Bearish
Markets turned lower this morning on a more cautionary tone after the number of expected interest rate hikes this year might be more than anticipated. Following the mid-week release of the Consumer Price Index, inflation worries persist as the year over year price indicator rose to 7%, from 6.8% in November, in line with expectations. Core CPI, which excludes food and energy, also rose to 5.5% from 4.9% the previous month. General sentiment gradually declined Thursday and Friday ahead of the shorter week filled with corporate earning releases that could give a small taste of what may lay ahead at least in the short term.
The S&P 500 returned to the 4600 level earlier today after reaching almost 4750 Wednesday morning. Similarly, the 10 year treasury breached the 1.85% level today after touching a low level Wednesday just below 1.70%. 10 year treasury yield hasn’t reached these levels since January 2020. Current indications now show a probability of four to five interest rate hikes this year, up from three to four just a couple weeks ago, and up from just one hike forecasted back in October. Situation is really fluid and investors have been keen reacting to the daily headlines.
On-Chain Update
Bitcoin (BTC) has largely held within a 5% range over the past two weeks with 30-day rolling volatility levels not seen since late 2020. Prolonged contraction of volatility typically leads to violent expansion of volatility, hinting at a price move sooner rather than later. Although BTC remains within the 2021 price range from $30,000 to $60,000, trend metrics for price continue to lean bearish, hinting at bearish continuation for an upcoming price move. Last week, a bearish 50-day and 200-day moving average cross confirmed on price, indicating a definitive bearish trend. However, these bearish crosses have not led to strong bearish continuation since May 2018. Significant volume support also sits from $31,000 from $40,000 based on 2021’s price action, suggesting significant volume or momentum would be needed to breach the $30,000 level. In order to strongly reverse the current bearish course, price would need to regain the upper quartile of the 2021 price from and breach above $49,000 for a significant period of time.
The Portfolio Management Team
Steven McClurg, CIO
Bill Cannon, Portfolio Manager
Wes Cowan, Portfolio Manager, Head of Defi
Josh Olszewicz, Head of Research
Sean Rooney, VP Research and Trading
Will McDonough, Vice Chairman, Investment Committee
Leah Wald, CEO, Investment Committee
Shannon Smith, Head of Investor Relations
