Bitcoin hit the bear flag highs and rejected.
Now the real move begins.

Bitcoin

By Tuesday of last week, Bitcoin peaked around $76,000, right at the upper end of the bear flag range it had formed. I identified this rally in the previous newsletter, and once Bitcoin moved into the $74,000 area and above, I recommended taking profits. In hindsight, that was clearly the right decision.

The key question now is where Bitcoin goes from here. My initial short term bullish outlook for the coming weeks is now at risk due to the increasing escalation in the Middle East. That is also why I never entered a long on Bitcoin despite expecting a possible move higher. Saylor will likely continue buying, and if geopolitical tensions cool down, a rally toward $80,000 and above is still possible before Bitcoin moves into stage 5 of the bear market. However, that scenario is becoming less likely. At this point, I see 2 main alternatives. One is a retest of the bear flag range lows followed by another push higher. The other is a breakdown below the bear flag, which would reinforce the broader bearish structure.

At this stage, I remain completely calm. I have been warning about the bear market since August, and at Sonderberg Research we are well prepared for the next major opportunity. The focus now is not on chasing every short term move, but on staying disciplined and positioning correctly to buy the cycle bottom when the time comes. Act accordingly.

S&P 500

I have been bearish on the S&P 500 since early January and warned of a correction of more than 10%. Since then, the index has already fallen around 7%. One of the key technical signals behind that view was the 5D bearish divergence, which helped highlight the weakening momentum well before the decline accelerated.

Our first downside zone around $6,500 has now been reached. Looking ahead, I continue to expect that the $6,200 area will also be tested at some point this year if the broader correction continues to unfold.

Economic Data

This week’s economic data was driven by the FOMC meeting and another hot inflation print. The Federal Reserve held rates steady at 3.50% to 3.75%, while its updated projections showed slightly stronger growth expectations through 2028 but also higher inflation forecasts, largely influenced by rising energy costs. Powell acknowledged limited progress on inflation, reinforcing a more cautious stance. At the same time, February PPI came in stronger than expected for the second consecutive month, with headline prices rising 0.7% month over month and core inflation accelerating further. Growth data showed some cracks, with new home sales dropping sharply and manufacturing activity slipping into contraction, while jobless claims remained relatively stable. The Atlanta Fed also revised its Q1 GDP estimate lower to 2.3%.

Treasury yields continued to rise across the curve, reflecting persistent inflation pressures and a more hawkish Fed outlook, with short term yields up around 15 basis points and longer term yields also moving higher. Market expectations shifted notably, with investors now reducing rate cut expectations and even beginning to price in the possibility of rate hikes in 2026 due to elevated oil prices and geopolitical uncertainty. While the Fed’s official projections still point to a single rate cut, markets are increasingly preparing for a higher for longer environment, where inflation risks and geopolitical factors limit the ability of the Fed to ease policy aggressively.

Post FOMC, Oil & U.S. Recession

Ben Cowen made an important point after the latest FOMC meeting that aligns with my view: the Fed looks trapped. The labor market is weakening, which would normally support rate cuts, but rising energy prices are keeping inflation risk alive and making a dovish pivot much harder.

That is why this still looks like a late-cycle environment. Historically, major oil spikes tend to show up around periods of macro stress, geopolitical shocks, and recessions. In that context, higher oil is not a sign of healthy growth. It is a warning sign. Late in the cycle, rising energy costs pressure consumers, squeeze businesses, and weaken broader demand.

Recent inflation data adds to the problem, while labor market trends continue to soften. That leaves the Fed stuck between slowing growth and inflation that may not cool fast enough to justify easier policy.

For equities, that is not a supportive backdrop. For Bitcoin, I still view recent strength as a countertrend rally within a broader bearish structure, not confirmation of a new bull market.

The main takeaway is simple: weakening labor, persistent inflation risk, and rising oil at this stage of the cycle all point to a more fragile macro environment. This is still a time for caution, not complacency.

Economic: Construction Spending
Earnings: Abivax SA (ABVX), Agi Inc. (AGBK), AITI Global Inc. (ALTI), Caledonia Mining Corp. (CMCL), DBV Technologies SA (DBVT), Lithium Argentina AG (LAR), WeRide Inc. (WRD)

Economic: New Home Sales
Earnings: AAR Corp. (AIR), Centessa Pharmaceuticals (CNTA), Concentrix Corp. (CNXC), Core and Main Inc. (CNM), GameStop Corp. (GME), Hesai Group (HSAI), KB Home (KBH), New Gold Inc. (NGD), Smithfield Foods Inc. (SFD), T1 Energy Inc. (TE), Worthington Enterprises Inc. (WOR)

Economic: Current Account Balance, Durable Orders, EIA Crude Oil Inventories, Export Prices, Import Prices, Mortgage Applications Index
Earnings: Alumis Inc. (ALMS), Celcuity Inc. (CELC), Chewy Inc. (CHWY), Cintas Corp. (CTAS), H.B. Fuller Company (FUL), Jefferies Financial Group Inc. (JEF), JinkoSolar Holding Co. (JKS), Karman Holdings Inc. (KRMN), Ondas Inc. (ONDS), Paychex Inc. (PAYX), PDD Holdings Inc. (PDD), Winnebago Industries Inc. (WGO)

Economic: Continuing Claims, EIA Natural Gas Inventories, Initial Claims
Earnings: Argan Inc. (AGX), Bicara Therapeutics Inc. (BCAX), Commercial Metals Co. (CMC), Kodiak Sciences Inc. (KOD), Lumexa Imaging Holdings Inc. (LMRI), Pony AI (PONY), Seabridge Gold Inc. (SA), TMC the metals company Inc. (TMC)

Economic: Advanced International Trade in Goods, Advanced Retail Inventories, Advanced Wholesale Inventories, GDP Third Estimate, PCE Prices, Personal Income, Personal Spending, University of Michigan Consumer Sentiment Final
Earnings: Autolus Therapeutics PLC (AUTL), Carnival Corp. (CCL), Humacyte Inc. (HUMA), Legence Corp. (LGN), SBC Metals Group Holdings (SBC)

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 framework: https://sonderbergresearch.com/video

Kind regards,
Diego Sonderberg

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