Part I Macro Market Analysis
Market status: Due to the collapse of the Japanese yen arbitrage trade, a large number of positions were forced to be liquidated. In the process of market correction, the Topix Index led a significant "deep V" reversal.
Data Adjustments: Although the recently released CPI, PPI and other data are in line with expectations, there are suspicious adjustments in energy and used car prices, which may reduce the market's implied volatility.
Federal Reserve News: The remarks of Federal Reserve officials show that they remain cautious in policy adjustments, and the dot plot is expected to continue to maintain an accommodative stance in September.
Federal Deficit: Although the Fed maintains a dovish stance and the Treasury's short-term bond issuance and repurchase programs have temporarily eased market tensions, large-scale financing programs may put pressure on market liquidity. However, the increase in reserves and the flexibility of fiscal operations help maintain market stability.
Corporate Performance and Buybacks: The performance of S&P 500 companies remained stable in the second quarter. With the opening of the corporate buyback window, market liquidity will be further enhanced, and the U.S. stock market is expected to continue to grow in the short term.
Medium-term market outlook: The market outlook is complex, and factors such as inflationary pressure, political changes, policy adjustments and fiscal deficits still need to be closely monitored.
Part II Crypto Data Analysis
Stablecoin growth: In 2024, the issuance of stablecoins continued to rise, indicating that the market demand for stablecoins remains strong.
ETF liquidity: Bitcoin spot ETFs have seen a decrease in net inflows since May, and market sentiment has become more cautious.
Holding cycle: Nearly half of Bitcoin is controlled by long-term holders, indicating solid market confidence.
Holding cost: The on-chain holding cost is higher than the current market price, indicating that there is still room for the market to rise.
Market resilience: Despite the volatility, investors' willingness to hold coins remains strong, and the market as a whole remains healthy and stable.
Part I The macro market has reached a turning point
1. August: Recovering from the turmoil
1.1 The collapse of the yen carry trade forced a large number of positions to be closed, the market began to correct its mistakes, and the Topix index led the "deep V" reversal
On August 5, the Bank of Japan unexpectedly raised interest rates, triggering the collapse of the yen carry trade. PSE Trading's macroeconomic commentary believes that the data is bullish overall, and the Bitcoin bull market and altcoin season are coming.
USD/JPY has depreciated significantly over the past four weeks, from close to 162 JPY/USD to around 142 JPY/USD, in line with our bearish outlook. This sharp depreciation was driven primarily by the Bank of Japan’s rate hikes and the Japanese government’s FX intervention on July 11-12. While some market participants are skeptical about the effectiveness of FX intervention, we support its ability to influence market trends by changing supply and demand.
USD/JPY's recent move is similar to similar declines in 1990 and 1998, but it's important to note that such moves don't always signal a reversal of the long-term trend. EUR/JPY and AUD/JPY's moves may be more worthy of further attention.
1.2 Market turmoil: Macroeconomic positives stimulate risk appetite
After the highly leveraged positions were cleared, the market rebounded quickly, with the Topix leading the gains. Positive macroeconomic data released last week led to bullish funds from US indices flowing back into the market, with more than $16 billion in new funds added to the S&P index and further positions expanding. The Nasdaq and Russell 2000 also rose modestly, and long position losses eased. Global market sentiment has improved significantly, with nearly all European and Asian indices rising in nominal terms. The DAX and FTSE turned net positive, while the KOSPI and Nikkei continued their bullish momentum. In contrast, the China A50 index remains bearish, but the position risk is limited.
CTA's quantitative buying has also driven a huge amount of funds into the market. It is expected that CTA will buy more than 60 billion stocks in the short term, of which 30 billion will flow into U.S. stocks. Strong buying demand will push the market to rise further. According to statistics from Goldman Sachs' Scott Rubner, traders' gamma fluctuations have changed significantly in the past three weeks, with long-term positions turning into short-term positions and then into long-term positions. Traders' gamma is no longer short-term and may serve as a buffer for the market in the future.
2. Data inconsistency
2.1 Data "modification" helps market sentiment recover, increasing expectations of a Fed rate cut
The CPI, PPI, retail data and PMI data released last week, although on the surface consistent with market expectations, eliminated market concerns about recession, while retaining expectations for the Fed to cut interest rates. However, we noticed that some coincidences in these data appear "unreasonable". For example, in the PPI data, although energy prices were the same as last month, energy rose by about 2% year-on-year. Although this can be explained by exports and government purchases, the used car price sub-item in the CPI (-10.9%) is unreasonable.
Overall, although the recent CPI, PPI, retail and PMI data are in line with expectations, there are doubts, such as the fluctuations in energy prices in PPI and used car prices in CPI. This shows that there may be deviations in the real data, which may further reduce the implied volatility of the market in the future.
