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Topic 1: Is Bitcoin Leading the S&P 500?

Could Bitcoin be tipping us off to the next move in equities?

A bullish divergence happens when one asset starts to move higher while another lags behind. Right now, Bitcoin is breaking out to new highs, while the S&P 500 hasn’t yet confirmed that move.

There are three red circles on the chart. Each highlights a time when Bitcoin either rolled over or failed to make new highs while the S&P 500 pushed ahead. In each case, the equity rally eventually stalled and reversed.

This time, the roles are flipped. Bitcoin is out in front, and the S&P 500 is lagging. If the relationship still holds, it may be a sign that risk appetite is building again, and the path forward for stocks could be higher.

It’s a setup worth watching.

Topic 2: Dollar Breakdown Is Support Giving Way?

The US Dollar Index has been pulling back from recent highs and is now breaking through key support levels that have been confirmed by price action for much of the past decade.

From 2015 through 2022, the dollar repeatedly struggled to break meaningfully above the 100 level. That changed when the Fed began its interest rate tightening cycle, and the dollar moved sharply higher. But now, with rate cuts on the horizon, the dollar has dropped back below 100 and looks like it could retest the long-standing support area around 90.

This move carries real portfolio implications. A weaker dollar can create a strong tailwind for non-US dollar denominated assets. While that’s often talked about in the context of global equities, don’t overlook the opportunity in international fixed income markets.

The trend in the dollar is shifting. That matters more than most people think.

Topic 3: Oil, Inflation, and the Case for Deregulation

Recent military activity in the Middle East has investors watching the potential return of inflation. Investors are concerned about the possibility of oil production facilities being taken offline. This could risk the possibility of constrained supply, especially heading into the busy US driving season, there is growing concern that oil could reignite inflation pressures.

Right now, the trend in oil is still working in our favor. But we need to keep a close eye on it. Oil tends to be a leading indicator for CPI, and that makes sense. Energy prices are a significant input in the inflation calculation.

If the situation overseas escalates, I believe we may see an executive order aimed at ramping up domestic oil production. That would further support the argument that deregulation could be a key driver of stock market value moving forward.

This is not just about oil. It is about supply chains, policy, and how fast the market can reprice risk.

Link: https://technicaltwist.substack.com/

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