SignalPlus Macro Analysis (20240507): The SPX Futures and BTC Trends Show Remarkable Similarity
Yesterday, the market experienced a calm trading day. Following last week's dovish developments (the Federal Reserve's policy leaning towards a weak labor market, a slowdown in JOLTS/non-farm data, weakening economic data, and the market facing a large number of fixed income short positions), the market continued to maintain momentum this week, boosting risk sentiment.
Yesterday, the market experienced a calm trading day. After last week's dovish developments (the Fed's policy leaning towards a weak labor market, a slowdown in JOLTS/non-farm data, weakening economic data, and the market facing a large number of fixed income short positions) boosted risk sentiment, the market continued to maintain momentum this week. Due to the lack of frontline economic data before the CPI data release on May 15 (one week later), and with only about 7% of SPX market capitalization reporting earnings, as well as no major Fed officials like Powell and Waller scheduled to speak, the market is likely to be driven by technical factors in the near term.
Speaking of momentum, bond yields have significantly retreated after testing upper resistance, falling 20-30 basis points over the past week. In the stock market, SPX futures have reclaimed the 50-day moving average, and recent historical highs are back in sight, although the short-term technical outlook does seem a bit overbought. Cross-asset volatility has also decreased, with stock market volatility falling to cyclical lows, followed closely by interest rate and foreign exchange volatility, especially the USD/CNH and USD/JPY, which have retreated to recent ranges. Our view remains unchanged: the market may slowly rise in the short term until it ultimately decides to clearly view "bad (economic) news" as "bad news" for future earnings and growth.
In the cryptocurrency space, there hasn't been much news aside from more litigation actions taken by the SEC, which mainly targets Robinhood's cryptocurrency division. BTC prices continue to reflect the ups and downs of stock market sentiment, with the movements of SPX futures and BTC showing remarkable similarity over the past month. We expect that without new catalysts (where did the halving discussions go?), cryptocurrency prices will remain in sync with stocks; however, considering the large-scale leveraged long positions were liquidated in April, cryptocurrency prices still lean towards the upside. Wishing everyone successful trading.
