This week, let’s take a look at some macro-economic news that could be moving crypto and stocks.
Consumer Price Index (Inflation)
The big news this week is coming Tuesday at 8:30AM – the August 2022 Consumer Price Index (CPI) will be released. When July numbers came out at 8.5% (down from 9.1% in June), the market rallied. You can watch out for new CPI numbers here from the Bureau of Labor Statistics.
You can find this interactive chart here.
I will send out another special email Tuesday morning when the numbers are released to keep you updated.
Crypto
I’m expecting crypto prices to crab until CPI numbers come out. Keep in mind that crypto markets never close – so while some stocks are trading pre-market, crypto is likely to show early signs of which way equities will be headed at 8:30AM before the stock market opens.
Ethereum has been driving the crypto rallies the last few months ahead of the big Ethereum Merge expected sometime this week. It’s no coincidence that Ethereum tokens have been seeing upsides while Layer 0 (or Layer 1) competitors like Polkadot, Solana, Doge, and Avalanche have been crabbing or showing weaker price action.
This is unusual for crypto since Bitcoin has largely dominated the market and steered direction for most altcoins. There is talk in the crypto space on Twitter than the Ethereum Merge is acting as a bull trap and a nuke in price is likely after investors “sell the news.” Conversely, we could see a small trend to the upside if CPI news is bullish to around ~$2,000 and then another leg up to ~$2,400 in the days leading up to the merge. This could present trading opportunities for Eth and altcoins like $MATIC, $LINK, and $GRT (all on my watchlist).
Last night Bitcoin tested resistance again – any breakout from this downtrend could be a fakeout as we’ve seen before or a bull trap before another leg down. RSI favors overbought, so I’m remaining cautious here.
Stocks
The S&P 500 saw a small rally last week but CPI numbers this week will be the true test for the market – will the S&P break through resistance lines or bounce back down?
There’s a short term, low timeframe resistance line that the S&P has been following – I expect this trendline to break if CPI data reveals lower inflation rates for August. However, I’m bearish on the larger (red) resistance trendline – CPI numbers might give us a small rally short term, but when the Fed meets next week and raises rates again, I am expecting another bounce down from resistance and possible new price entries for any short term trades.
The Dow Jones and Nasdaq are equally bearish, making lower highs and higher lows in what seems to be pennant formations across all assets. As the price action gets tighter, we’re going to look for breakouts or breakdowns to confirm whether or not a recovery is in sight. Coincidentally, the pennants all point to confluence around election day.
Blue chip stocks and commodities are all pointing in the same direction as well.
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