This is NOT investment advice.
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Bitcoin Higher/Lower TF, Out of Jail?
Some macro/FA type of things have shifted for BTC in my view:
1. Not fixated on rate cuts. Powell, in my humble view, just reiterated what he said at the Fed Meeting . . . . . . . . which was that beyond some short term inflation and growth concerns he didn't see the tariffs as causing inflation. Also emphasized will have wait and see approach on rate cuts. That aside - more specifically what I mean with the 'Powell Put' is the admission/acknowledgement they need to prepare for full QT runoff and be in a position to launch an asset purchase program. This shifted BTC from Liquidity Rug Pull to It's Coming Eventually. This Put, in my humble view, is for BTC and bonds and not equities.
2. Tariffs as deployed increase the odds that China either A) unleashes unprecedented stimulus, or B) devalues the Yuan, or Both. Bitcoin likes this. Bessent doesn't sound like they will be timid with China and/or the main conduits highlighted by the big numbers on the board (Vietnam, Cambodia for example).
3. StableCoins picking up steam and SEC victory. Clearer path for StableCoin adoption. Clearer path for Tether on Lightning Network. Bitcoin likes this.
4. Land values even rose in more than half of Japan's rural areas on top of 4 straight years of land value gains overall. If Japan is out of deflation more pressure on BOJ to be Hawk = stronger Yen = lower JGB prices . . . . . . . . . . . which is also more incentive for China to gain even more export share with a deval while also in a way forcing Japan to seek those Dove days as well. Bitcoin might really like where this goes (think it through and see how BOJ placed itself in Checkmate).
There is a lot of discussion now concluding Bitcoin has shaken loose from the QQQ at the half mile pole so to speak and now runs free. I need confirmation to make me feel more confident in that. After all, same players that helped create the surge in upside volume Nov-Dec should be all over a major trend change should there be one.
- Money Flow on Higher TFs Green
- Volume backing it up
- at least be moving towards 91K if not above it and testing it
I would say it's "held up well" against the bloodbath last few days, but far from breaking away and decoupling as of yet. Show me the volume and conviction.
Risk On vs Risk Off
QQQ offered multiple warnings. Still looks very ugly on higher TFs.
If earnings start falling (about 40% of S&P 500 revenue is from overseas), the multiple would expand meaning prices would have to fall even more to close this gap . . . . . . . . . . not exactly cheap here even after the pummeling:
HY spreads on the move quick, but still below absolute levels of SVB 2023:
Projected Spider Vol next 30 days way above the volatility of the vol measurements themselves saying it's a one way street down (or elevator I suppose). So, must bounce at some point right? Or, why is the market thinking this is only going one way?
All that said, personally I'm getting more intrigued by jumping on something for longer than a 4HR candle at some point. Was expecting another flushing out and another purge of Risk. Is this enough or is it over?
My instincts tell me the final purge is not yet complete as the higher TFs are just simply so atrocious. However - social media posts mentioning tariff concessions can literally move SPY futures completely, so who knows. Light and nimble on those shorter TFs I'll let it try and prove it to me.
Enticed by small caps - beaten to hell here but might be the biggest beneficiaries. Add a little on a counter-trend move if it's there perhaps. Need volume and confirmation for more commitment.
Again - light and nimble, check out the liquidity tightening for the ES (this is the futures contract for the S&P 500 fyi, more or less the tip of the spear for equity movement). Can get worse, just check out August of 2024 so light and nimble it can and will swing around (from ZeroHedge.com).
Bessent again made a concise comment about this Trade War regarding surplus versus deficit nations in terms of manufacturing and production. America already has a well ingrained culture where domestic consumption is not only common it's arguably excessive for most of the population. Other nations (in fact more so those that tend to be large exporters) simply don't have a population that consumes nearly as much. Who do you think is going to ultimately win this Trade War? They're not buying hardly anything from America as it is, so what if they threaten to buy even less (well, except for buying less UST, see my prior speculation about tying tariffs to UST buying).
Near Term Forward Spread
The market's opinion now about where it thinks the 3-month T-Bill rate will be in 18 months relative to today's 3-month T-Bill rate:
What Makes Powell Cut
2YR closed slightly above the lowest weekly closes around when Powell cut by 50BPS in September of 2024.
I'm aware that the market expects more cuts now and there is even chatter of an emergency cut. Next Fed Meeting is in May. That's a long time. Naz could easily fall another 30% before the next Fed Meeting. Nonetheless - I still don't see cuts as a response simply to falling equities. I could be way off. Seems different. Need to see something break like the Discount Window bursting with activity, bank equities really tanking, inter-bank rates exploding, plumbing clogging up. Then again - wasn't that long ago (2020) this same Fed more or less opened up the SWAP lines and started buying junk bond ETFs. I see these three below or some combo/variation as pushing them to act sooner than planned if it were to happen:
Bond Market Threats/Instability
Banking Liquidity Problems
Hard Data Labor Market
Oil and Copper
Difficult to emphasize too much how big of a role crude oil plays in the global economy.
Red Arrow and Circle - 'Biden' took a butcher to drilling and leasing. This literally set the fuse on inflation.
Blue - Lack of legitimate and credible global economic growth puts lid on prices.
Green - Oil been getting crushed lately, and just as it lit the fuse of inflation can light the fuse of deflation (short and intermediate term) in energy and food.
How can you make the global economy function right here and now without petroleum? You can't.
How does the majority of the world eat with food (that they aren't growing themselves) so close to their place of residence? Because oil and fossil fuels ensure the supply chains get the food out to the people.
Not a miracle or panacea but making food and energy abundant and priced efficiently would be a big boost to the entire global economy over time.
And copper:
Shake things up in the short term with weakness, high volatility, tariffs, sentiment plummeting, etc. - oil gets whacked and copper gets pushed down a bit into a correction/consolidation. Helps to try and contain core inflation components where we can have an impact on supply/demand, logistics, and supply chains.
JGB Vol
Is this another signal about turmoil and tensions ahead? Check out the Bond Vol in Japan. Tariffs tank exports tanks the Nikkei flight to doomsday in JGBs . . . . . . . . . . . but the inflation data is building and BOJ is supposedly a Hawk? If tariffs hurt exports in the short run, how will Japan compete with other nations weakening currencies when it needs to strengthen its currency to contain food and energy prices for its population? Extreme volatility. BOJ in Checkmate. Oh yeah, the BOJ owns more than half of the JGBs already.
Two New Growth Areas Consistently Emphasized in Trump Reset
AI and Bitcoin. AI and Bitcoin. AI and Bitcoin.
DC Area Labor Market
As stated earlier, hard labor data that confirms job losses is something that would possibly nudge the Fed into actual cuts, but it has to be beyond anecdotal and beyond just one scenario (more than just the DC area).
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