Turn around Tuesday, housing peak, bitcoin moment

Blue Origin’s successful first astronaut flight to space gave Wall Street a nice distraction before the open.  Jeff Bezos, the richest human in the world and founder of both Amazon and space tourism company Blue Origin, earned his astronaut wings after flying to the edge of space.  Amazon shares rose slightly following the successful flight. Following yesterday’s raucous stock market selloff, much of Wall Street held onto optimism that the cyclical rotation is not dead, just deferred and that the theme of recurring fresh record highs will eventually continue once this latest wave of COVID concerns ease.

While many earnings conference calls continue to suggest management has no hesitancy offsetting rising input costs by pushing through price increases, the Biden administration pointed out they are seeing some signs of relief over the global semiconductor supply shortage.  One of the biggest drivers of inflation over the past couple of months has been surging new and used car prices, which could start to see some relief now that automakers are seeing a gradual increase in supplies.  If the transitory inflation argument wins, then the cyclical boom in stocks could very much continue a little while longer.  Don’t count out cyclical stocks as they could thrive on a lower interest rate environment and an extended economic growth outlook thanks to expectations for more fiscal support from the Biden administration.

Has the housing market peaked?

The housing market is still the bright spot of the economy, but signs are emerging that the peak is in place.  Housing starts jumped to a three-month high as Americans continued to buy single and multi-family homes.  The June housing starts headline rose 1.643 million homes, better than the 1.59 million consensus estimate and 1.546 downwardly revised prior reading.  Building permits, a leading indicator for starts continues to slide, dipping from 1.683 million to 1.598 million.  With mortgage applications maintaining a declining trend, it looks like the housing market has peaked even as Treasury yields continue to flatten.

Bitcoin

For some bitcoin traders, the plunge since the April highs is merely a flesh wound, while the consistent chorus of bitcoin bears rejoice that the end is nearing.  The majority of the growing cryptoverse appears committed to buying digital assets in the future according to the latest survey by Fidelity.  It appears the risks are still to the downside for bitcoin but today’s resilience above the USD 29,500 level is a promising sign that institutional investors are buying the dip.  Regulatory and environmental concerns will likely keep bitcoin heavy but improvements on both fronts should happen before the end of the year.

Bitcoin could have made a run towards USD 30,000 if it were not for the news that the EU Commission is proposing a revamp of anti-money laundering rules including banning anonymous crypto asset wallets did not help sentiment.  Bitcoin may struggle to attract massive inflows until after the Fed releases their paper on digital assets in September.  Bearish sentiment is fully in control right now but if bitcoin doesn’t plunge over the next week or two towards the USD 20,000 level, institutional investors are ready to place big long-term bets.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya