(Kitco News) – The market euphoria seen in recent weeks faded in early trading on Thursday as stocks, gold, and Bitcoin (BTC) slid lower after the latest Personal Consumption Expenditures (PCE) index reading was in line with expectations and did little to change the outlook on interest rate cuts in November.
The annual “core” PCE for September, which excludes food and energy prices, rose by 2.7%, more than 2.6% expected by economists, and equal to the 2.7% rise in August. On the job front, initial jobless claims declined by 12,000 to a five-month low of 216,000, versus estimates for 230,000.
This was the final inflation data ahead of the Federal Reserve’s interest rate decision next week, but there will be one final monthly jobs report, set for release on Friday, for the Fed to take into account before they decide if they plan to announce another interest rate cut. The CME FedWatch Tool currently puts the odds of a 25 basis point cut at the November 7 FOMC meeting at 96%.
“Today’s PCE numbers, coming in as expected, have reinforced the dovish sentiment sparked by last month's FOMC rate cut, boosting confidence that the Fed is on the right track to cooling inflation,” said Matt Mena, Crypto Research Strategist at 21Shares. “This supportive backdrop has given Bitcoin a notable lift as investors gravitate toward risk assets, anticipating a continued accommodative approach from the Fed.”
“Bitcoin had already factored in this positive outlook, closing above $72,000 last night—a level it has only reached once before when it hit its all-time high of $73,700 in March of this year,” he noted. “This shift in sentiment is also reflected in Bitcoin ETPs.”
“Over the past three trading days, net inflows have exceeded $2 billion, driven by growing confidence in a cooling inflation landscape and the perception of a more crypto-friendly political environment in the U.S.,” Mena highlighted. “The cumulative net inflows for Bitcoin ETPs now stand at over $23 billion, surpassing even the world's largest ETF, SPY, and outpacing major funds like QQQ and AGG. Furthermore, spot Bitcoin ETPs have attracted over 22 times the net inflows of gold ETPs, which have seen only around $1 billion in net inflows year-to-date.”
“Additionally, the top 12 tech ETFs, categorized under Morningstar’s Technology Sector, have collectively garnered approximately $23 billion in net inflows,” he added. “It’s remarkable to consider that the 12 spot Bitcoin ETPs have matched or even surpassed these inflows, despite the robust performance of tech giants like Meta, Microsoft, and Google – all of which reported impressive earnings that exceeded analysts’ expectations.”
Regarding stocks and the tech giants, David Morrison, Senior Market Analyst at Trade Nation, noted that, “Following on from Alphabet’s better-than-expected earnings report on Tuesday evening, Microsoft and Meta Platforms were the next two ‘Magnificent Seven’ constituents to update the market. Both companies reported after last night’s close, and both managed to disappoint investors in slightly different ways.”
“Microsoft beat expectations for both earnings and revenues. But it issued a downbeat outlook for future growth, which saw the stock drop 4% in early trade,” he said. “Meta also posted revenues and earnings above those forecast. But user numbers came in light and the company warned that infrastructure expenses were set to soar due to spending related to generative AI. The stock fell 5.5% on the news, but has pared some of those losses this morning. The news has put investors on edge as they await results from Apple and Amazon after tonight’s close.”
“Yesterday, the first look at Q3 GDP came in at 2.8% annualized, and below the 3.0% expected,” Morrison added. “But there was an unexpected jump in ADP Payrolls, although it is tomorrow’s official Non-Farm Payrolls which are of greater importance as far as investors are concerned. But investors look slightly rattled for now. Further bad news on tech earnings could see more shredded nerves and a tendency to sell first and ask questions later.”
Regarding the pullback in gold, which has seen the yellow metal fall 1.95% on the session to $2,733.70/oz at the time of writing, Morrison noted that “Gold is certainly overdue a correction, or at the very least a fair period of consolidation.”
“Gold has rallied 40% from mid-February, from $1,990 to $2,790, in a pretty direct fashion. In all that time, it has only had one significant period of consolidation, which came between April and July,” he underscored. “Back in April, gold was looking very overbought, and that consolidation helped the daily MACD to reset at lower levels, without a significant drop in prices, and so provide a springboard for its rally since then.”
“At current levels, gold is still not as overbought as it was in April. So it could have some additional upside before it hits ‘decision time,’” Morrison said. “Meanwhile, silver remains volatile. Just over a week ago it traded at a twelve-year high not far short of $35 per ounce. It has pulled back, rallied, and pulled back again. For now, it is holding comfortably above $33, and is within sight of recent highs. But it is struggling to find direction, and the only thing that seems certain is that there’s more volatility ahead.”
Data provided by TradingView shows that Bitcoin continued to consolidate following its recent rally above $73,000 and looks poised to retest support at $70,000 after collapsing through the higher support levels.
BTC/USD Chart by TradingView
While much of the ecosystem is in bull market mode following this week’s rise, TradingView analyst Xanrox warned that bears could be setting up a bull trap and advised traders to stay cautious.
“Bitcoin is currently very bullish; that's clearly visible and soon will hit a new all time high. That's exactly the point where a lot of people will start buying with the belief of going to 100k - 130k,” he wrote in a Thursday update. “But you may know that Bitcoin is under extreme manipulation by BlackRock and other institutions. This is not a stock market, so they will not let Bitcoin go up, and instead they will trigger a massive crash back to 63k. Nobody likes Blackrock, but it's how it is.”
“So what is the plan? First, I expect Bitcoin to go up and reach 78k. Then, when everyone buys, the price will crash to 63k,” he said. “Do not forget that we also need to see a successful retest of the bullish flag. There is no retest yet. Bitcoin needs to confirm this uptrend, so do not FOMO in.”
“Why is 63k important? We have a 200 daily moving average and FVG (Fair Value GAP) around this level,” Xanrox concluded. “Also, the RSI indicator is starting to be overbought; you want to buy low when everyone is bearish.”
At the time of writing, Bitcoin trades at $70,750, a decrease of 2.27% on the 24-hour chart.
