In the previous newsletter, I mentioned the stronger than expected jobs report, which led some to predict a final 25 bps rate hike in May; on the other hand, last week brought us the headline March CPI just below the 5.1% estimate at 5.0%, which decreased the likelihood of another rate hike, but that’s a possibility that’s still very much on the table. Speculating on whether there will be another hike or not isn’t that crucial (or interesting), but there’s another datapoint that I found much more intriguing. It seems that everyone and their grandma is short equities right now, as net positioning on the S&P 500 is skewed even more heavily to the short side than it was in 2020.

Think about that: there are more shorts on the S&P 500 right now than there were in the wake of the Covid crash, when most people were convinced the world is going to end and all assets are going to zero (unless they were too busy stocking up on toilet paper to think about the markets, that is). While this is far from a perfect indicator—sometimes, the crowd can be right—it’s still a key piece of information to keep in mind. If stocks can show some strength here, pushing those overexposed shorts underwater, we could see a squeeze leading to a lot of upside. Again, I can’t stress enough that this shouldn’t be taken as a trade signal on its own, but looking at this historically, when shorts were as all-in as they are now, they were almost (!) always punished.

Bitcoin

Bitcoin weekly

Bitcoin Daily

Bitcoin traded above $30000 for the first time since May 2022.

Following a bullish week, Bitcoin soared to a high of $31,000 before retracing towards the weekend. As we discussed last week, the daily timeframe appeared bullish due to BTC trading above the short-term trend (EMAs). Bitcoin indeed bounced off these EMAs, and now we’re witnessing a similar situation. The daily RSI resembles its structure from a month ago, so I wouldn’t be surprised if we see some choppy action around $29k-$31k.

The weekly timeframe reveals a bearish divergence on the OBV, with three lower highs while the price printed three higher highs. It’s not the most reassuring sign if you’re hoping for the $30,000 level to hold. However, this divergence isn’t new, and it hasn’t played out yet.

It’s worth noting that we haven’t experienced a significant retrace since late February/early March. With a substantial drop in volume (as seen in the weekly volume), a retrace could be on the horizon.

The Bloodgang fam successfully closed all trades in profit after BTC hit $30,000 and ETH reached $2k. For now, we’re sitting on the sidelines, scouting for new altcoin opportunities. Stay tuned to my Twitter account and keep those notifications on.

SPX, Gold and DXY

S&P 500

U.S. Dollar Index

Gold

The S&P 500 hasn’t seen much change from our previous analysis, so there’s not much to delve into here. However, it’s worth noting that we’re approaching the weekly 100 MA, which marked a local top back at the end of January. We also nearly witnessed a head and shoulders formation on the weekly timeframe, so keep an eye on that in case it comes back into play. Note that, given the extreme short positioning mentioned above, the head and shoulders pattern could end up failing and leading to a bullish expansion (as the H&S is the perfect fuel for bears to get too excited, which could be part of the reason why they’re currently overexposed). This all depends on macro data at this point, so don’t get too confident in either direction.

As expected, the U.S. Dollar Index hit a new low, driven by ongoing currency wars between BRICS nations and the USA. As long as the Dollar Index continues to decline, risk-on assets are likely to thrive. With several key weekly EMA & MA levels around the 100 and 98 marks, we might see a bounce there and a subsequent retrace in crypto.

Gold has successfully retested the last level before its all-time highs. Since mid-March, it’s been climbing in a flawless staircase pattern, staying above short-term EMAs and supported by a consistently rising OBV.

Ethereum

Ethereum/USDT

Ethereum/BTC

Ethereum reclaimed the $2000 level after the Shanghai upgrade.

Contrary to expectations of a short-term retrace, those who went short got rekt as ETH soared to a high of $2,141. Bulls will aim to defend this reclaimed level since there’s a significant gap between $2,000 and $2,600. Not much has happened in between, leaving no clear levels except for the weekly MA100 around $2,350.

Just like Bitcoin, I’ll consider Ether bullish as long as it holds the short-term EMAs. However, if that trend is lost, I’ll turn bearish, at least in the short term. Should we see a retrace to the low 1900s, I’ll be keeping an eye on the charts for potential longs.

The Ethereum/BTC pair dipped below the critical 0.065 BTC line but quickly reclaimed it the next day, now trading at 0.07 BTC. I’m still holding onto the trade where we flipped BTC to ETH at 0.065 BTC and plan to keep it until the 0.08 BTC mark is reached.

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Concluding notes

There aren’t any crucial updates on the CFTC vs. Binance situation, but there have been plenty of headlines about FTX in the past week. According to a new report, they have recovered $7.3 billion of assets, which is $800 million more than in January (maybe they left some 100x longs open and forgot about them?). The increase might not be too surprising—although the extent of it definitely is—given what the markets have been doing so far this year, but the most shocking piece of information was that there might be plans to restart the FTX exchange, under new leadership, of course.

A lot of people have been talking about that idea, with most dismissing it, but if there’s ever a relaunch of FTX, there’s no reason why it would be an unsafe exchange just because of what happened previously—SBF & co. would be in prison by that time, and none of them would ever have anything to do with it. In any case, restarting the exchange wouldn’t be easy; as we’ve learned, the clean UX wasn’t at all representative of what was going on with user funds behind the scenes. That scenario could also lead to users getting some form of equity in the exchange (which would be a good thing, provided that they first get their money back, of course), but, once again, it’s far from certain at this point. In fact, given how much FTT pumped when the news came out—and how much almost-worthless FTT is still owned by the FTX estate—this could just be part of a PR stunt to try and recover some more funds by pumping the token.