnings. In this particular scenario, there will be continuing collateral damage to the global economy and financial markets.
In the bullish scenario, we would have thought that all of the bubbles will have burst already. Monetary policy has turned restrictive enough that inflation is brought down without causing a global recession. We will need to see as Fed will likely increase its rate two more times before the end of 2022.
Needless to say, the bearish case seems to triumph over the bullish case for now. The spread between bull and bear in the US Investor Intelligence Survey is -9.0 and -33.6 according to AAII.
Favoring the bulls throughout the end of the year is the typical Christmas rally. This is then coupled with the midterm elections that are happening in early November. Below is the chart for the monthly historical return for the S&P500 index. Since 1928, the S&P 500 fell 1.1% on average during September, by far the worst performance of any month. October, November, and December were up 0.5%, 0.6%, and 1.4% on average.
Since 1942, during each of the 3-month, 6-month, and 12-month periods following each of the 20 midterm elections, the S&P 500 was up on average by 7.6%, 14.1%, and 14.9%. Expect to see more favorable market conditions in the coming months due to the midterm phenomenon coupled with the Christmas rally.
Notice that the yield curve spread has slighty decreased to -0.39 (from -0.5 mid-October). The Dollar Index seems to be having its 2nd consecutive weekly red candle. Falling US Treasury yields and DXY could potentially relieve the selling pressure hitting the equity indexes following big tech earnings.
On global news, We saw Rishi Sunak appointed as the 57th Prime Minister of United Kingdom. Following the announcement, we see the British Pound rallied against US Dollar.
Mid week, the European Central bank raised their rates by 75bps to 1.5% for the 3rd consecutive time, putting the reduction of its balance sheet on the agenda. ECB rates had been negative for eight years until it hiked in mid 2022.
We also saw Xi JinPing re-election in China, becoming the first president to be elected for a third term in the history of the country. This shocked the financial markets with the Chinese stocks having their worst day since Covid crash. This occurs amid country’s Q3 GDP report revealing a stronger than forecast growth figure. The Chinese Yuan also dropped to a new all time low vs the USD.
The following economic data and potentially market-moving events are slated for the week ahead:
Some other data such as the Purchasing Managers’ Index Composite and Markit Purchasing Managers Composite Services for October 2022, as well as the employment report will also be released next week. Also, more than 100 companies are expected to report their Q3 earnings.
Monitoring the data above is an important thing to do as a reference for macroeconomic conditions and can affect market movements.
Over the past week, we have seen that BTC rose 7% (at the time of this writing). Note that the current price level coincides with the 250 weeks MA (at 20,500), which is historically been a very strong support after breaking down from the 200 weeks MA support. Should we close above the price point, expect more upside in this rally.
On shorter term view, BTC is trying to break above the 55 weeks EMA ( at 21,200). Last we broke down from this support line was back in April, we have yet to see whether we are able to break this resistance. We have tried 4 times since April to break through this resistance but to no avail. This is a very important price point to develop positive momentum towards the upside.
ETH has been seeing a very strong week, gaining almost 20% WoW at this time of writing. It has blasted through the 0.236 Fibonacci retracement as well as the 100 and 200 week EMA. A very strong positive momentum indeed throughout the week. Next resistance would be the range of 1720-1740, which coincide with the daily Fibonacci golden pocket. Support is at 1617.