9/11 CPI Surprises, but What’s Next for the Market?

12 septOverview:
The latest CPI data is out, showing a slightly better-than-expected 2.6%, beating estimates by just 0.1%. It may not seem like much, but in a market where key metrics are constantly revised, even small improvements matter. It has been exactly a year since July 26, 2023, when the Federal Reserve finished raising rates to the current 5.25% to 5.50% range. Yet, over the past 12 months, prices have still risen by 2.5%, even with those high interest rates.

However, the Federal Reserve favors another metric—Core CPI. This measure excludes volatile food and energy costs that can fluctuate in the short term. And what about Core CPI? Month-over-month, it increased by 0.3%, which was 0.1% higher than expected. Year-over-year, it sits at 3.5%, which is still well above the Fed’s target. So, wave goodbye to any hopes of a 25 basis point rate cut anytime soon.

By the time the Fed substantially cuts rates, crypto could very well experience not just one, but two bull cycles. As we mentioned yesterday, lower CPI is good for the markets and has historically brought green candles. Initially, the SP500 opened with a big red candle, trading below Monday and Tuesday's opening prices. But once the Fed's report was released, it began to rally. On the daily timeframe, the S&P 500 remains below the Bollinger Band's moving average (BB MA).

Cryptocurrencies reacted positively as well, with Bitcoin bouncing off the weekly support level of 55.9K and now pushing toward the upper boundary of its trading range at 58.4K. Interestingly, ETF flows were net negative. A closer look reveals that Fidelity was buying both BTC and ETH, while ARK, Grayscale, and VanEck were selling. It’s important to remember that not all ETFs are created equal. Fidelity might represent everyday retail investors, while funds like Grayscale and Blackrock tend to cater to more sophisticated entities.

W: Bitcoin is actively forming the top wick of this week's candle, currently touching the upper boundary of 58.4K but still far from the BB MA.
D: Bitcoin is testing both weekly resistance levels and the BB MA.
4h: This is the third attempt to break 58.4K. Failure to break and remaining within the range would signal a bearish turn.
1h: No divergences detected.

Alts Relative to BTC: No divergences across the board, except for SUIUSDT, which saw a massive 8.28% pump, breaking through the $1 resistance level. This marks its third peak in the last month, though the most recent valley was lower than the previous one.

Bull Case: The Fed continues to deliver positive data, fueling a five-day pump. Selling pressure has eased, as most who could sell have already done so.
Bear Case: This could be a temporary rally before the real turmoil begins.

Fear and Greed Index: 37, indicating a return to Fear territory.

Prediction: Bitcoin is likely to reject at the weekly resistance level and bounce downward.