The Hole in the Jackson
Cryptic ball: now we know why is it called that.
Bulls got rekt and my optimism too, as central bankers cajoled the market into another aggressive dump. If things looked grim last weekend, now they should appear even worse. But bears shouldn't rejoice - as bulls haven't lost just yet.
- First, what happened? As Jerome Powell remarked this Friday, in the highly anticipated Jackson Hole symposium, the US Fed is prepared to keep fighting inflation without fear of causing "some pain" to the economy (and the market).
- The speech was very short and nothing new was said, but its tone was unusual and its conciseness allowed the Fed's chair to focus on the resolve of the world's most powerful central bank to keep rates elevated until inflation declines.
- We knew that, but it provided an excuse for traders to go short and break the hopes of those who believed the Fed would pivot its hawkish stance earlier than expected. But what matters is not that the Fed pivots, just that it stops hiking.
- Then, what's on the cards for the end of August and September? Looking at the charts, stocks, ether and alts can continue to fall a bit more (some 5% for stocks and 10% for ETH) without breaking the current uptrend.
- Naturally, if bitcoin remains correlated this would mean a break of $20k - which looks imminent as it is trading right above that key level already. Such move would need to be heavily defended by bulls or else winter will be tough.
- So, I'm expecting some nice fighting to go on next week. Fresh inflation data that also came out this Friday - the PCE Price Index, also known as the "Fed's preferred inflation gauge" - showed monthly inflation has halted.
- After that, we'll need to reassess. Zooming out, things look fine and this can be a normal retrace after August's excellent recovery. I still feel the bottom is behind us but the charts look ugly and thus bears may easily attack.
Let's wait a bit and see if bulls still have the strength to fight. I'm hoping traders digest these news and less assertive remarks from Fed officials are strategically released to calm down the markets. After all, there's not much more left to hike.
Chart art: now we know what the bears hope.
Three things: now we know why the Fed is stuck.
- Ben Lilly explains why the Fed can't raise interest rates much more.
- Tahin analyses successful on-chain traders to learn how they profit.
- a16z helps crypto teams manage their treasuries in this market.