Market Thoughts - 12/19/2021
I wanted to shoot you a little update on some market trends and news that caught my eye. Keep in mind these are subject to change every day. The financial markets are very over reactive. Any slight news can destroy the thoughts here.
The Fed announced this week they will aggressively taper their bond purchases. The Fed made multiple indications Wednesday that it’s bond purchasing was coming to an end. This has been a consistent, monthly, purchase since the beginning of the pandemic. The response seems aggressive to curb the worries of inflation. We all know inflation is here to stay, no matter what they tell us.
After the tapering of bond purchases come to an end near late winter or early spring, the central bank expects interest rates to rise. Their released projects actually mentioned approximately three rate hikes coming in 2022, two in 2023, and two in 2024.
Once again, they are slowly boosting their inflation prediction to the upside. The now have released it as 5.3%. As I said before, we all know better than that.
The markets initially reacted positive to the news released by the Fed. The Stock Market and Crypto market both had a little relief bounce to the upside. That didn’t hold for long, as SPY dropped 3% to end the week.
After the drawdown to end out the week, SPY has now flipped the previous support to now be resistance. If you are bullish, this is not a good sight to see. We now have the previous buyers as sellers, above us. Let’s watch this week to see if we can breakthrough the S/R flip at 463.91.
As we have talked about before, Bitcoin follows SPY pretty closely on the terms of price action. Bitcoin also saw a relief bounce, and then a drawdown.
We are still in the same situation we are last weeks on the terms of trend break. I would not be shocked to see us fill that big wick from 2 weeks ago (2 candles left). If this happens, there would be great buying opportunities.
Total Cap 3 (Alt Coin Cap)
While Bitcoin is chopping, some alt’s are popping and to the upside. The Total Cap 3, which is Total Market Cap without Bitcoin and Ethereum, has two doji candles and still in a downtrend. You can see the green line is support now (previous resistance). Do we break the downtrend or test the support? Let’s watch what Bitcoin does as well.
On Thursday, President Biden signed the bill congress approved to increase the debt ceiling limit. This prevented the first ever U.S. default. The Treasury released an estimated date of December 15th that it would run out of tools to pay the bills. The President signed the bill one day after the estimated date. This bill will allow the government to cover its obligations into 2023. They lifted the borrowing limit by 2.5 trillion. No matter what is said, this will allow the government to spend more.
Just remember to keep investing in assets.
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