Risk has its first wobble of the year

This Daily Digest will cover:

• 👀 Risk has its first wobble of the year
• 🪙 Crypto retreats but only gently
• 📊 Correlations continue to give mixed signals

Yesterday was a familiar story for most of the day as the USD sold off, crypto was bid pushing the next set of key break up levels and stocks were in the green and looking strong.

Then the plethora of central bank speaker comments, highlighted in yesterday’s piece, took their toll. There was a real sense of a final hurrah from some of the FOMC members all calling for higher terminal rates and higher rates for longer. Stocks gave in first with the S and P falling over 2 percent. Crypto rolled next as 21500 and 1620 proved a bridge too far in that environment. Finally the USD tried to join the party as Euro retreated a cent after posting a marginal new high for the year.

The outlier to the move was US yields which sold off hard yesterday morning and did not join in the afternoon turn around. This makes me think the sell off in stocks is more driven by recession fears and potential disappointment in earnings rather than a more wide spread risk asset move.

I find myself trying to be very selective today as in this environment asset class stories can actually shine rather than a broader theme. This leads me to focus on Crypto for now as we could be heading for a scenario where traditional stocks suffer but high beta risk assets can outperform and the USD can lag.

I remain in buy the dip mode for BTC and ETH and whilst 1500 looks a great entry point, the chart of the day shows the gap up a week or so ago when the move really gathered pace. I hate gaps on charts as they invariably get filled at some point, so whilst I have bought a little into the sell off yesterday I will treat 1460 as the perfect adding level with a stop sub 1350.

Good luck as always.