What a week!
From early CPI release to an unexpected 180 degree turn on Ethereum spot ETFs
What a week it’s been since the last issue of The Market Breakdown went out. The April CPI data was released (with some data being released early), stock indexes hit new all time highs, Bitcoin rallied and almost hit its own all time high, and now there’s chatter that suggests we may see an Ethereum spot ETF approval sooner rather than later.
I went through chart requests on last Friday’s live stream and FiboSwanny showed up as a surprise guest. That makes two weeks in a row.
CPI Comes In As Expected
The new CPI data that came out last Wednesday was actually, believe it or not, in-line with expectations. Furthermore, core CPI (excludes food and energy), which came in at 3.6% YoY, was the lowest it’s been since April 2002. After months of coming in hotter than expected, this was a nice reprieve and the markets took full of advantage of it. This CPI release gave market participants confidence to buy into risk assets driving the Nasdaq, SPY, and Dow to new all time highs.
Shelter has started to moderate slightly but remains stubbornly high while insurance premiums have recently been providing upward pressure as well. Services, which has remained high along with shelter, finally started easing in April. If moderation in CPI continues then it gives the Fed the ability to cut later in the year, just in time for elections. But the real news was that some of the CPI data was released a half hour early by the Labor Department.
According to a statement released by the BLS, they “inadvertently loaded a subset of files to the website approximately 30 minutes prior to the release.” However, the lack of any real unusual activity in that half hour suggests that not many people saw it. Just another day at the office, am I right?
Ethereum ETFs to be approved?
In a surprise move on Monday, the SEC asked Ethereum spot ETF filers to update their 19b-4 filings on an accelerated basis. With Thursday being a key deadline (the SEC needs to make a decision on the VanEck spot Ethereum ETF by May 23rd), the market expects to see approvals. But I believe most retail market participants are missing the full picture which is that an approval on Thursday doesn’t mean that the ETFs would start trading on Friday. Once the 19b-4 filing is approved, the S-1 documents will still be outstanding, and they are required to be approved as well. So, that means that even if the 19b-4 filings are approved by Thursday, it could be days, weeks, or even months until the S-1 filings are approved and the ETFs are allowed to start trading.
As a result of the news on Monday, Ethereum rallied 20%, breaking out above resistance and signalling that it is likely headed toward new all time highs. My targets remain unchanged at $5185 followed by $6350.
The US Dollar (DXY)
The DXY gave us the breakdown below 104.522 which sent it into the ascending channel support. That resulted in a small bounce that is being hold back by the S1 pivot. We want to see follow through below the ascending channel support next. As mentioned in last week’s newsletter, doing so will signal that the trend should continue lower and take out the swing low at the channel start.
Bitcoin All Time History Index (BTC/USD)
We got all of the in-range breakouts that we were looking for last week as price rallied into resistance just a couple of thousand dollars from the all time high. Usually, we will expect a pullback from around this area toward the yellow range between the pivot and the 65541.11 resistance. And from there is where we look for the rally that breaks through the resistance at the all time high. However, we could still get a rally a bit higher without breaking out before pulling back. We need to see what price does now that it has rallied over $5000 today.
I still believe we will see a short squeeze that carries price into the low-$80Ks at least when price does break out. We can see that hedge funds are still very net short at record levels while asset managers remain very net long.
There is the plain fool, who does the wrong thing at all times everywhere, but there is the Wall Street fool, who thinks he must trade all the time.
— Jesse Livermore
Ethereum/Bitcoin (ETH/BTC)
With the ETH/USD rally outperforming the BTC/USD rally, the ETH/BTC price rallied 15%. In doing so, it looks like this pair may have finally bottomed after pulling back since December of 2021. But this move is only the start, so it does have more work to do to add confidence to that scenario.
Nvidia (NVDA)
Nvidia will release its April ‘24 quarter earnings report after hours on Wednesday. EPS is estimated at 5.60 and revenue at 24.593B. It looks like price wants to break out higher. If you’ve been following me since it was below $500, then you know I’ve been expecting a rally above $1000. Locally, I have a target of $1138. But the aggressive move through the pivots on the weekly time frame suggest that price could hit the R5 pivot area around $1465.51, meaning if it gets there then $1500 is a very strong likelihood by the end of the year.
Join me as I co-host spaces with Gary Cardone and Samuel Armes every Monday at 4 p.m. CST/5 p.m. EST. And, also, as I join Scott Melker every Wednesday at 8:30 a.m. CST/9:30 a.m. EST with some of the more interesting charts of the day.
My Live Streaming Schedule
Simulcasting on Fridays
11:00 a.m CST
Interviewing guests and discussing charts: