Economic Waves: Volatility Vantage

Top of the morning to ya! Or as my coffee mug likes to say, "Rise and whine!" 🌞☕

US equities are surging, driven by dovish comments from the Federal Reserve Chair, who has strongly hinted at an imminent rate cut, the first since March 2020. The market is now nearly certain of a rate reduction at the upcoming September 18 meeting. This sentiment is bolstered by last week’s revision of Non-Farm payrolls, indicating a cooling labor market and reinforcing the case for easing monetary policy. Consequently, US equities are nearing their record highs, while the cryptocurrency market remains disconnected and continues to lag. Meanwhile, Japanese equities have staged an impressive recovery, climbing over 20% from recent lows and erasing the losses incurred after the Bank of Japan’s rate hike.

This week, our Technical Analysis covers BTC and SOL. We cover SPY and GLD on stocks. Follow the detailed plans carefully and pull the trigger only at the recommended levels. Finally, we provide updates on trading exchanges, Crypto and the AI sector. Enjoy, and good luck out there.

We rode the wave!

• NVDA - NVDA at 128.50, called the short to 120, and it sunk to 123.4. Wavey!

• BTC - We dove in at $60.9k, eyeing key resistance at $62.8k and $64.6k, and rode the BTC wave all the way to $64.9k. Surf's up!

• SOL - We caught the Solana wave at $143, and it cruised up to $162.2. Surf’s up!

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The Wave

This week… there isn’t much on the macro front… 😭 other than earnings. We are holding on to minor NVDA Puts from last week as we await NVIDIA’s earnings report, which is expected to show significant growth due to strong AI demand. However, given the market's high expectations and the potential for volatility, we have prudently closed most of our positions to manage risk.

The US Core PCE Price Index, the Fed's preferred inflation measure, is set for release this week and will be closely monitored for its potential to significantly influence market expectations regarding the Fed's upcoming decisions. Recent data, including a cooler CPI print and a notable downward revision in the jobs survey, has set the stage for a potential rate cut at the September 18 meeting. The CME FedWatch Tool indicates that the market is currently pricing in a 25bp rate cut, with a full percentage point cut anticipated by year-end. In light of these developments, we are considering positioning ourselves in high-duration sectors such as Real Estate, Tech, Regional Banks (KRE), and small caps (IWM), pending further clarity from the PCE report.

Next week’s payroll numbers will be pivotal in shaping our strategy, offering critical insights into the labor market and potentially influencing the Fed’s next steps. Stay informed as we navigate these key developments.