Bitcoin’s rally looks strong on the surface, but beneath it the market is approaching a critical zone where relief turns into decision.

Bitcoin

Bitcoin had a strong week, pushing up to just under 98K, and closing the week at around 95K. In the area near 98K we are seeing clear profit taking. Many market participants who missed the top in October are now attempting to exit between 98K and 102K, worried they may be front run before Bitcoin reaches the 50 week moving average. This entire move higher was supported by the 3D bullish divergence we identified in mid December.

In the short term Bitcoin looks constructive, as it has managed to reclaim the 94K area. On the macro level however the picture remains unchanged. Bitcoin has now recorded nearly 10 consecutive weekly closes below the 50 week moving average and outside the green parallel channel that defined the entire bull run. Combined with the Dollar Index sitting at long term range lows, this continues to support the view that Bitcoin has been in a bear market since October. I warned already in September going into October that the top was in. I opened shorts around 120K when Bitcoin formed a 3D bearish divergence together with a monthly divergence. When a weekly bearish divergence formed and retail euphoria peaked, I added to those positions. That view has not changed. Bitcoin remains in a bear market unless it decisively reclaims the 50 week moving average.

For those who missed the top, there may still be an opportunity to exit at favorable levels. A few weeks ago I opened a long position at 85K, which is currently up roughly 12 percent. The idea behind this trade is that Bitcoin historically tends to retest the 50 week moving average during bear markets before continuing lower. That average is currently sitting around 101.5K. If Bitcoin reaches that zone, I plan to take final profits on the long and begin building short exposure again.

SPX

The S&P 500 closed the week slightly negative at 6,940. On the higher time frame the index has confirmed a weekly bearish divergence. While divergences are generally less reliable in traditional markets than in crypto, they become more meaningful on weekly time frames and should not be ignored.

At current levels equities are not attractive to me. The S&P 500 is showing weakening momentum, trading near the upper Bollinger Band, while the Dollar Index appears positioned for a broader upside reversal on the macro level. If a correction unfolds and is accompanied by clear bottom signals and a volatility spike in the VIX, I will look to reenter equities. Until then, I prefer to take profits and remain patient.

DXY

The US Dollar Index reached the lower boundary of its long term parallel channel toward the end of last year and has since begun to reverse higher. It is now approaching the key resistance zone around 100. My outlook remains unchanged. I expect a break above 100 toward 105 and 110, and potentially even a move toward the upper range near 120.

This trajectory will largely depend on monetary policy decisions and geopolitical developments over the course of the year. Current expectations suggest the Federal Reserve will cut rates only twice this year, with the first cut likely in June. Inflation trends and labor market data will be decisive in shaping that path.

Economic Data, Rates and the Fed

This week delivered a heavy set of economic data, highlighted by inflation and retail sales reports. Inflation readings were mixed. Core CPI and core PPI came in slightly cooler on a month over month basis, while year over year PPI readings remained elevated. These inflation figures should be interpreted cautiously due to data distortions caused by last year’s government shutdown. At the same time, economic activity remains firm. Retail sales exceeded expectations, jobless claims stayed low, and the Atlanta Fed revised its Q4 GDP estimate higher to 5.3%, reflecting resilience in consumption, investment, and government spending.

Bond markets showed modest flattening. Two year Treasury yields rose to around 3.60%, ten year yields edged higher toward the 4.20% level, and thirty year yields remained largely unchanged. Market expectations for Federal Reserve rate cuts continued to decline. The probability of a 25 basis point cut in March fell to 23%, April dropped to 39%, and June eased to 80%. Strong economic data combined with only gradual disinflation has reinforced the view that the Fed is in no rush to ease policy, keeping upward pressure on yields and supporting a stronger Dollar backdrop.

Economic: no reports
Earnings: no reports

Economic: no reports
Earnings: D.R. Horton Inc. (DHI), Fastenal Co. (FAST), Fifth Third Bancorp (FITB), KeyCorp (KEY), Interactive Brokers Group Inc. (IBKR), Netflix Inc. (NFLX), 3M Co. (MMM), United Airlines (UAL), US Bancorp (USB), Zions Bancorporation (ZION)

Economic: Building Permits, Construction Spending, Housing Starts, MBA Mortgage Applications Index, Pending Home Sales
Earnings: CACI International Inc. (CACI), Charles Schwab Corp. (SCHW), Halliburton Co. (HAL), Johnson and Johnson (JNJ), Kinder Morgan Inc. (KMI), Knight Swift Transportation Holdings (KNX), Pinnacle Financial Partners Inc. (PNFP), Prologis Inc. (PLD), RLI Corp. (RLI), TE Connectivity PLC (TEL), Travelers Companies Inc. (TRV), Truist Financial Corp. (TFC)

Economic: Continuing Claims, EIA Crude Oil Inventories, EIA Natural Gas Inventories, Q3 GDP Revised Third Estimate, Initial Claims, PCE Prices, Personal Income, Personal Spending
Earnings: Abbott Laboratories (ABT), Alcoa Corp. (AA), Capital One Financial Corp. (COF), CSX Corp. (CSX), East West Bancorp (EWBC), Freeport McMoRan Inc. (FCX), GE Aerospace (GE), Huntington Bancshares (HBAN), Intel Corp. (INTC), Intuitive Surgical Inc. (ISRG), McCormick and Company (MCK), Procter and Gamble Co. (PG)

Economic: University of Michigan Consumer Sentiment Final
Earnings: Booz Allen Hamilton Holding Corp. (BAH), Comerica Inc. (CMA), First Citizens BancShares (FCNCA), SLB NV (SLB), Webster Financial Corp. (WBS)

If you manage a 6-figures or more portfolio, missed the top and want clarity with a structured timing system, make sure to watch my free training: https://go.sonderbergadvisory.com/

Kind regards,
Diego Sonderberg

Share this Outlook:
If you find these insights valuable, please share this newsletter with anyone who follows crypto or global markets. Since 2021 I’ve consistently identified major cycle tops and bottoms and aim to make this the most useful market-timing letter you read each week.
Share the following link with friends and family: https://newsletter.sonderbergadvisory.com/

Learn more:
YouTube Channel
X Account