ProfZero likes relief trades, but calls BTC overheat for now 🤒

31 мая 2022 г.

INVESTMENT CONTEXT

• After choppy negotiations, the EU finally agreed on May 31 to ban oil and petroleum products from Russia, with a temporary exception for imports carried via pipeline
  
• Inflation reading in EU for the month of May scored 8.1% on a yearly basis, well above median analyst estimates of 7.8% and April 7.5% reading, underscoring inflation is still far from having peaked
  
• Insider buying at S&P 500 companies in May has been the strongest since March 2020, signaling that blue chip executives have called the bottom on their stocks
  
• President Joe Biden said on May 30 that the U.S. will not send Ukraine long-range rocket systems that could attack Russian territory, in an apparently de-escalatory move
  
• Blockchain assets confidently extended gains even as market sentiment persists in Extreme Fear territory, with BTC attempting to regain 32k in upward channel breakout
  

PROFZERO'S TAKE

• ProfZero reads the latest signals from the West to Ukraine as underwhelming, and only mildly conductive of greater resolve to bring the conflict to an end. In fact, ProfZero and ProfOne already remarked the faltering cohesion of the bloc on crude oil could only translate into yet deeper fractures on natural gas, especially as the buy season for winter 2022-2023 is now reaching its peak
  
• Russia has signaled its willingness to facilitate the unhindered export of grain from Ukrainian ports to destination countries, in coordination with Turkey. The move may represent a major relief to several Middle Eastern and North African economies (Egypt, Lebanon, Libya and Tunisia in particular) that rely for at least half of the daily cereal supply from Ukraine - and a deflation factor on soft commodities at large
  
• ProfZero highly values insider buying to read bull cycles - definitely another relief element in the picture
  
• ProfZero is amongst those not caught off-guard by EU spike in inflation in May. As it was shared for the past month, there simply is no corner of the economy as of now from which price decreases could originate. Brent prices in fact keep swelling, and on May 30 they broke through USD 120/boe, a major technical as well as fundamental indicator; the embargo on two-thirds of crude imports from Russia certainly will not contribute to bringing prices down. With the ECB still expected to officialize its monetary policy, it is easy to see mounting pressure to for tighter interest rate increases - with all too known prospective effects on markets
  
• The two-day rebound staged by blockchain assets has reached a standstill, with BTC nonetheless trading firmly above USD 31.5k, pulling up the entire asset class (noteworthy overperformance of Layer-1 asset ADA, up 45% in 3 days). Yet ProfZero sides with rather bearish analysts, interpreting the rally as largely a relief trade out of oversold territory. Still, seeing BTC breaking out of the 2-week range-bound channel and potentially setting for leg (D) of a bearish Elliott wave may concur to moderately optimistic scenario in the short term
  

PROFTHREE'S TAKE

• ProfThree and ProfZero agree - it’s time to talk about gold. Bullion has historically been responsive to changes in the Fed’s monetary policy, as well as to fluctuations in bond yields and US dollar. ProfThree doubts the recent slowdown in U.S. Personal Consumption Expenditures (PCE) print points to the peak of inflation already being at our back; in fact, the +50bps interest rate hikes expected for July and August are clear pitfalls ahead for zero-yielding gold. On a balancing note, ProfZero and ProfThree concur gold shall still enjoy price support on persistently higher inflation, and on Central Banks bolstering reserves in the wake of volatility