Bitcoin Price Surges to New High on MicroStrategy Nasdaq 100 Boost
Bitcoin has been one pocket of speculative strength amid a messy technical setup and the potential for a messy finish to the year.
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With just 10.5 trading sessions left in 2024, market conditions are ripe for a chaotic finish. The technical setup is messy, and several major catalysts are about to hit.
The most notable aspect of the recent market behavior is very poor breadth, which is hidden to a great extent by strength in big-cap technology stocks. While S&P 500 breadth has been negative for 10 straight days, the Magnificent Seven MAGS has been ripping higher and hovering just under its all-time highs.
Under the surface, the DJIA and Russell 2000 IWM have been trending down for more than two weeks, and the Equal Weight S&P 500 (SPEW) is sitting at its 50-day simple moving average for the first time since the start of November.
There are still a few pockets of speculative strength, but they are primarily related to Bitcoin and quantum computing. Bitcoin IBIT jumped to a new all-time high of over $116,000, in part due to MicroStrategy MSTR being added to the Nasdaq 100 QQQ. While many Wall Street pros question MicroStrategy's valuation, its move to the Nasdaq 100 is just further confirmation that Bitcoin is now an asset class that is required for proper diversification.
The two-tiered technical action creates an intriguing setup as we prepare for two major events. The first is the Fed Reserve's interest rate policy decision on Wednesday, December 18, at 2 p.m. ET.
It is widely anticipated that the Fed will cut rates by a quarter point, but there is increased concern that the Fed may not cut rates again for a long time. Even the quarter-point cut this week is being questioned, but the Fed has already signaled a commitment and is unlikely to change.
Since the election, the market has been very optimistic about economic growth and lower inflation, but that is starting to shift as the true test of actual policy starts on January 20. Bonds indicate concern about inflation, and the dollar will be of great importance.
The Fed decision is hitting at the same time that the market is dealing with end-of-the-year trading pressures. There are many moves being made in the next two weeks for tax purposes, and there is also positioning and profit-taking by major funds that are preparing for the new year.
Many market players are looking for a Santa Claus rally to start after the Fed interest rate decision is out of the way. In view of the pullback in many smaller stocks, conditions are good for some sort of self-fulling celebration, and tax moves and positioning will add volatility to the action.
The very poor recent breadth has caused some market concern, but it offers an interesting bullish setup for an end-of-the-year rally.
At the time of publication, DePorre was long IBIT and MSTR.
