Investors Overlooking Crude & Yield Moves? AI & Bitcoin Extend Stock Market Optimism

slowdown. Pretty fascinating stuff. Welcome back to Morning Trade Live. Let's welcome in the team from the Schwab Center for Financial Research. We got Nathan Peterson with us. He's the director of derivatives analysis. And Jim Ferraioli, the director of crypto research and strategy. Good morning gentlemen. Happy Wednesday. Nate, good to see you. It's been a while, my friend. Let's talk a resilient marketplace. An S&P 500 Nasdaq that have been sort of going sideways for much of the last quarter despite, you know, I would say a lot of things that in other times may have brought down the market notably what's going on with geopolitics and crude oil. Yeah, yeah. No doubt. Good morning Alex. Yeah. Good to see you as well. Yeah. Look at the stocks today. The stocks is up. The AI infrastructure trade you know reminds me a little bit of the April playbook right. Market breadth rolling over money flow going to where they perceive it to be the safest money there. But to that bid that you're talking about that resiliency. If you look at the S&P 500, basically that's 7600 level. That's kind of the the breakout level. And then it's served as support multiple times. You know, where we bounced off it. You know, what was that last week or the week before that? And so there is this bid that is there in the technical nature that is there. And why? Well, number one, earnings and the earnings growth story, the AI infrastructure build out, that's healthy. But the other reason that I think that this bid is there is because it's a condition, you know, investor psychology going back to the tariff announcement, you know, back in, you know, back last year where, okay, we sold and then the market came back, then the Iran war, we sold and then it came back. And we've had higher oil prices since, you know, basically going back to March. And has it really mattered yet to the kind of the the health of the economy? The economy has done really well since then. So all of those factors create basically this bid, basically that it's going to be in place. And, and higher oil is not going to matter until it does. But 95 oil here, Alex. I think we can all agree based on the depletions of the SPR, it's a lot different than 95 back in April. And so are we being a little bit, you know, too complacent about what higher oil prices might mean. And yes, the fed is going to come into the equation with all of that. But then inflation expectations getting embedded in there. And then even if Iran were to have a, you know, some kind of announcement of a deal. Well, we've already seen that playbook too. So my point is, it doesn't look great on the on the Iran conflict. Oil prices are in an uptrend. Bond yields are in an uptrend. And yet we're kind of overlooking all that and saying, well we got the AI infrastructure build out. Yeah. It's a lot to explore more on that in a second though, because you mentioned market psychology. We'll tie that into sentiment as well, Jim, as we kind of bring crypto into this discussion, you know, you go into September and every single news headline that covers financial markets tells us how September is historically the weakest month for stocks. First question is, does that apply to crypto in the same way? And secondly, how big of a of a deal is it that you're starting to see some recovery here? I think, you know, sailors back in the green, a lot of the you know, the big discussion points around crypto seem to be maybe turning the corner to the a little bit more positive. Hey, good morning. And what I would point to there is seasonality in crypto markets actually tends to align with equity markets. And that doesn't really matter if crypto at the time is showing a high correlation to stocks or low correlation to stocks going back to 2011, September tends to be the weakest month for cryptocurrencies. On average, Bitcoin's returned about -4% in the month of September. But to your point, sentiment appears to be improving. There was a big reset in kind of market structure and sentiment. In August. There was a pretty extreme short squeeze, and what we saw during that is prices rose over 20%. However, open interest did not actually fall. So while shorts were getting squeezed and contracts were getting closed, investors were opening new futures contracts. And so what we've seen in the past is that's actually something that tends to happen in bullish uptrends. And so I think that aligns with some of the things you mentioned about strategy being back in profit. The key levels that we continue to watch are about $80,000. The spot exchange traded products, they have a cost basis of around $83,000. If we look at all active investors for Bitcoin, that's at about 76 $77,000. So you get to about $80,000, taking an average of both of those measures. And so we think there's some healthy fundamental resistance there. But to again, your point, if you can break through these levels, that means the average investor is now in profit. And so that that certainly would have a broad impact on crypto market sentiment. Jim, real quick follow on to this. How much do you attribute the most recent rally to kind of the anti dollar trade? It's hard for me not to see the recent correlation to gold being quite strong. And the inverse correlation to the dollar being quite strong as well. That's one of the things we we track very closely. So over the long term a multi year basis, Bitcoin tends to be a low correlation asset to all different asset classes. In the short term it can get correlated to things. The past couple of years it had a high correlation to tech stocks. This most recently its correlation to stocks has actually fallen and its correlation to gold is rising in. And that's really sparked was sparked earlier in August when the secretary treasurer of the Treasury came out and started talking about ramping up their Treasury buybacks. That kind of sparked some life back into the debasement trade. And we also saw gold rally there. And so that's one of the fundamental reasons people have invested in Bitcoin historically, because it has its own monetary system. It's not linked to any central banks. And so when you start hearing people talking about dollar debasement or the market starts sniffing it out, it makes sense that Bitcoin is going to get a bid there, and its correlation to gold is likely going to rise. All right. Last question for you Nate. Hard not to notice how subdued volatility has been at the index level. When you look at the S&P 500 what stands out technically levels to watch is this tug of war continues to rage on below the surface. Yeah. So on the VIX real quick you know if you look at the term structure it's not reflecting that much. Of course it's in contango. And basically going out to 19 when you get to December. And the reason is is because of realized volatility and because of the rotational nature of what's been going on with stocks. And that it's not really filtering through to the S&P 500 index. Now on those key levels, it is 7600 on the S&P 500. And that also coincides with 2900 on the Russell 2000, which is roughly the 100 day simple moving average. Watch these levels because, Alex think of it from a psychology a trader psychology perspective. If the S&P is at like, let's say 7630, I can get long here and I know where my out is. If it breaks 7600. So as long as this bid comes in, then my risk reward is skewed to the upside. However, once you reach that level, you're going to lose the technician, so to speak. And I wouldn't be surprised if you start getting larger red candles on the S&P 500, a larger move in the VIX. If that happens right now it's holding up good stuff guys. Really appreciate the insights. That's Na