Post-CPI: Watch out for bull traps

Compass 127

Note to paying subscribers: One major Layer 1 altcoin that has been battered worse than most is in shape for an upcoming move up in our view. Don’t miss it below (and read the why behind it to form your opinion).

The CPI bears good news for Powell.

• At the start of this week, positive sessions in the S&P 500 and Bitcoin staying above $60k suggested that the upcoming U.S. inflation data release would turn out positive. As a result, these expectations were already priced into the market, providing breathing room for the Fed and Powell when the numbers were published today. The Consumer Price Index (CPI) MoM—the percentage change in inflation from one month to the next—came out as expected at 0.2%, and the CPI YoY—the percentage change in inflation compared to the same month last year—beat expectations by coming in lower than anticipated (2.9% vs. 3.0%). This gives Powell some maneuverability despite not achieving the long-cited Fed's ultimate goal of 2.0% inflation.

• We won't have to wait long to hear Jerome Powell's firsthand comments on the new data: the Jackson Hole Economic Symposium from August 22 to 24 will feature a keynote by Fed Chairman Jerome Powell. This year’s theme is "Reassessing the Effectiveness and Transmission of Monetary Policy." This leads us to ask the same old question: will we get hints of a possible rate cut in September? Asking this question has significant implications, as we are in an environment where the interpretation of Powell's comments moves markets.

• Bitcoin is facing a battle on two fronts: on one side, the pressure from the macroeconomic environment, and on the other, the advance of the bearish brigade that keeps the bulls at bay. While the S&P 500 was cautiously responding to inflation data, rising timidly by midday, Bitcoin plummeted by 5% after climbing to $61.8k and correcting to $58.5k in a typical fakeout move, liquidating the bulls who anticipated a rise following the inflation data release.

• An unforeseen variable pressuring the price down was the impact of wallet movements from the U.S. government's confiscated Silk Road funds to Coinbase Pro, while just a day earlier, another chapter of Mt. Gox distributions occurred without causing a stir.

• While we have been detecting a decisively bullish newsflow overall, our indicators suggest that risk levels are rising and the bearish momentum remains. Positive news items will likely serve as bullish fakeouts and we recommend not being to reactive to such news events, but rather use pull backs as entry points. If you are using leverage, it is not a time to go long in our view.

Speedometers indicating the current state of BTC. The full dot represents the current reading and the white dot represents one week ago.

State of the System.

• As the last section shows we clearly do not want to induce any FOMO. We remain in risky waters. Nevertheless,