Weekly Financial Update: October 13-21, 2022

Is Wall Street finally bottoming out? The main indexes hit the local bottom on October 13, with NDX100 reaching as low as 10,432, dragged by Tesla. Since then, the tech stocks recovered almost 7%, as risk appetite returned to the market. The euro and pound sterling started a recovery against the dollar. Cryptocurrencies continue to drift sideways, with the volume decreasing but the leverage increasing, which may be the calm before the storm. Check our Weekly Financial Update: October 13-21, 2022.

Weekly Financial Update: October 13-21, 2022: has the recovery begun?

Monday, October 17, was an excellent day for equity markets. Nasdaq 100 rallied 3.86%, Dow Jones gained more than 2%, and SPX100 3%. Dow Jones Industrial Average has shown a vital sign of a trend reversal since early October; with some price fluctuation, the index has gone up 6.8% from 28,571 to 30,634, beating the significant 30k resistance.

SPX500 weekly chart 17-21 Oct 2022 (Source: SimpleFX)

It comes after a mini-black Thursday. On October 13, the stock hit its lowest since November 2020, and there have been severe signs of recovery since then.

The treasury yields reached 14-year highs overnight last week, another reason the equity markets fell. The main reason for the sell-off stays the same. Investors may wonder if the Federal Reserve may push the economy into a recession with a highly aggressive monetary policy. The severe rate hikes increase the cost of money, and cheap credit stops fueling bold ventures – like tech companies and cryptocurrencies.

Is Crypto volatile about to take off?

A report from Techcrunch says that despite the falling prices of cryptocurrencies (the total market cap is down 58% in the last 12 months), the number of qualified WEB3 developers and engineers is snowballing. They are attracted by projects like blockchain smart contracts and decentralized applications (dApps).

The last week was quiet for the crypto markets. BTCUSD stays glued to the $19k support but can’t break the $20k resistance. Altcoins follow, with ETHUSD regularly bouncing off the $1,300 resistance, while ETHBTC stabilized between 0.066 and 0.068.

BTCUSD weekly chart 17-21 Oct 2022 (Source: SimpleFX)

The trading volumes on the leading crypto pairs also went down. The lower volatility convinces many traders to increase the leverage of their trades. In October, the futures estimated leverage ratio (ELR) for BTC, ETH, BNB, ADA, and DOT pairs rose. While this strategy proved profitable for many individual traders, there is a risk of a wave of liquidations. If the shorters or maxis are knocked out of their leveraged positions, we may expect a sudden surge in volatility.

Weekly Financial Update: October 13-21, 2022: A Positive BTC Funding Rate

On the bright side, the leading cryptocurrency exchanges have noted a positive BTC funding rate for eight of the last ten days. However, glassnode analysis suggests they are primarily bullish leveraged positions. They last while the BTCUSD trends sideways or increases, but liquidations are luring if we note a substantial drop.

Things to watch this week

Analysts agree that the capital has focused mainly on the central banks recently. Suppose you are looking for any news that will influence the price action. In that case, you should follow closely not only the interest rates decisions by the Fed, ECB, Bank of England, and others but also the press conferences and statements from the representatives of these institutions.

Bank of England Headquarter in London, Lombard Street View (Diliff, Wikipedia)

There are a lot of earnings reports coming up in October. Stay tuned for your company’s financial results.

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