The Fed policy announcement came as expected on Wednesday with no change to interest rates. Fed Chairman Jerome Powell soothed the markets by speaking out of both sides of his mouth, as he is wont to do, during his ensuing press conference. For example, on the one hand, he said that "tight" financial conditions as a result of Fed policy are "weighing on the economy" while at the same time entertaining the notion that the "economy remains strong."
The Fed raised its inflation expectations for the remainder of the year, but also stated it was likely that perhaps three rate cuts might be seen before year-end, down from the seven that the markets had previously priced in for 2024 at the start of the year. And while Powell might insist that financial conditions are "tight," at the same time the Chicago Fed's National Financial Conditions Index shows that in fact financial conditions continue to loosen and are currently at levels last seen in early 2022, before the Fed even began raising rates.
Nevertheless, the major market indexes heard what they wanted to hear, and off the market went with the NASDAQ Composite, NASDAQ 100, S&P 500, and Dow Indexes posting all-time highs on Wednesday. The Financial Times and billionaire Chamath Palihapitiya called Powell's testimony the Fed "put" - the idea that the central bank will intervene to support markets and economies in times of turmoil. This would help Biden get reelected because it would ensure a looser monetary policy for higher markets while supporting the economy. Sitting presidents usually get reelected when the economy is strong even if their approval ratings are low. Nevertheless, all four indexes stalled off new all-time highs on Thursday and on Friday churned around with the Dow coming in. Volume was lighter all around, so the action on the index surface was mostly indecisive.
Bitcoin ($BTCUSD) initially responded positively to the Fed's announcement and subsequent comments from Powell by reclaiming its 20-dema. By week's end, however, it was back below the 20-dema to trigger a technical short-sale entry using the 20-dema as a covering guide but over the weekend is attempting to regain the line. Should it fail, one could implement an effective short play by going long the ProShares Short Bitcoin Strategy (BITI) ETF and basing their stop out point on any rally by $BTCUSD back above the 20-dema.Keep in mind the reason for the fast selloff in Bitcoin was due to fears of inflation spurring a hawkish Fed, somewhat overheated cryptocurrency futures funding rates, and profit taking after Bitcoin had nearly doubled (+92%) from its January lows after Bitcoin spot ETF buying started to outweigh GBTC selling. GBTC selling was pronounced on the launch of the Bitcoin spot ETFs on January 11 because investors could finally sell after being locked up since the inception of GBTC. But Powell's dovish stance in his testimony on Wednesday pushed Bitcoin back into rally mode. That said, expect some volatile backing and filling as FUD is still captain until Bitcoin can clear resistance levels. This can afford the short entry point as discussed above.
Crypto miners are a mixed bag. CleanSpark (CLSK) proves itself as the leader of the pack as it continues to build a base, with several shakeouts along 10-dma and 20-dema support over the past three weeks. Meanwhile, Marathon Digital Holdings (MARA) and Riot Platforms (RIOT) continue to play out as effective short-sale targets. MARA failed at 50-dma resistance on Thursday to trigger a short entry at that point while RIOT did so at its 50-dma and 200-dma. In both cases one would then use the relevant moving averages as covering guides.
Precious metals have also rolled over after streaking higher Wednesday, with gold posting an all-time high Wednesday evening at 2225.30 an ounce. Both the SPDR Gold Shares (GLD) and the iShares Silver Trust (SLV) closed both Thursday and Friday below their 10-day moving averages. Since breaking out in early March, both metals have become quite extended and are entitled to some backing and filling. The 20-demas would be logical areas to look for moving average support, assuming either or both are able to quick retake their 10-day lines.
Big-stock AI Meme semiconductor/hardware names Nvidia (NVDA) and Super Micro Computer (SMCI) parted ways this week in the afterglow of NVDA's big GTC AI Developer's Conference held from Monday through Thursday. NVDA ended the week with a flourish, clearing the $900 level on above-average volume to trigger a Livermore Century Mark long entry using the $900 level as a selling guide. SMCI meanwhile broke down and, as we reported during the day on Friday, was actionable as a short-sale entry as it rallied on a VDU volume signature right into 20-dema resistance, using the 20-dema as a covering guide.
A consistent leader since we first reported on it as it posted pocket pivots on the way up, Arista Networks (ANET) burst to new highs this past week following a big-volume shakeout at the 10-dma and 20-dema on Tuesday. While the stock does not get the attention of the other AI Meme names, primarily in the semiconductor/hardware space, this big-stock telecom leader continues to trend higher as it follows the 50-dma to the upside.
This market is notable for having bullish and bearish pockets underneath the smooth surface of the index uptrends. Breadth on Friday, despite rallies in the NASDAQ indexes was roughly 2-1 negative, which may be a cautionary sign near-term.The Market Direction Model (MDM) switched to a BUY signal on Wednesday, March 20, 2024.