Did Jerome Powell Just Kill the Bulls?
Crypto & Stock Market Update
Happy Friday! Yesterday was one of the worst days for equities since September, following the FOMC’s decision to raise interest rates by half a point to 4.25-4.50 target range. During the press conference, Chairman Powell more or less held the line on his talking points from November’s meeting.
Powell also said he doesn’t believe the US is in a recession.
In this quote I meant to say systemic rather than systematic. The two are similar but convey different meaning.
But JP makes it abundantly clear there is no path to getting the economy back in shape that doesn’t involve significant pain. Jobs will be lost, wages will suffer. 2023 will be a tough year in the US for some.
The Fed will have to break some things to fix others. Sounds like a mess, right? Welcome to the afterglow of modern monetary theory!
To the charts!
Bitcoin
The weekly chart for Bitcoin is important right now, because it removes any doubt about the high-timeframe bias. Here’s a snippet from last Friday’s update:
“If bulls get continuation here, they may press toward 18-18.4k resistance in coming days. A rejection there could set up a weekly bear flag, in which continuation toward 14k ensues. A weekly close above 18.4 would present a case for bulls, who would then be targeting the last weekly lower high near 21.5k.”
Bitcoin pretty much tapped 18.4k on the nose yesterday prior to the FOMC decision, after which it rejected heavily as the US dollar rallied on the news of a 50bps rate hike.
High-timeframe bias remains bearish for BTC as it was unable to get above 18.4k and so far it’s shaping up to be a pretty nasty weekly candle. However, we still have a few days to go.
BTC Weekly Chart
Scrolling down to the 4H on BTC, the level to hold is 17.2 diagonal support. If bulls are able to push above 18.4, they’ll try to make a run at 20k.
BTC 4H Chart
Ethereum
ETH went right to $1355 resistance on Wednesday morning, but failed to close above the red horizontal and diagonal levels. That means it may wander down to $1140 or $1000 levels in coming weeks. On a successful flip of $1355, bulls would be targeting $1500.
ETH 3-Day Chart
S&P500 Stocks
Last week I was cautionary/neutral on SPY after the diagonal resistance target was met. There’s a good chance we set a higher low before EOY, and the initial level I’m looking at is around 380. If there’s no bounce there, the 362-372 golden pocket area is the next major zone.
It was quite a run up from the lows (348-410) and after an 18% move, it’s normal to see some correction. However, I’ll err on the more cautious side until bulls break that downtrend diagonal.
SPY Daily Chart
US Dollar Index
The dollar index has reached the level we’d been waiting for at the June lows. This is a likely area to bounce. Just for a hypothetical scenario, I’ve shown how this may play out as a head & shoulders pattern before coming back and breaking to new lows. A close below 103.40 would negate the bounce and send it toward 101.3 in the short term.
DXY Daily Chart
Bitcoin vs. Nasdaq
This chart still looks like a bear flag with the ratio now hitting resistance. It was interesting how well Bitcoin held today with the US stock indexes down 2-3%. If this strength continues and BTC/NAS is able to get back above this resistance, that will be a notable change in behaviour.
BTC/NAS100 Daily Chart
Bitcoin Dominance
Bitcoin dominance continues to look like it’s bottoming, and a move above 42 will solidify that. This is a tricky place to trade altcoins as a result. We need to see which way Bitcoin is going to break and then it will be easier to predict alts.
BTC.D Weekly Chart
Stay tuned for a macro update later this weekend!
