Let’s start with the July FOMC. I personally had no expectations of the Fed cutting rates at this FOMC because they are afraid of making mistakes and don’t like to be too early or too late. As expected, they didn’t cut rates. Powell said there was discussion about a September rate cut and the statement downgraded inflation from “elevated” to “somewhat elevated.” I think that’s a big change. I accept that the possibility of the Fed’s first interest rate cut in September has gone from being very low to slightly higher. I don’t think there was anything special other than that. If the interest rate cut actually approaches quickly, the important thing will be whether there is an economic recession or not.
Since Powell said he wants to see more data in order to cut interest rates, interest in two CPI and two jobs data will increase until the FOMC meets in September.
Yesterday’s ISM data confirmed that growth is continuing to slow. Bad data in almost every way. The market appears to have interpreted this data as “Bad is Bad” and made a big downward move. It’s definitely not good when this data keeps repeating and trending down. I still think there will be no recession in 2024, but if this data continues to trend down, I may change my mind. It’s certainly good to see nominal GDP growing and disinflation continuing, but I’d like to see the rest of the data improve as well.
I have no major concerns about price data such as CPI and PCE. This is because disinflation is still well underway and most economic data being released does not suggest that CPI will rise again. I will continue to focus on growth data as I did a few months ago.
The bond market has definitely changed momentum. As I predicted a month ago, the bond market is moving in line with my expectations, but… with yesterday’s economic data, it showed a complete risk aversion signal. The bond market is telling us that we are in a recession. Will the bond market be right this time too? Additional data in the coming months and today’s NFP will be very interesting from this perspective.
ES has seen a sharp decline following yesterday’s clear risk aversion signal. The market has reacted to the bad economic data with “Bad is Bad”. As the election approaches, the market is showing more volatility. Today’s NFP will tell us whether the recent lows can be maintained. I think the market will interpret today’s NFP as “Good is Good, Bad is Bad”. However! But! More accurate is to look at market movements. Individual opinions can always be wrong, so focus on what the market is saying.
Coinbase earnings were very good. Double Beat. Growth is continuing steadily, but retail is still not coming back. Institutional volume is driving the majority of volume. Overall, satisfactory earnings.
The daily candles are very beautiful, but it looks like there will be a bit of mean reversion in BTC price as we wait for the NFP. The move between 64.5-63.5k looks important. Yesterday’s down move was very strong, but it seems that someone was buying behind it. Most of the spot buy orders seem to have been filled, and most of the buy orders on Binance futures market seem to have been filled. Price movement can reverse in an instant depending on the situation, but the movement at the bottom is satisfactory.
After FOMC, BTC, IWM fell, but ES, NQ rose. I felt this could be a signal for the rotation to stop. As of now there are no clear “signals” so I maintain a bullish view on Q4 but wait for NFP in the near term!
Vol has been steadily declining since Trump’s conference speech ended… Those who bought call options on the August 2nd product and still have positions will be in for a lot of pain. Unless there are big surprises in an event, Vol usually falls. There were a few trades, such as the closing of December call spread positions, but there didn’t seem to be any special trades in the options market.
NFA DYOR
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