This week marked a clear shift into risk-off, as Bitcoin broke key structural levels, equities corrected, and capital began rotating decisively into defensive assets.

This edition is arriving later than usual as I waited for Bitcoin’s weekly close before publishing. I’m writing this late Sunday evening from Miami, Eastern Time.

Bitcoin

Bitcoin extended its decline from the prior week after being rejected at the 50 week EMA and closed the week below the yearly open, around 87.5K. The bearish signals were clearly present and I warned about them in advance. It is now evident that the market regime has shifted from risk on to risk off. Capital is rotating out of higher risk assets such as crypto and into more defensive allocations.

This is exactly why I consistently emphasize that one should never be loyal to an asset class. I am not pro crypto or anti crypto. I am pro allocation. Capital should always flow toward what is set up to perform best next. During September and October, the process of scaling out of Bitcoin began, and I combined that with short exposure to the broader crypto market.

I do not believe this bearish trend will end soon. Lower prices are likely ahead. A retest of the 50 week SMA has become less likely given the recent price action, although it cannot be fully ruled out. Direction in the near term will largely depend on how United States equity markets behave at the start of the week.

S&P 500

United States equity markets opened the week sharply lower, with a notable correction in the S&P 500. The initial selloff was triggered by comments from Trump regarding Greenland and the announcement of new tariffs on European Union countries. These developments reignited fears of a renewed trade conflict, prompting a risk off reaction across markets.

From a technical perspective, the S&P 500 confirmed a weekly bearish divergence. As mentioned in previous newsletters, I had already warned about the potential for a correction. While I do not believe this move alone marks the end of the downside, I also do not want to assume an immediate continuation. Over the coming weeks and months, a broader correction remains likely.

Trump later softened his comments on Greenland during the World Economic Forum, which helped stabilize markets and sparked a partial recovery. However, the larger macro and technical picture still suggests elevated risk.

Gold and Silver

The clear winners this week were commodities. While most major asset classes declined, precious metals moved sharply higher. Silver reached a new all time high, breaking above 100, and Gold approached the 5000 level (as I am writing this at 11:42 PM New York Time Zone, Gold surpassed the 5000 level).

My expectation is that Gold continues higher through Q1 and Q2 before entering a corrective phase in Q3 or Q4. This timing aligns with my broader view that Bitcoin is likely to find its cycle bottom around the same period, as capital rotates out of commodities and back into risk assets.

Economic Data, Rates and Fed

This week’s economic data confirmed a picture of a still resilient U.S. economy with only gradual cooling. The Personal Consumption Expenditures report, the Federal Reserve’s preferred inflation gauge, came in largely in line with expectations, which led to little immediate market reaction. Growth data, however, remained strong. Q3 GDP was revised slightly higher to 4.4%, the fastest pace in two years, while the Atlanta Fed’s GDPNow estimate for Q4 was raised to 5.4%. Consumer spending continued to surprise to the upside, even as personal income growth lagged expectations. Sentiment data improved, with the University of Michigan index rising to 56.4, while inflation expectations eased modestly on a one year basis. Housing data remained weak, highlighted by a sharp drop in pending home sales, and leading indicators continued to point toward slowing momentum beneath the surface. Labor market data stayed firm, with jobless claims remaining well below recessionary levels.

Markets are increasingly adjusting expectations for Federal Reserve policy. Treasury yields edged slightly higher across the curve, with the 10 year yield holding above the key 4.20% level, reflecting confidence in ongoing economic strength and reduced urgency for rate cuts. Expectations for easing continued to decline, with probabilities for near term rate cuts in March and April falling further and June expectations also easing. As long as economic growth remains strong and inflation continues to cool only gradually, investors appear comfortable with fewer rate cuts or potentially none at all this year. This environment supports equities in the short term but reinforces a higher for longer rates backdrop, which remains an important headwind for risk assets and valuations going forward.

Dates: h4 bold

Economic: Durable Orders
Earnings: AGNC Investment Corp. (AGNC), Alexandria Real Estate Equities Inc. (ARE), Bank of Hawaii Corp. (BOH), Brown and Brown Inc. (BRO), Crane Co. (CR), Graco Inc. (GGG), Nucor Corp. (NUE), Ryanair Holdings PLC (RYAAY), Steel Dynamics Inc. (STLD), W.R. Berkley Corp. (WRB)

Economic: Consumer Confidence, FHFA Housing Price Index, New Home Sales, S and P Case-Shiller Home Price Index
Earnings: Boeing Co. (BA), General Motors Co. (GM), F5 Inc. (FFIV), HCA Healthcare Inc. (HCA), Nextera Energy Inc. (NEE), Nextpower Inc. (NXT), Packaging Corp of America (PKG), PPG Industries Inc. (PPG), RTX Corp. (RTX), Seagate Technologies (STX), Texas Instruments (TXN), Union Pacific Corp. (UNP), United Parcel Service Inc. (UPS)

Economic: Advanced International Trade in Goods, Advanced Retail Inventories, Advanced Wholesale Inventories, EIA Crude Oil Inventories, MBA Mortgage Applications Index
Earnings: Amphenol Corp. (APH), ASML Holding NV (ASML), AT and T Inc. (T), Automatic Data Processing Inc. (ADP), Danaher Corp. (DHR), General Dynamics (GD), GE Vernova Inc. (GEV), International Business Machines Corp. (IBM), Lam Research Corp. (LRCX), Las Vegas Sands (LVS), Meta Platforms (META), Microsoft Corp. (MSFT), ServiceNow Inc. (NOW), Starbucks (SBUX), Tesla Inc. (TSLA), United Rentals Inc. (URI)

Economic: Continuing Claims, EIA Natural Gas Inventories, Factory Orders, Initial Claims, Trade Balance, Wholesale Inventories
Earnings: Apple Inc. (AAPL), Blackstone Inc. (BX), Caterpillar Inc. (CAT), Honeywell International Inc. (HON), KLA Corp. (KLAC), Lockheed Martin Corp. (LMT), Mastercard Inc. (MA), Parker Hannifin Corp. (PH), SanDisk Corp. (SNDK), Visa Inc. (V), Western Digital Corp. (WDC)

Economic: Producer Price Index PPI, Chicago Purchasing Managers Index PMI
Earnings: Air Products and Chemicals Inc. (APD), American Express Co. (AXP), AON PLC (AON), Chevron Corp. (CVX), Colgate Palmolive Co. (CL), Exxon Mobil Corp. (XOM), Regeneron Pharmaceuticals Inc. (REGN), Verizon Communications Inc. (VZ)

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

Kind regards,
Diego Sonderberg

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