US equity stocks recovered from their losses over the weekend on the first day of trading as futures settled after hours. Although it is unclear whether the market has recovered from September's interest rate hike and October's CPI, the fall in the dollar index has made more investors feel the strength of the market, even hitting a 10-day low after falling below 112, and the decline in the dollar index is also what the market expects from a weaker Fed rate hike.
But, in fact, judging from the CME's projections, there is no doubt that a 75-basis-point rate hike in November will not shake the Fed's resolve when PCE and unemployment figures are released next, so the focus of the game is on the rate hike expected in December. Despite the market's recovery, the December rate hike is still expected to be mainly around 75 basis points, and perhaps many of the smaller partners will be in doubt. Friday's final drop was due to the December rate hike, from 50 to 75 points. So, just one weekend later, why the same 75 basis-point increase in expected interest rate is the main reason, but the market has taken a completely different view, with even some small partners believing that the current strength of US stocks has no direct relationship with the Federal Reserve, but is because the farcical ending of the UK tax cut has stimulative effect on UK government bonds and the entire risk market, which is also true, but not all, because it is obvious from yesterday's tweet. The rally in Nasdaq futures did not start with the announcement that Britain would consider a new "stimulus" package. It began in the early hours of yesterday morning, after the opening bell when Britons were still sleeping, and there was no direct news to get excited about. So the main reason was the speeches by two Fed officials, both hawks - George and King Brad. The first speaker was George, who, while still hawkish in general, emphasized the need for stability and slowness. After all, the Fed's rate hike is lagging behind. And if it moves too fast, it will disrupt financial markets. It may even be a metaphor for the United Kingdom's chaotic situation to remind the Fed of the pace of rate hikes. While that didn't help falling US stocks at the time, it is worth considering Brad's words later.
Hawking's speech at first glance looks like empty rhetoric, but if one looks closely even Brad (George) isn't in favor of a quick and sharp rate hike, it isn't clear, but the year-end rates of 4.5-4.75% are "appropriate" to conclude that the December rate hike will come in the 50 and 75 basis points range, at the moment the September CPI appears and the October CPI is predicted to be higher. Hawks did not mind the 50 basis points option for a December rate hike, and reiterated that while inflation continues to strengthen, a carry increase, while necessary, does not imply that the end-point rate will exceed September's 125 basis points chart. This is only one factor, and an even more important one is that, regardless of how much the Fed chooses to raise rates in December, the overall terminal rate must already be close to the top. As we've repeated many times in the last few days, the Fed's rate hike is not unlimited. From the calculation in July, it can be seen that the terminal rate of about 7% is already the upper limit without impacting the U.S. debt into a death spiral, and not only does it go much higher, but it will, according to the Fed, keep raising interest rates until inflation falls below 2%, with no rate cut scheduled for the whole of 2023.
So it's inferred that, on the one hand, commentators saying that 100% of the US economy will go into recession within a year, which is fatal for Biden and for the Democrats. On the other hand, high fiscal pressures will also put the US Treasury in a bind, so the Fed's interest-rate hike is likely to be just what the Fed wants to signal, avoiding the 5% red line. And once it surpasses the pressure, it will multiply, especially if inflation is not contained. That is why it is clear that the more the Fed can raise rates now, the less it can raise rates later. From today's data, it will be 25 at most in 2023, and perhaps only 25 at most. So even if the market were to assume a 75 basis-point increase in December, it is not hard to imagine that this must be the last big Fed rate increase, or even that there is no chance of another game.
These two reasons, together with the changing situation in Europe, may be the main reasons for the bottom-up rally. These are expectations, of course, and cannot be 100% justified. But, in any case, with the end of 2022, the Fed's rate-hike program will have to come to an end, and there is plenty of room for European interest-rate hikes at the same time. So, either a fall in the dollar index, or a return of capital from the US bond market, can be expected. In the long run, the market looks as if it's gotten out of the gloom it's been having since the September rate hike, but that doesn't mean the market is going to go all the way up. We're starting to see a trickle of tech earnings today, and the consensus forecast is not very good, including Morgan Stanley cutting Apple's stock price to $177 and suggesting that Apple's stock price hasn't hit rock bottom. The news that could have been a little better was Wednesday's Tesla results.
And whatever it is, the market is in a game, both that the market will get better and that it's still not bottom, that it's not what people say, that even Warren Buffett loses money, that it's more important to summarize the information that you want to get, and to adjust to your strategy, that it's always unsafe to listen to anyone, and it's necessary to have your own trading logic.
Macro is the pulse of the market on the big side, but there is still a logic to it, and the market value of the stablecoin is one of the benchmarks for measuring the currency's prosperity. As of 8 a.m. today, USDT, which has been the main trading force over the weekend, is not on track for a market value increase. It was up $10 million on Saturday, and nothing has changed since.
The same is true of BUSD, the other main trading force, which has not changed since Oct. 7, when it added $580 million to its market value. And USDC, the main underwriter, is busy. Its market value has dropped to below USD 45 billion. The three main stable currencies also represent the direction of funds in Europe, Asia, and the United States. It is clear that Europe is still the main buyer, and most of Asia is still on the sidelines. The Americans are leaving.
The next DAI, though less important, still reflects the attitude of ETH backers toward the aftermarket, and judging by DAI's market value, it is not overly optimistic. Only $6.4 billion of DAI's market capitalization has been selling off its holdings by tens of millions of dollars a day recently. So from the four main stable currency market value changes, the reduction of the overall purchasing power is still not questionable, also represents the purchase sentiment of the currency market still has no sign of recovery.
In this case, even if the macro-sentiment factor is not considered, it is difficult to say that the market has moved out of the bottom range. After all, the market value of the stable currency affects the maximum purchasing power of the currency market. Therefore, from the purchasing power data up to 8:00 this morning, we can see that the main transaction USDT, although showing signs of improvement, is barely at the recent average level. This also shows that the purchasing power is still low.
From the BTC and ETH selling data, although both had a upward trend after a weekend, it is precisely because of the higher prices that more chips have shifted to exchanges and turned into selling pressure. After all, there are still a lot of bargain hunters, especially the BTC price of nearly 20,000 US dollars, which also gives many of the boxed chips a chance to get out. ETH's profit, though not a lot, has increased significantly less than the BTC's.
So it is not hard to think of more money focused on the BTC. But despite the selling pressure, the purchasing power is not very good, but the number of BTCs and ETHs leaving the exchanges is still quite high, and in Europe the main trading time zone is not only the USDT which has been most numerous to the exchanges, but also the BTCs and ETHs which have shown the most signs of leaving the market, which is why the Europeans have been the main purchasing power.
In the stock exchange data can also be seen that the BTC which was in the low inventory after another weekend refilled nearly four years of the minimum inventory, representing even a bear market but BTC is still the most valuable investment products in the currency market, a large number of users continue to buy, although relatively slow, but still in the gradual consumption of BTC circulation. The ETH stock also continues to decline, but it is still in a more dangerous position.
Finally, on the emotional side, since last night's video found that BTC and ETH are very different in the same price trend, but they are both the best bets and the worst bears. But from now on, while BTC is still the most bullish, it's clearly a lot more rational, and ETH continues to be the worst bears. As long as there's enough money on the deposit, you'll make it back.
Even after the US stock market closes, Nasdaq futures are still rising slowly and with volatility. The market should have fully expected a rate increase in November. Therefore, by November 3, apart from the third-quarter results, even the core PCE data should not have much trouble. Of course, we are still looking forward to the third-quarter GDP data on the 27th. It would be hard to get up to 2.8% in a few days. PS: Last night I thought a lot about what's missing in the video, and I saw a lot of suggestions from some of my friends. Now I've got a preliminary direction. Try it tonight, and I hope it'll help.
