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MARKETS RESILIENT DESPITE NEAR GUARANTEED RATE HIKE

Outlook: With a May rate hike now fully priced in, equity markets have shown remarkable resilience. Although I do not trade forecasts, I’d say this marks the final hike in the tightening cycle. Broad indices have historically risen an additional two months following a final hike and, combined with lopsided sentiment, the narrative fits perfectly with my assessment that the remainder of H1 2023 will follow the choppy bullish action that has marked the year so far.

QQQ: A breakout of the weekly flag formation would measure upside to 352. 

SPY: Resistance at 415 will be broken with growth doing most of the legwork.

DXY: Dollar remains weak and it’s only a matter of time before the 101.5 level is broken for good.

Yields: As the best-case scenario for strength in yields plays out (i.e. sideways at best) I expect falling inflation to eventually weigh too heavily, sending the 30Y below 3.5% and the 10Y below 3.3%.

Energy: I do not believe the gap up in crude oil is a sign of what’s to come and instead expect a retracement with additional downside to at least 73. Natural gas on the other hand is sitting around strong historical support and although the downside risk to 1.7 is not for the faint-hearted, the longer-term upside potential could warrant sizing in at these levels.

BTC: As has been the case all year, BTC has seen rapid appreciation followed by volatile sideways action with sudden shakeouts. I would ignore downside moves. Stop loss at 26,500.

ETH: I like ETH relatively more than BTC but not by much. I would be concerned by a break and hold below 1800. You have to go back to 1980 to catch the full picture, but a secular cup and handle indicates an upcoming test of 28 which may ultimately give way to much higher prices. 

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JANUARY 12, 2025 OBSERVATIONS

Multiple selloffs in equities following strong jobs and ISM data highlights a general concern of returning inflation at a time when valuations are already quite...
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