Week 3

Weekly Trader's Market Outlook.

Author

Diego Sonderberg
January 12, 2025

Welcome to the weekly UpCrypto Trading Newsletter.

Brief Overview

  • What does Week 3 bring?
    Key economic data such as CPI, PPI, Retail Sales, and Jobless Claims will set the tone for markets.

  • Weekly Market Wrap:
    Markets digested strong labor data, higher bond yields, and rising inflation expectations last week.

  • Earnings Highlights:
    Major banks including JPMorgan, Goldman Sachs, and Bank of America kick off the Q4 earnings season.

What does week 3 bring?

Monday, January 13:

  • Monthly Budget Statement šŸ“Š
    December's budget deficit is expected at -$67B. This data provides insights into government spending trends and fiscal policy.

  • Earnings Reports šŸ“
    KB Home (KBH) releases earnings, offering a view into housing market dynamics.

Tuesday, January 14:

  • Producer Price Index (PPI) šŸ­
    A 0.3% increase is forecasted, slightly below last monthā€™s 0.4%, indicating moderating wholesale price pressures.

  • Earnings Reports šŸ“
    Applied Digital Corp. (APLD) and Calavo Growers Inc. (CVGW) release results.

Wednesday, January 15:

  • Consumer Price Index (CPI) šŸ“ˆ
    The YoY CPI is expected to rise to 2.8%, while Core CPI remains steady at 3.3%. This data will heavily influence market sentiment regarding inflation trends.

  • NY Empire State Manufacturing Index šŸ“‰
    Januaryā€™s reading is expected at -1.8, reflecting contraction in manufacturing activity.

  • Fed Beige Book šŸ“–
    This report will provide qualitative insights into economic conditions across the Federal Reserve districts.

  • Earnings Reports šŸ“
    Major banks kick off Q4 earnings: JPMorgan Chase (JPM), Wells Fargo (WFC), Goldman Sachs (GS), and Citigroup (C), among others.

Thursday, January 16:

  • Initial Jobless Claims šŸ“‰
    Jobless claims are projected to remain steady at 210K, a key indicator of labor market health.

  • Retail Sales šŸ›’
    A 0.5% increase is expected, signaling resilience in consumer spending post-holiday season.

  • NAHB Housing Market Index šŸ 
    Forecasted at 47, this index provides a snapshot of builder sentiment amidst high mortgage rates.

  • Earnings Reports šŸ“
    UnitedHealth Group (UNH), Bank of America (BAC), Morgan Stanley (MS), Taiwan Semiconductor (TSM), and others report earnings.

Friday, January 17:

  • Building Permits & Housing Starts šŸ—ļø
    Building permits are expected at 1.46M, and housing starts at 1.31M. These metrics provide insights into the health of the housing market.

  • Earnings Reports šŸ“
    Companies such as Truist Financial (TFC), Schlumberger (SLB), and Delta Air Lines (DAL) release earnings.

Weekly Market Wrap before the Outlook

Markets Digest Strong Employment Data and Rising Inflation Expectations
Last week was dominated by significant economic data releases that shaped market sentiment:

  • Nonfarm Payrolls (NFP): A robust 256K jobs were added in December, far exceeding the expected 165K. While this highlights a resilient labor market, it increases the likelihood of the Fed maintaining its hawkish stance.

  • Unemployment Rate: In line with expectations at 4.1%, reinforcing a stable employment landscape. Good for the economy but bad for the market in the shortterm.

  • CPI Expectations: Rising inflationary pressures and the Fedā€™s cautious tone have dampened hopes for multiple rate cuts in 2025.

Key Insights from Last Weekā€™s Analysis:

  • The SPX printed another lower low, confirming a bearish market structure. A CPI print below expectations this week could counter this narrative and provide relief for risk assets.

  • TOTAL2 Macro Update: Altcoins faced resistance at key levels, but funding rates and open interest suggest a healthier market environment compared to December.

  • The dollarā€™s strength post-NFP limits the Fedā€™s flexibility for aggressive rate cuts, adding pressure on risk assets like crypto.

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Crypto and Market Outlook for Week 3

Inflation Data and Trumpā€™s Inauguration Take Center Stage
This week brings two pivotal events that could shape market dynamics in the near term: the CPI print and Trump's inauguration.

CPI Print (Wednesday): A YoY CPI increase to 2.8% is expected, with Core CPI steady at 3.3%.

  • As noted in our analysis on 12/31, a CPI below expectations could counter the narrative that fewer rate cuts will occur in 2025. This would provide relief to both stock markets and speculative assets, potentially reversing the bearish trend seen in the SPX. A higher-than-expected CPI, however, would likely intensify concerns about the Fed's hawkish stance and pressure risk assets.

Trumpā€™s Inauguration (Thursday): The market is closely watching Trump's return to office for signals on economic and monetary policy.

  • If Trump signals support for pro-growth policies, such as encouraging additional rate cuts or advancing crypto-friendly regulation, it could act as a bullish catalyst for both traditional and crypto markets. Conversely, if his policy outlook appears restrictive or ambiguous, it may exacerbate market volatility.

Market Approach: Gradual Position Building
Given current market conditions, disciplined strategies like DCA (dollar-cost averaging) remain prudent. As the funding heatmap stabilizes and open interest levels normalize, the market appears healthier than it did in December.

Cycle Patterns and Historical Parallels
Bitcoinā€™s current price action mirrors past January corrections, particularly those that coincided with U.S. presidential inaugurations in 2017 and 2021.

  • If history repeats itself, as seen in previous cycles, we could witness a significant rally in February and March. Trumpā€™s policies, especially regarding crypto, could act as a similar catalyst to the BTC ETF launches of prior cycles.

Potential Risks and Opportunities:

  • Risks: Elevated inflation, a hawkish Fed tone, or unclear signals from the inauguration could prolong bearish sentiment.

  • Opportunities: Positive CPI surprises or pro-crypto moves by Trump could reignite bullish momentum, pushing Bitcoin past $100K and lifting the broader crypto market.

Conclusion

Week 3 is poised to be a defining moment for both traditional and crypto markets. Key events such as the CPI release and Trumpā€™s inauguration will likely determine whether markets stabilize or face renewed pressure.

Investors should stay cautious, focusing on long-term strategies while remaining vigilant for short-term volatility triggered by macro developments.

Traders should stay cautious and attentive to macroeconomic developments while positioning themselves for potential opportunities. As always, weā€™ll keep you informed with updates and insights throughout the week.

Here's to a successful week, and stay tuned for more weekly outlooks on the crypto and financial markets.

Best regards,
your UpCrypto Team!

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