We’re seeing more backtesting this morning, consolidation after yesterday’s strong surge.
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Tag: BTC
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Analog in Play
Futures are all over the map this morning, with the overnight losses largely erased at one point.
The key, though, is that SPX bounced back above a key Fib level after tagging its 20% target last week. Although it’s still early stages, our analog is in play.continued for members… (more…)
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Analog Watch: May 13, 2022
Friday the 13th – an inauspicious day to break a new analog! With SPX nailing our downside target and futures breaking out of the falling wedge pattern yesterday, we’re off to the races.
These things don’t always work out. But, when they do, it can be a career-making trading opportunity. The one which worked out absurdly well was back in 2011. The 22% correction played out almost exactly as forecast, with the vicious 11-day, 18% plunge starting on the very day and within 1 point of what the analog promised. You can read all about it HERE.
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Bitcoin’s Meltdown
BTC reached our next downside target at 28,600 last night, then dropped as low as 25,401 before bouncing back to current levels.
It’s not unusual for BTC to overshoot important support. And, this .618 Fib level is theoretically important support. But, it’s also important to remember that a bounce is sometimes just a backtest of newly formed resistance before another leg down.We’ve been bearish on BTC since 66,432 in October 2021. We were a little early, but maintained our posture ever since with with the exception of the Dec 2021 and Jan 2022 bounces – a stance which has produced exceptional gains.
We’ll take a fresh look at BTC and whether it’s worth trying to catch this falling knife.
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A Swing and a Miss
ES spent 11 hours hanging around our next downside target yesterday. While the session had many characteristics of capitulation, the fact that SPX didn’t quite reach significant support (3956) suggests that the overnight ramp is a head fake.
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Update on Bitcoin: May 9, 2022
Bitcoin, the inflation hedge which has fallen 56% in the midst of the sharpest rise in inflation in over 40 years, is plunging again. Recall that we turned momentarily bullish after it broke out of a falling channel back on Feb 6.
We expected a backtest of the 200-day moving average – which BTC dutifully delivered on March 28.
Turning bearish again, we settled in and began waiting for a breakdown. Bitcoin didn’t disappoint. Today, it reached the bottom of the rising yellow channel.
Strange behavior, indeed, for a so-called store of value.continued for members… (more…)
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The Reflation Trade
Remember how excited the bulls were about the reflation trade? Higher interest rates meant the economy was reopening at a good clip. What could be better than that?
Things look a little different from the perspective of 3%+, don’t they?
Nothing alarming here…
Remember, it’s not the inversions that bite, but the spikes higher which come after.
Futures are off again this morning following a strong jobs report, but we’ve yet to punch through Monday’s lows.
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FOMC Day: May 4, 2022
Today’s FOMC meeting is one of the most anticipated and consequential in years. It’s difficult to overstate its importance in terms of economic impact and, perhaps more importantly, Fed credibility.
Yes, we care about whether the Fed hikes 50 or 75 basis points – though either is unlikely to put a dent in inflation. The bigger question is what the Fed does with its $9 trillion balance sheet.
Futures are up modestly.
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A Fork in the Road
Yankee great Yogi Berra famously advised that “when you come to a fork in the road, take it.” The S&P 500 is weighing such a decision this morning, having closed Friday at a critical level of technical support. A rebound from here would buy the Fed a little more time for inflation and hawkishness to ebb. A failure to bounce implies at least another 8-10% downside.
Which will it be? Fortunately for us, our chart patterns are sending a very unambiguous signal.continued for members… (more…)
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The Market is (Still) Broken
Futures came roaring back into the falling white channel yesterday, revealing what many know but few say out loud: the market is broken. When expectations of a 1% quarterly rise in GDP yield, instead, a 1.4% decline, stocks should decline. Plain and simple.
The old “bad news is good news” argument doesn’t work any more because the Fed no longer has the ability (at least this coming meeting) to ease in response to a slowing economy. Perhaps they would have if they hadn’t squandered the opportunity to taper months ago, but that’s water under the bridge.
Instead, we get this massive disconnect which is, at the end of the day, a means of ramping stocks in advance of the bad news we all know is coming via the Fed’s meeting next week: a 50+ bps rate hike. Beyond monetary policy, which is now a headwind instead of a tailwind, we see more and more indications of tough times ahead. As Bill Blain (a treasure) sums it up:
The world is not what we think it should be. It is what it is…and that is getting less pretty.
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