The FOMC came and went without anything too surprising, with interest rates staying where they are for now, although one final hike for this year is still expected, as discussed in the previous newsletter. Because this decision was completely expected, most media attention was focused on other comments made by Powell regarding inflation trends, long-term predictions of interest rates and key economic indicators.

Whenever there’s a FOMC meeting where the rate decision is pretty much known in advance (as the pause was priced in with a 99% probability this time), that means it’s going to be even harder to trade than a meeting where expectations are more or less evenly split between two different outcomes. With no factor of surprise from the rate decision itself, traders can only obsess over Powell’s exact choice of words or even tone of voice when mentioning inflation.

As for their long-term predictions, while those can impact the market, they should never be taken too seriously. The Fed is notoriously bad at predicting where rates will be in a year or two, let alone the economic outlook over such time frames. Apart from the intrinsic complexity of trying to predict something like that, Fed members typically err on the side of conformity and majority expectations, and they mostly use lagging indicators such as the CPI to shape their decisions. 

In a way, it’s hard to blame them. There are countless factors that go into where inflation will trend—for example, the fact that oil is up almost 30% this quarter isn’t exactly a good sign—but for traders, obsessing over long-term predictions is a fool’s game anyway. We all want to be right with our forecasts, but in the end, it’s all about staying nimble and trading the market that’s right in front of you.

Bitcoin

Bitcoin Weekly

Bitcoin Daily

A terrible Bitcoin weekly close after some volatility.

Historically, September has always been a red month, but I am not a guy who tends to trade purely based on this kind of information. The charts were looking good and the uptrend seemed reasonable, however stocks crashed, so Bitcoin was dragged down as well. Anyway, on a weekly view the important level to defend is $25,158 and the level to break is $29,500—a huge range which we have been trading in for 196 days already. Enjoying the ride?

The daily paints a clearer picture. Bitcoin was rejected at the daily MA 50 which was in confluence with the $27,500 resistance level and formed a new lower high. We are trading back in the range below $26,500 and there is a big downside gap to the weekly support. 

Should be a fun week and monthly close over the weekend. 

SPX, Gold and DXY

S&P 500

Gold

U.S. Dollar Index

The S&P 500 crashes to support

The higher low on stocks played out and flash crashed right to the support level, creating a new swing low. The FOMC event did not paint a nice picture and left investors in fear, which resulted in a selloff. I’m staying patient for today’s open, however if stocks do not bounce here, I will bid the 4096 level heavily.

Gold traders are indecisive

In the context of risk-on assets crashing, gold remains glued to the 1916 level. As soon as there is talk of more pain in the future, along with the lack of trust in traditional finance (e.g., because of the government shutdown that I discuss in the concluding section), gold will perform well and here is a good example. I will be even more convinced in this theory when I see a higher high form, until then, we chill.

U.S. Dollar Index continues its uptrend

New week, new green candle close on DXY. Surprised? You shouldn’t be anymore. As long as there’s slaughter in the markets, the dollar will keep performing well. It has confirmed its breakout above the 105 level and now there is a big gap towards 108 which spells even more trouble for risk-on assets. October is historically good for stocks and crypto, but will this be the case this year?

Ethereum

Ethereum/USDT

Ethereum weekly candle closes below the support level for the first time since March.

It has been almost two months since ETH broke below the trendline that was formed from a series of higher lows, and since then there has been no real interest from traders. The volume is decreasing each week which can also be seen from small candle bodies and lack of any real movement. A real bear market slow bleed towards three-digit Ether.

The only hope for Ethereum bulls now remains the ETF application in October and if that doesn’t move it, we can probably forget about it till 2024.

Blood’s content recap

Current financial Sentiment

“Big Uncertainty towards the Future.

Fear is clearly seen in social media where retail is expressing opinion.

If your goal is to prosper, you WILL.

The only thing keeping you down is your Vision.

Be positive. Opportunities are around. Always will be.

Negativists don’t make it.

Optimist do.”

Reminder

“F. Templeton has $1.5 trillion Assets Under Management & wants #Bitcoin spot ETF

Gensler tries delay SEC decisions, but its clear that wave is turning after Grayscale Win

Soon, floods of ETFs will be approved and people will want to put savings in BTC

And you are Bearish?”

Concluding notes

In case you missed the news, there’s a real chance we might see a US government shutdown on October 1: if the Senate (controlled by Democrats) and House (led by Republicans) don’t manage to agree on government funding by the end of the month, then the millions of people employed by federal agencies will stop getting their paychecks. All non-essential work on the federal level will be put on hold, while essential services will keep operating (but employees will only get paid once the shutdown is over).

This sounds scary, but it’s happened before, with the longest shutdown lasting 35 days over the holiday season between 2018 and 2019, during a stalemate on funding for Trump’s border wall. That shutdown was only partial, since some parts of the government did manage to get funding, but it still goes to show that a legislative standoff like that can take quite some time to resolve.

If you don’t live in the US and are wondering why this would be relevant for you, then—apart from the broader loss of trust in the US government that could certainly have at least some global consequences—the answer is simple: no federal funding, no economic releases. The CPI and other key pieces of data could be delayed, making it less likely for the Fed to hike on the November 1 FOMC.