Bitcoin is rallying while most markets struggle, but structurally nothing has changed. This is still a bear market.

Bitcoin

Bitcoin had a strong week and outperformed most major asset classes, even as many markets, including gold, remained under pressure. A large part of this move appears to be driven by continued buying from Saylor, something I have been expecting for some time. In the short term, I still expect Bitcoin to push above the $72,000 resistance zone and potentially move as high as $87,500.

From a macro perspective, however, nothing has changed. Bitcoin remains in a bear market. Structurally, I view Bitcoin as being in stage 4 of a 6 stage bear market cycle. Stage 4 is what I call the Meat Grinder. It is a draining sideways range marked by fake breakouts and false breakdowns that exhaust traders, punish impatience, and destroy discipline. Its purpose is to wear out participants mentally before the market moves into one final capitulation phase.

S&P 500

The S&P 500 continues to show clear weakness. The Iran war has only accelerated the downside move that I have been warning about since January and, in the case of technology stocks, even as far back as August. Since my warning in January, the S&P 500 has fallen around 4.5%.

My expectation of a move back toward the $6,500 area is becoming increasingly realistic, and a deeper move toward $6,200 is also possible. The broader structure still points to a correction rather than renewed strength.

DXY (US Dollar Index)

The US Dollar Index has now climbed back to the 100 level. After failing to break above 100 in November, the DXY formed a 2 week bullish divergence in February, which in my view clearly signaled where this market is likely heading in 2026. We have seen similar conditions before. In 2018, Bitcoin crashed in Q1 while the DXY moved higher after reacting to a 2 week bullish divergence.

This is exactly why we have been discussing the regime change since Q3 of last year. That was the period when we sold all crypto holdings and opened shorts on Bitcoin. Smart money recognized the shift early and positioned accordingly. Retail participants, as usual, are reacting too late and will once again be left behind.

Economic Data, Rates & the Fed

This week’s economic data delivered mixed signals with some stagflation like characteristics. Growth indicators softened while inflation remained somewhat sticky. The second estimate of Q4 GDP was revised down sharply to 0.7 percent from the initial 1.4 percent reading, and durable goods orders were flat for January, well below expectations. Manufacturing orders have now declined in three of the past four months, suggesting weakening momentum in the industrial sector. Inflation data was mixed. Headline PCE came in as expected while core PCE rose 0.4 percent month over month and accelerated to 3.1 percent year over year. CPI readings were largely in line with expectations. On the positive side, job openings increased to 6.946 million and weekly jobless claims remained subdued at around 213000, indicating the labor market has not deteriorated significantly despite slower growth.

Treasury yields moved sharply higher across the curve as rising oil prices and geopolitical uncertainty increased inflation concerns. Two year yields rose about 18 basis points while ten year and thirty year yields also climbed notably, flattening the yield curve. Expectations for Federal Reserve rate cuts shifted lower as markets adjusted to the combination of sticky inflation and higher energy prices. The probability of a rate cut by June dropped sharply while September expectations were also reduced significantly. Overall, markets are increasingly pricing a scenario where the Federal Reserve remains cautious and keeps policy restrictive for longer unless growth weakens more substantially or inflation begins to decline more convincingly.

Economic: Capacity Utilization, Empire State Manufacturing, Industrial Production
Earnings: Annexon Inc. (ANNX), Dollar Tree Inc. (DLTR), Forgent Power Solutions Inc. (FPS), KE Holdings Inc. (BEKE), MBX Biosciences Inc. (MBX), Oruka Therapeutics Inc. (ORKA), Science Applications International Corp. (SAIC), Semtech Corp. (SMTC), VinFast Auto Ltd. (VFS)

Economic: Building Permits, Housing Starts, NAHB Housing Market Index, Pending Home Sales
Earnings: Academy Sports and Outdoors Inc. (ASO), Atour Lifestyle Holdings Ltd. (ATAT), Corporacion America Airports SA (CAAP), DocuSign Inc. (DOCU), Elbit Systems Ltd. (ESLT), GDS Holdings Ltd. (GDS), Lululemon Athletica Inc. (LULU), New Gold Inc. (NGD), Oklo Inc. (OKLO), Tencent Music Entertainment Group (TME)

Economic: Federal Open Market Committee FOMC Rate Decision, Producer Price Index PPI, EIA Crude Oil Inventories, Mortgage Applications Index, Net Long Term TIC, BOJ starts two day Monetary Policy Meeting
Earnings: dLocal Ltd. (DLO), EquipmentShare.com Inc. (EQPT), Five Below Inc. (FIVE), General Mills Inc. (GIS), H World Group Ltd. (HTHT), Jabil Inc. (JBL), Macys Inc. (M), Micron Technology Inc. (MU), Williams Sonoma Inc. (WSM)

Economic: ECB Governing Council monetary policy meeting, Continuing Claims, EIA Natural Gas Inventories, Initial Claims, New Home Sales, Philadelphia Fed Index, Wholesale Inventories
Earnings: Accenture PLC (ACN), Alibaba Group Holding Ltd. (BABA), Carnival Corp. (CCL), Darden Restaurants Inc. (DRI), Erasca Inc. (ERAS), FedEx Corp. (FDX), PDD Holdings Inc. (PDD), Planet Labs (PL), Signet Jewelers Ltd. (SIG)

Economic: no reports
Earnings: SANUWAVE Health Inc. (SNWV), Xpeng Inc. (XPEV)

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://sonderbergresearch.com/video

Kind regards,
Diego Sonderberg

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