Bitcoin is breaking down fast, gold and silver just unwound in historic fashion, and the Dollar may be entering the reversal phase that tightens conditions across everything.

Bitcoin

As I am writing this, Bitcoin is selling off sharply. The week started constructive with Bitcoin recovering above the yearly open, but price then formed a bearish flag and rolled over into the 80K region, which aligns with last week’s expectation for a pullback into 85K or even the low 80Ks. The speed of this move increased alongside a sudden and significant selloff in gold and silver, combined with unfavorable inflation data, which tightened conditions across risk assets.

On the higher time frames Bitcoin is forming bullish divergences, and similar divergence structures are showing up across other indexes as well. Higher time frame divergences are generally reliable, but when market structure is severely damaged, they can be invalidated quickly. The weekly candle is currently on track to close at a new low and with a new RSI low. In my view, a retest of Saylor’s average cost basis around 76K is increasingly likely. If the divergences do play out, a short term recovery could follow, but it must be treated as a bearish retest within a confirmed bear market structure. There are still no long term bottom signals that would make me interested in building positions for the next cycle.

US Dollar Index

The DXY began the week by breaking below its parallel channel and printing a new 4 year low, following the rejection at the 100 area about 2 months ago. That weakness in the Dollar coincided with fresh all time highs in gold and silver. Then sentiment flipped aggressively. Right when the narrative shifted toward the Dollar being dead and capital needing to flee into commodities, the commodity complex and other futures markets such as crypto sold off hard, while the DXY stabilized and recovered.

Over the coming week or the next few weeks, the DXY may form a bullish divergence on the weekly or 2 week time frame. I view the broader setup as a Dollar reversal phase that eventually leads back into a break above 100. A divergence is not required for that outcome, but it would add confirmation. I am holding cash with the intent to deploy into risk assets in Q3 and Q4 of this year once conditions and bottom signals align.

Gold and Silver

Gold and silver futures sold off violently late Thursday into Friday. Gold dropped more than 16% from its highs and silver fell more than 38%, which qualifies as a historic liquidation event. The speed of the move suggests forced deleveraging and large scale repositioning, with trillions shifting in a short window.

This correction was not a coincidence, it was necessary. Gold was clearly overheated, with the monthly RSI around 94. I do not believe this was the final top for commodities, but I do expect further corrective action to develop again in Q3 and Q4 this year.

S&P 500

The S&P 500 remained resilient and closed the week green. The broader setup remains consistent with last week’s report. The index is extended and a weekly bearish divergence is still present. That divergence does not have to resolve into a larger decline, but it does increase the probability of short term weakness before any continuation higher.

After confirmation of the bearish divergence, profit taking was encouraged (in combination with low VIX) and the S&P 500 did correct roughly 2.5%. For now equities are holding up better than commodities and crypto, but the divergence and stretched positioning remain important to monitor closely.

Economic Data, Rates & the Fed

This week delivered a heavy mix of macro catalysts, led by the FOMC and a hotter than expected PPI print. The Federal Reserve held rates as expected unchanged in the 3.50% to 3.75% range and the overall message leaned slightly hawkish, pausing rate cuts until Summer. There were 2 Fed members in favor of a 25 BPS cut, and the Fed acknowledged solid growth and signs of stabilization in the labor market. Inflation data was the main negative surprise. December PPI came in meaningfully hotter than expected, with headline inflation rising 0.5% month over month and core PPI rising 0.7%, reinforcing the idea that inflation is sticky and may not fade smoothly. At the same time, hard activity data stayed firm with durable orders and factory orders beating expectations, while soft data weakened as consumer confidence fell to a decade low. Manufacturing sentiment improved in the Chicago region, with Chicago PMI jumping into expansionary territory for the first time since 2023, signaling pockets of resilience even as confidence deteriorates.

Rates markets reacted with a mild steepening in the Treasury curve across the week, shaped by the Fed decision and then further influenced by news that Trump nominated Kevin Warsh as the next Fed Chair. Short end yields moved lower while longer end yields edged higher, reflecting shifting expectations around the policy path and longer term growth and inflation risk. The Atlanta Fed GDPNow estimate for Q4 growth was revised down sharply to 4.2% from 5.4%, driven by softer consumption and a smaller net export contribution, which adds a cooling signal into an otherwise still firm data mix. Looking ahead, expectations for rate cuts in 2026 moved slightly higher versus last week, supported first by the tone of the FOMC and then by the Warsh nomination. Market pricing now implies broadly similar odds for a March cut, a small rise in April odds, and a larger increase in expectations for June, meaning investors still see easing as more likely later rather than sooner, but remain highly sensitive to inflation and labor data as the next decisive inputs.

Economic: Construction Spending, ISM Manufacturing Index
Earnings: Alliance Resources Partners LP (ARLP), Aptiv PLC (APTV), Fabrinet (FN), Hess Midstream LP (HESM), IDEXX Laboratories Inc. (IDXX), NXP Semiconductors NV (NXPI), Palantir Technologies Inc. (PLTR), Simon Property Group (SPG), Tyson Foods Inc. (TSN), Walt Disney Co. (DIS)

Economic: no reports
Earnings: Advanced Micro Devices Inc. (AMD), Amgen Inc. (AMGN), Chipotle Mexican Grill (CMG), Chubb Ltd. (CB), Eaton Corporation PLC (ETN), Emerson Electric Co. (EMR), Illinois Tool Works Inc. (ITW), Merck and Co. (MRK), Mondelez International Inc. (MDLZ), PepsiCo Inc. (PEP), Pfizer Inc. (PFE), TransDigm Group Inc. (TDG)

Economic: ADP Employment Change, Business Inventories, EIA Crude Oil Inventories, Factory Orders, ISM Non Manufacturing Index, MBA Mortgage Applications Index
Earnings: AbbVie Inc. (ABBV), Aflac Inc. (AFL), Allstate Corp. (ALL), Alphabet Inc. (GOOGL), Arm Holdings PLC (ARM), Eli Lilly Co. (LLY), McKesson Corp. (MCK), Novartis AG (NVS), Novo Nordisk A/S (NVO), O'Reilly Automotive Inc. (ORLY), Qualcomm Inc. (QCOM)

Economic: Continuing Claims, EIA Natural Gas Inventories, Initial Claims, Productivity Preliminary, Unit Labor Costs Preliminary
Earnings: Amazon.com (AMZN), Banco Bilbao Vizcaya Argentaria SA (BBVA), Barrick Mining Corp. (B), Bloomer Energy Corp. (BE), Bristol Myers Squibb Co. (BMY), ConocoPhillips (COP), Digital Realty Trust Inc. (DLR), Fortinet Inc. (FTNT), Linde PLC (LIN), Monolithic Power Systems Inc. (MPWR), Roblox Corp. (RBLX), Shell PLC (SHEL), Strategy Inc. (MSTR)

Economic: Average Hourly Earnings, Average Workweek, Consumer Credit, Nonfarm Payrolls, Unemployment Rate, University of Michigan Consumer Sentiment Preliminary
Earnings: AerCap Holdings NV (AER), Biogen Inc. (BIIB), Centene Corp. (CNC), Cboe Global Markets Inc. (CBOE), nVent Electric PLC (NVT), Philip Morris International Inc. (PM), Toyota Motor Corp. (TM), Ubiquiti Inc. (UI)

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

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