I'm sure many of you were checking the charts this morning and saw markets dump after the CPI report came in at 9.1% (vs the 8.8% consensus). The narrative was that higher inflation would mean quicker rate hikes by the US Fed. That was supposed to Bearish, right? Below is my take based on analyzing the price action.
As markets flushed 1 hour before US equities opened, institutional money showed their hand. $SPY 373 was a prior support area that has held up 3 times in the past few weeks. It is a line in the sand where demand pressure has outweighed supply pressure. Inflection points such as these require big money to halt and reverse price, especially on multiple occasions. Think herd mentality.
S&P 500 1h chart - Held $373 support area where price previously bounced 3 times
Anyone blindly following amateur opinions or media narratives might have panic sold during the dump. Even worst, some day traders shorted at the opening bell only to be squeezed by the Bulls who were in full control of the trading session. Here are the stacked charts for $SPY and $BTC which show how similar the price action was.
$BTC held the line as Buyers took back control from Sellers
$SPY held the line as Buyers took back control from Sellers
Let's take a look at the revised estimates for the probability of a 1% rate hike at the next Fed meeting: from 8% chance yesterday to 82% chance today. That is how quickly markets can pivot and price in future events; price action hinted at how institutions were digesting the shifting dynamic in real-time.
July 13, 2022 - CME FedWatch Rate Hike Probabilities
As I have been alluding to in recent posts, everything you need to know is right there in front of you on the charts. Each candlestick provides clues into the relationship between supply/demand. And within that, the emotions, psychology, entries, and exits of the institutional whales who dictate the ebbs and flows of the market. Analyzing and reacting always beats opinion and predicting.
I will leave you with the current daily chart of Bitcoin. We are rangebound until buyers are able to overcome $22.5k, or sellers can drive price below $18.5k. Watch the stock market for clues as to which side will set the tone until the much anticipated FOMC meeting on July 27th. Today's bounce was relatively constructive for the time being.
Bitcoin currently consolidating within a range
Disclaimer: Not financial advice. Do your own due diligence. Only invest with money you can afford to lose. Crypto account is 100% cash.
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