(Kitco News) – Stocks and cryptos trended red in early trading on Friday while spot gold ticked higher – up 0.15% at the time of writing – as traders digested Thursday’s comments from Fed Chair Jerome Powell that the central bank is in no hurry to lower interest rates, which reduced risk-on sentiment.
“The domestically-focused, mid-cap Russell led Thursday’s decline, dropping 1.4% during the session,” noted David Morrison, Senior Market Analyst at Trade Nation. “But it is the tech sector which is leading this morning’s move lower, with fairly uniform declines for the ‘Magnificent Seven’ constituents.”
“Federal Reserve Chair Jerome Powell managed to spook markets during a speech and Q&A session last night,” he added. “He said that the economy was not giving out signals to suggest that the US central bank should be in a hurry to lower rates. His comment led to a pullback in equities and a rally in bond yields.”
“There was also a sharp reversal in rate cut expectations as measured by the CME’s FedWatch Tool,” Morrison highlighted. “Yesterday morning, the probability of a 25 basis point rate cut at the Fed’s FOMC meeting next month stood at 82%. This dropped to 62% in the aftermath of Powell’s comments.” At the time of writing, the odds of a rate cut in December have slipped further to 58%.
“So, once again, there’s plenty of uncertainty building ahead of the December meeting,” Morrison said. “The Fed can blame this on recent data, particularly this week’s CPI and PPI releases, but also on what a Trump administration may mean for the US economy. Even though it appeared that both Trump and Powell were in favor of lower rates – the former to goose the economy, the latter to ease the pain of the $1.5 trillion of real estate loans which reset next year – it’s possible that Powell’s hawkish tilt will put the pair back on a collision course, reminiscent of their clash during Trump’s first term.”
Looking forward, he said the question that is top of mind for traders “is whether this week’s pullback proves sufficient for investors looking for better long side entry points, or is there more downside from here? If US stock indices can find support around current levels, say 5,900 on the S&P, and rally into the weekend, then this could set the stage for more upside. But if the selling accelerates into today’s close, then investors will have more reason to cut their exposure as we head towards the year-end.”
At the time of writing, the S&P is down 1.08% on the day and trading at 5,885, which based on Morrison’s assessment points to continued weakness.
Turning to crypto, Bitcoin (BTC) bulls rallied higher from support at $87,300 in the early hours on Friday, hitting a high of $90,723 near the U.S. market open, at which point bears mustered the defenses and stamped BTC back down to support at $88,000.
BTC/USD Chart by TradingView
“The cryptocurrency market continues to cool for the third day in a row, falling 1.7% in the last 24 hours to $2.92 trillion,” said Alex Kuptsikevich, chief market analyst at FxPro. “This is a retest of the lower end of a range that is seeing serious position shake-offs. This dynamic is also in line with the general risk-off sentiment that has prevailed in the markets this week.”
“By the end of the week, we cannot rule out a deeper correction to the overall level of $2.73 trillion, which is the 61.8% level of the last growth impulse and the consolidation area of 10-11 November,” he warned.
“Bitcoin is consolidating [near] $88K, opening and closing within the $88K–$89K range for the fourth day,” he added. “On the daily timeframe, the RSI is about to fall below the 80 level, which could trigger a deeper shakeout with a pullback to $83K.
BTC/USD Chart by TradingView
“Ethereum has pulled back to $3,000, losing 12% from its peak in a four-day correction,” Kuptsikevich said. “Local support could come from the 200-day average at $2,950, which coincides with the coin's support area from April to July this year.”
ETH/USD Chart by TradingView
While cryptos are currently showing signs of consolidation with the possibility of further pullbacks, this November has been one of the best months in Bitcoin history, and barring a major sell-off, BTC is on track to print its best monthly candle ever, with analysts noting that we are only half-way through the month.
?BREAKING: #Bitcoin is on track to close the biggest monthly candle EVER!
We're only halfway through November! pic.twitter.com/5B5e7MC1Pb— Bitcoin Archive (@BTC_Archive) November 15, 2024
Adding in the fact that “Bitcoin reserves on exchanges in 2024 have reached the lowest level since November 2018,” as noted by CryptoQuant analyst Gaah, market watchers remain optimistic that Bitcoin will continue to climb higher once this consolidation is complete.
“This milestone represents a significant change in the behavior of investors, who are increasingly inclined to withdraw their assets from exchanges for long-term storage in private wallets,” Gaah said. “This movement reduces the supply available for immediate sale, creating buying pressure in a tight supply environment.”
“As a result, the market may see a trend towards Bitcoin's appreciation, especially if demand remains stable or grows,” he noted. “This scenario also indicates greater investor confidence in the asset, who see Bitcoin as a store of value in a global economic context of uncertainty and high inflation.”
“With that said, this scenario signals a potentially more volatile but more resilient Bitcoin market, with less selling pressure and a growing dominance of long-term holders, which could open up space for new price peaks,” Gaah concluded.
At the time of writing, Bitcoin trades at $88,964, an increase of 0.88% on the 24-hour chart.
