SignalPlus Macro Research Report (20231017): Crypto market trading volume continues to decline, and we need to be wary of violent market fluctuations

The market was relatively calm yesterday. As the recent Israeli-Palestinian conflict did not escalate sharply, investors risk aversion was temporarily suspended. The SPX index rose by 1%, crude oil fell by 1%, gold fell by 0.6%, and the 30-year yield rose by 11 basis points. This is the fourth consecutive session of +/- 10 basis points moves in long-dated yields.

Fed officials continued to make dovish remarks, with Harker saying I dont see a significant change in the data... We can keep interest rates unchanged for now, adding that it will take some time for the impact of high interest rates to be fully felt. The Chicago Feds Goolsbee mentioned that the recent price slowdown is undoubtedly a trend, not a blip, paving the way for Powells dovish stance ahead of Thursdays FOMC silence period.

In terms of economic data, the U.S. New York Fed manufacturing index fell 6.5 points to -4.6 in October, the employment index rebounded to 3.1 after falling to -2.7 in September, while new orders fell back to -4.2 after rebounding in September, and the price paid There was little change, but the price charged dropped 7.9 points to 11.7, indicating continued price slowdown.

The upcoming retail sales data is the main data this week, and some earlier indicators have shown signs of weakness. Citigroups total credit card spending fell 0.47% month-on-month in September, and all major categories fell.

From a risk perspective, the market appears to be getting more optimistic, with markets down 4.9% in September, according to Citi, due to strong earnings expectations during earnings season and an overreaction in the stock market to recent interest rate moves, but realized volatility was only 10.3 %, was the least volatile decline in the past 90 years, which means that the risk sell-off in the stock market appears to be very orderly, within the bounds of normal portfolio management, and most importantly, there are no surprises in the value at risk (VaR) market. This has helped risk parity and volatility control funds stay afloat, as these market participants have not suffered too much and can continue to hold positions despite the sharp surge in yields.

From a risk hedging perspective, the market has been actively buying quality assets and taking protection from higher rates, as evidenced by the contrast between the implied volatility premium and realized volatility in these categories, which may indicate market sentiment towards the near term. Interest rate changes and geopolitical risks are fully hedged, and the market may not necessarily go down in the short term.

In fact, the call/put ratio for SPX 0 dte (zero days to expiration) options has risen to its highest level since late summer and trading volume has been increasing, showing that the market has tended to adopt a more risk-on stance amid the recent decline in stock prices. .

For the upcoming earnings season and FOMC meeting, options pricing indicates an average daily volatility of 4.3% (compared to 3.9% last quarter), while expected volatility will have little impact on economic data ahead of the Fed meeting and non-farm payrolls data. What a reaction.

On the cryptocurrency side, BTC briefly jumped 8% yesterday on news from Cointelegraph that Blackrock’s iShares BTC spot ETF had been approved. However, the asset management giant quickly denied the news, causing most of the gains to quickly retrace. However, as of this writing, BTC is still up around 4%.

With the approval of a BTC spot ETF likely just a matter of time, the GBTC NAV discount is shrinking every day. However, it’s worth noting that BTC’s outperformance has not spread to the entire cryptocurrency space, with its performance single-handedly outperforming ETH, most Altcoins, and For other related stocks, the overall risk sentiment is still weak, and the secondary market trading volume is very low. As we approach the SECs decision, it is expected that violent intraday fluctuations like yesterdays may occur again.

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