Big Tech earnings to set the tone for the market this week

TLDR

• Bitcoin has rallied but needs to break past $31-32k resistance to sustain a move.
• Big Tech earnings and forward guidance will likely drive markets this week.
• Key economic data like Core PCE and spending could impact stocks and yields.
• While crypto sentiment has improved, caution is still warranted at current levels.

Disclaimer: Not financial or investment advice. Any capital-related decisions you make are your full responsibility.

Is this where Equities begin to crack?  

As Gold moves higher and the DXY (the Dollar Index) holds at its highs, this is a generally risk-off environment. This is perhaps why we're seeing the S&P sell down, opening this week with a new low. However, the US market opened today (23/10/23), with buyers beginning to step in. The S&P is close to oversold levels; so, we could get a relief rally from this.

This week's big focus is corporate Earnings, particularly that of the Big Tech firms. 

The expectation is for earnings to be positive. This introduces a relatively high expectations bar for earnings to beat. Yet, Big Tech, and therefore, the S&P, needs better-than-expected earnings to go higher. 

However, if earnings aren’t as good as expected, but the forward guidance delivered by the Big Tech firms is still positive, this may help the S&P rally. 

What many market participants will be looking at is the forward guidance. How strong is the consumer? If the consumer is weakening, how material is this weakening and when do the firms expect this to show up in the earnings picture? These questions and answers will likely dictate the S&P’s direction over the coming weeks. 

Data 

This week’s key data are the ‘Core PCE Price Index’, ‘Personal Income’ and ‘Personal Spending’. Core PCE is expected to come in at 0.3%, greater than last month’s reading of 0.1%. Income and spending came in at 0.4% last month and are expected to remain hot this month, with the consensus being at 0.4% and 0.5%, respectively.

If this data surprises to the upside or downside, then this also has the potential to move the markets. There is more chance of an upside surprise, which may see the S&P sell down and Bond Yields go higher. 

Bitcoin and Alts rally, but is this move sustainable? 

The Bitcoin move has been nothing short of phenomenal so far. We note that sentiment has drastically improved, which is clear on Crypto Twitter. However, Bitcoin is technically still within its range, having not broken above the $31,300 to $32,000 resistance area that marked the last range highs in July of this year. This may be market participants front-running the ETF news. It’s highly expected that a Bitcoin ETF will be approved in the coming months. This past week's positive price action is front-running this future news.  

When you then look at ETH, ETH has under-performed Bitcoin, with some major alts performing really well that have, in previous months, been greatly oversold on larger timeframes. Again, ETH is potentially playing catchup here. 

We still see the $31,300 to $32,000 area for Bitcoin as the crucial area to break out from, and until that happens, we suggest caution rather than fomo’ing into new positions at these current price points. 

What do we expect from markets?

Earnings will drive the market this week, along with the forward guidance given by the Big Tech companies. 

Due to a deteriorating macro environment, we still believe that risk assets (the S&P and crypto) will pull back considerably further in the coming 2-6 months. Hence, we suggest caution and maintaining USDT on the sidelines to scale into positions (buy Crypto) in the coming months).

Cryptonary’s take 

Here’s how to play Bitcoin here.

The crypto rally has been impressive, but maybe front-running positive news like a Bitcoin ETF approval. While sentiment has turned bullish, Bitcoin is still stuck in its range. Stocks face a key test with earnings this week. 

Though further pullbacks in risk assets seem likely given the macro backdrop, these rises present a chance to scale into positions. As always, be cautious at current levels and ready to buy potential dips ahead.

As always, thanks for reading.

Cryptonary, OUT!