Where can FED's pain get us
Hot topic right now is J Powell's promise to fight inflation no matter what the cost until people feel the "pain" and change their habits. As we know recent rally on risk-on assets show us how eager investors were to get bullish even though there was no real evidence of FED Pivot coming. I have no doubt larger players used that opportunity to dump unwanted stock on already hyped retail that will be scrambling this week to offload their shares if we continue to fall with same pace as Friday 26th of Aug.
This week having few FED members speak should only re-iterate all that was said recently offering no dovish views, plus unemployment data is unlikely to change anything either (last month's NFP numbers were double the consensus yet the consensus is again the same, could have another surprise).
Really the only question now should be how low we will fall on risk-on assets and SPX is a good chart to look at for that purpose, considering Digital assets like Bitcoin will go with the flow of what equities do.
Chart pattern on SPX is very clear as we bounced off the top of the wedge, heading now to AT LEAST, tag the last low, but imo breaking to new lows in 3300-300 range is very likely by early October. That is all assuming a normal pace of movement no extra events that could add to volatility like any new war or unexpected events.
Worth watching VIX at the same time and see where we are on SPX once it starts going above 34 (usual target for VIX in any recession like situations is above 40 which we have not reached this time yet).
What does that drop mean for the likes of BTC and ETH?
Usually Bitcoin doubles the rate of the fall on equities so I would at least expect a drop between 20-35% from here, giving us a likely target of 13-15k in September. With ETH it is difficult to predict with merge happening around 14-15th of Sept how despite falling equity prices this asset will act, but assuming it won't break the overwhelming selling pressure I would expect it to pause between 900-1200.
In general with one more CPI reading in Sept if we are really low on SPX already and CPI shows lower than expected it could give it a small temporary boost, but no FED pivot coming anytime soon, thus no break in Down trend to be expected.
This week having few FED members speak should only re-iterate all that was said recently offering no dovish views, plus unemployment data is unlikely to change anything either (last month's NFP numbers were double the consensus yet the consensus is again the same, could have another surprise).
Really the only question now should be how low we will fall on risk-on assets and SPX is a good chart to look at for that purpose, considering Digital assets like Bitcoin will go with the flow of what equities do.
Chart pattern on SPX is very clear as we bounced off the top of the wedge, heading now to AT LEAST, tag the last low, but imo breaking to new lows in 3300-300 range is very likely by early October. That is all assuming a normal pace of movement no extra events that could add to volatility like any new war or unexpected events.
Worth watching VIX at the same time and see where we are on SPX once it starts going above 34 (usual target for VIX in any recession like situations is above 40 which we have not reached this time yet).
What does that drop mean for the likes of BTC and ETH?
Usually Bitcoin doubles the rate of the fall on equities so I would at least expect a drop between 20-35% from here, giving us a likely target of 13-15k in September. With ETH it is difficult to predict with merge happening around 14-15th of Sept how despite falling equity prices this asset will act, but assuming it won't break the overwhelming selling pressure I would expect it to pause between 900-1200.
In general with one more CPI reading in Sept if we are really low on SPX already and CPI shows lower than expected it could give it a small temporary boost, but no FED pivot coming anytime soon, thus no break in Down trend to be expected.
For more info please check my newsletter - thecryptog.substack.com/
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.