After a week marked by volatility, with ups and downs under the shelter of rates and inflation, American supremacy continues to dominate market discourse. The SP500 is set to close 2024 with an impressive gain of over 24%, driven by appetite for US stocks at the expense of international assets, especially emerging ones. However, this preference has led to extreme valuations, which could increase vulnerability to shocks like the one experienced this past week.
On the other hand, inflation fears remain after the Fed's higher projections, which have slowed the pace of rate cuts and could even reverse the trend in 2025 if economic growth "overheats." Additionally, the specter of a global trade war and the possibility of a recession loom as the biggest risks according to the latest fund manager survey.
On the side of flows, a magnitude that must be analyzed by any investor, money market funds accumulate 6.75 trillion USD in assets, a figure that has become stickier due to the higher interest rate environment. This raises doubts about whether we will see appetite from those investors for US stocks that could channel part of that capital into equities if a FOMO phenomenon materializes in the face of new highs in US indices.
At the same time, the reduction in the use of the reverse repurchase facility (RRP) shows that the Fed is strategically adjusting short-term liquidity. Although these measures aim to avoid tensions in funding markets, their impact on risk assets remains limited.
With the holiday week underway, the economic calendar is quiet. Key data includes consumer confidence on Monday, new home sales data on Tuesday, and unemployment claims on Thursday. The question on Wall Street is whether there will be a "Christmas final rally," a phenomenon where stocks tend to rise in the last days of December and the first of January.
However, the Fed's recent more aggressive stance and high valuations could limit any upward momentum. Investors must closely monitor the behavior of the SP 500, which, after a two-week losing streak, remains a key thermometer for global markets.
Key technical levels
THESE ARE NOT INVESTMENT RECOMMENDATIONS. Just comments from an informative technical perspective.
1.- S&P
From a technical standpoint, first attack and rebound to the key zone we have been marking between 5,850 and 5,870 points. That is the support that must not be lost in the coming sessions. This week is characterized by lower trading volume and the danger of experiencing greater volatility, which should be considered in any investment strategy. If prices lose that reference, it will be directly to 5,650 points. Above, we need to recover 6,000 points to return to the highs. Good time to rebalance portfolios, reduce risk in those assets that have the most volatility, and enjoy the excellent year 2024.
Source: investing.com
IBEX-35
From a technical standpoint, new losses of supports and support in a key zone. Losing 11,400 would first take us to 11,200 and then to the 11,000 point zone. For now, let’s think about recovering 11,400 and generating a consolidation movement limited by the ranges of 11,400-12,000 points. Those are the references to watch and maintain in this new week. Inditex seems to be holding at 50 euros, and the banking sector wants to generate upward momentum. Caution.
Source: investing.com
3.- BITCOIN (BTC)
Last Thursday, spot bitcoin ETFs in the United States recorded a record daily net outflow of 680 million USD, coinciding with the price of bitcoin falling below 100,000 USD. This phenomenon breaks a streak of 15 consecutive days of positive flows, with significant outflows from some of the most relevant funds in the market. On Friday, outflows were 200 million USD. In parallel, Ethereum ETFs also suffered outflows of 61 million, ending an 18-day streak of net inflows.
One additional point to highlight is the fact that more than 1 million BTC are trapped out of the money (OTM), above 97,000 USD now. This indicates that a large number of investors who bet on higher price levels are currently at a loss, which could add selling pressure in the short term.
It is important to note that, in my opinion, the recent behavior of bitcoin's price continues to show a significant correlation with equity markets, particularly with the Nasdaq. The reaction to Powell's comments reinforces this view, as both bitcoin and tech stocks experienced simultaneous declines. This behavior is a reminder that, at least for now, bitcoin seems to be more influenced by macroeconomic movements and changes in monetary policy than by purely internal factors of the crypto ecosystem. It is an asset perceived as high risk, generating massive purchases when risk aversion falls and vice versa.
The magnitude of outflows in spot bitcoin ETFs and the amount of BTC trapped OTM suggest potential short-term downward pressure. However, they could also be a sign of necessary consolidation before a possible recovery.
The current situation underscores the importance of considering the macroeconomic environment and monitoring bitcoin's correlation with other risk assets. Investors should remain cautious, especially in a scenario where the impact of monetary policy remains a determining factor.
From a technical perspective and after the rise in volatility, the destruction of leveraged investors (over 2 billion liquidated in 3 sessions) and the loss of 100,000 USD, maximum caution must be the dominant note in these coming sessions. The 92,000 USD zone seems to be functioning as an initial control zone that, if lost, will take BTC directly to 87,000 USD. That is the level that BTC must not lose under any circumstances, as doing so would take us to a totally different scenario. The correlation with liquidity and the Nasdaq will mark the rest of the year while we wait to realize many of the positive expectations discounted by the market.