The Do-Nothing Tape Resumes

Louis Sykes
November 3, 2022

Risk assets sold off following the latest move by the Federal Open Market Committee to hike interest rates by 75 basis points.

As always, we prioritize how markets price in these events and, ultimately, how they react to the actual print.

That's because the market is a forward-looking discount mechanism; price action reveals a collective expectation of events before they take place.

Rather than focusing on the minutiae of the CPI and/or the workings of the FOMC, we prioritize money flow.

Leading up to the FOMC, the S&P was in the process of testing a resistance zone around 3,900. This was one of the reasons we argued for patience coming into the week.

There's just no point in swinging for longs here.

Even if we break 3,900, there's only another 5% to a significant resistance zone: the AVWAP off all-time highs and the channel resistance.

Unless you want to be swing-trading a 5% move in the SPX (which isn't our time frame), we're best to let bullish shape form beforehand.

Sure, we may be paying a premium on flipping our books long when the S&P breaks 4,100. But that premium is dwarfed by the financial and emotional capital that could be lost getting chopped up in this tape.

So, why is this important in a discussion about crypto?

Because the correlations are still there.

Would we like for these to be two independent markets?

Absolutely.

It's always great to have a wide range of independent and uncorrelated markets to trade. 

But we need to deal with reality -- Bitcoin's merely been a short volatility trade over the last year. It'd only be foolish to think otherwise.

So, with equities looming behind all this supply, there's no real conviction to be had. It's been such a do-nothing tape for so long.

We're betting it stays that way, at least in the near future.

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Thanks for reading, and please let us know if you have any questions!

Allstarcharts Team

 

 

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