SignalPlus Macro Report (20230721): Nasdaq Falls on Tech Stocks Impact, Leading to Cryptocurrency Market Correction.

NASDAQ experienced a significant adjustment last night after a round of short squeeze. I mentioned last week that liquidity is the main factor restricting the extent of the risk assets' rise before the end of the Fed's rate hikes cycle. Reflected in the market, in addition to the siphon effect between asset prices, an important indication is the continuous low volume in the options market. The trading and open interest of NDX futures options have been declining, and the short-term implied volatility in the crypto options market has reached historically low levels below 3. Unlike the decrease in options trading driven by the low actual volatility in the past, the continuous decline in risk asset implied volatility in this round is mainly due to concerns about the Fed's continued rate hikes and the adoption of conservative strategies.

In the face of strong economic data and the dual blow of underperformance in tech giants Tesla and Netflix, the Nasdaq fell 2% yesterday, marking the largest single-day decline since April. Initial jobless claims this week were only 228,000, lower than expected and the lowest level in two months, indicating that the U.S. job market remains strong and ignoring pessimistic expectations of an economic downturn.

In terms of corporate profits, Tesla's stock price fell by about 5% due to a decrease in profit margins and concerns over a budget expenditure that exceeded expectations by $1 billion. Although production is estimated to reach 1.8 million vehicles this year, meeting market expectations, sales have not kept up, and inventory has been slowly rising. In addition, investors were disappointed by the lack of further confirmation on the delivery of the Cybertruck in 2023, the sudden end of the earnings conference call, and Musk's response regarding how long the production line will be suspended in the third quarter.

Netflix is another tech giant that has disappointed investors, as its estimated Q3 revenue of $8.5 billion is lower than expected ($8.7 billion), resulting in an 8.4% drop in its stock price, the largest decline since December last year. Despite an 8% increase in subscription numbers, sales only grew by 2.7% to $8.2 billion, and single customer profit has decreased.

The US bond yield has experienced a steep bearish trend, with the overall curve rising by 12 basis points, mainly influenced by the trend in initial jobless claims and poor secondary market liquidity. Market pricing indicates a probability of around 100% for a rate hike next week, but as the Fed's tightening cycle nears its end, the likelihood of another rate hike is only about 25%.

Regarding the issue of low liquidity, July has the opportunity to become the second slowest trading month in over two years. However, we will experience two one-time stock events in the next few days. On Monday, the Nasdaq index will undergo a special rebalancing to reduce the dominance of tech giants and increase the weight of other index constituents. JPM estimates that the trading volume from this rebalancing alone will exceed $60 billion.

In addition, $2.4 trillion worth of US stock options will expire on Friday, and due to the continued risk appetite, it is expected that a large number of call options will continue to roll forward.

There is not much news about digital assets, and spot prices still face pressure. BTC has failed to break through the resistance level of $30,000. However, influenced by the court ruling, XRP has now replaced BNB of Binance as the fourth largest token by market capitalization, and it is expected to further expand this leading advantage in the foreseeable future. In terms of volatility, the market is mainly selling bullish options, and the volatility is still low. According to exchange data, the open interest of bullish options is almost twice that of bearish options.

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