Bullish Setups Build, but Bond Markets Hold the Veto

Key Takeaways

BTC sits at an inflection: bullish triangle vs. bearish flag
ETH leads on relative strength and IWM-linked momentum
Equities look bullish into the FOMC meeting, but bond yields may also push higher

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Digital Asset Commentary

A glimmer of hope has appeared on the lower timeframes for short-term crypto traders after a multi-month downtrend. Bulls will note that price stabilization in the upper 80s and low 90s resembles an ascending triangle, implying a measured move back toward the 100k region. Bears, meanwhile, point to the higher-timeframe potential for a bear flag, which would project into the 60s based on the length of the flagpole. A catalyst this week could break the deadlock and end the current consolidation.

ETH continues to look strongest, potentially linked to Tom Lee’s BMNR ETH buying spree. BMNR added another $435m last week, while Saylor’s MSTR, though a smaller steady buyer recently, did disclose nearly $1B in BTC purchases last week, mostly via its at-the-money (ATM) offering. The ETHA/IBIT ratio also favor ETH, with a sharp downward channel now ending. ETH has maintained a strong correlation with the Russell 2000 (IWM) since 2018; IWM sits just below all-time highs and is showing a W-bottom with improving relative strength versus QQQ. Any bullish tailwinds for IWM could similarly lift ETH.

Equity indices broadly appear positioned for bullish continuation, with bears entering the week heavily exposed ahead of the Fed meeting on Wednesday the 10th. If markets detect even a hint of dovish QE-leaning rhetoric, something Fed repo-watcher Mark Cabana has alluded to, stocks may react quickly. With SPY and QQQ near all-time highs after a month-long consolidation, the setup favors a strong upside continuation.

Bonds, however, seem ready to challenge any dovish tilt. Both the 2-year and 10-year yields are forming inverted head-and-shoulders patterns, typically pointing to higher yields. Bond markets may assert themselves across the curve if the Fed sounds too relaxed about inflation, which remains slightly above the 2% target. If investors believe the Fed is not treating inflation seriously, bonds could spoil the equity and crypto party by reminding everyone who is in charge.

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