6/4/2020 Eye on the Market: FED Money Printer Go BBRRrrrrr
Good evening all,
I hope everyone is well and 2020 sure does not stop to amaze with its new developments.
There have been some fun moments on the markets over the last few weeks and I think, as always, its better to zoom out first to see what the heck is going on in the world and how might events impact the markets.
We have had progressive easing of COVID-19 restrictions aside and the stock market seems to keep on rallying no matter the protests, the civil unrest and the quarantine in the US. Is there more to the plot here?
The Elephant in The Living Room
We have continued to see the SNP 500, DJIA and other indices perform quite well over the last three weeks. Infact the DJIA is back to where it was before the Big Drop and SNP500 continues to be bullish without a hickup. But let's just hold that thought for a second.
So, shouldn't the markets go down when we have a list of things like ~
- A spike in US unemployment
- A drop in Q1 earnings (US) with projected drop in Q2 earnings in Corporate America
- US GDP drop 4.8% (biggest since 2008 Crisis) h
- Mortgage forebearance (US) leaving soon.
- A drop in US Consumer spending / and confidence in the market
And last, but not least ~ a resolving quarantine with civil unrest in the Good Ol' Us of A with troops on the ground.
The answer would likely be a resounding "Yes," yet the Federal Reserve Bank continues to buy treasure bonds and assets to levels unprecedented in recorded human history.
To pontificate, the new dollars find their way to circulation end up in the accounts of hedge funds and so on and from there end up on the stock market in a form of buy (long) orders. With more buys with fiat dollars the market just continues to be bullish and bullish. A fake kind of bullish.
I could even pull up the chart infront of you guys (and gals) and tell you how bullish the picture is on the daily and the weekly. Would I believe the picture? Ofcourse not! This is because the latest series of rallies in SNP, DJIA (ASX and other markets followed) have been created artificially with stocks being more overpriced now than ever before.
If I were in stocks right now (I am not), I would shy away from indices and get to the nitty gritty individual stock selection. But even then, I suspect one in a hundred stocks would be underpriced in these conditions.
And there is no end in sight. Without the Fed Intervention, the market would drop in these conditions, and it is truly hard to say what will it take to get it to drop at this stage.
But there is a happy side to all of this. What does excel during financial crises? Commodities, the US Dollar and in the digital age I would add some stable crypto coins. So let's check those out!
Gold
Gold continues to maintain its positive uptrend, gaining on the daily and weekly charts. Momentum is positive on the weekly, but we are overextending on the MA. Furthermore, volumes decreasing and bearish divergence on the RSI noted. We are probably due for a pullback soon. It's only fair.
Silver
We are still in a weak bearish trend on the daily and the weekly. This is not to say that I would not consider trading this. Stellar performance since late March, closing up on that MACD convergence. My hunch is after making people money, this one is also due for a bit of sidewinding and/or a pull back.
Which leaves me with the thought, or better put a question. Who is in control here?
Trading View actually lets you pull up XAU/XAG (gold/silver) cross. Note we are in a triangle, with strong negative momentum and trend on the daily and the weekly. Gold is getting weaker and weaker in relation to Silver. Conclusions? We may see more volatility and price pushes up on the Silver, Gold may be in the last phase of its stellar run up since the highs of GFC era. If Silver has tomorrow in this crisis, watch for derivative and producer rallies.
FOREX
I just love forex. This is probably the biggest market on the planet, and almost purely technical too from my standpoint. I mentioned above that the USD tends to strengthen in crisis. As a side note, this is historically true, as people run to buy up USD, driving up its price. There is a devaluation, however, as the storm passes. This interesting phenomenon is observed in only a few other currencies and the belief in US Dollar being that safe haven in peoples' minds globally may be a factor here.
Closer to home, lets have a look at AUD/USD pair.
AUD/USD
It looks like we have gone through a healthy consolidation/pulback and are in the middle of the next impulse wave. If we are in the middle of Elliot Wave 3, as I believe we are, we can get this baby past that key level of ~0.70. And it's further up from there if the line is crossed. Momentum is still positive, which is what you want to see if you are holding Aussies.
Crypto
BTC
We got rejected a few days ago, establishing a new resistance at about ~10,400. Basically, the coin got pumped and dumped. No pun intended. We are still looking bullsh on this one. Slowly accelerating MA after a quick bounce back with now low volatility. I am looking for new entry points.
Altcoins
I have had increasing success in the altcoin space. There has been a lot of talk on if and when the next altcoin season will engage, and I have noted some nice rallies on NEO, Tezos and Cardano.
ETH/BTC is a good cross to look at to see about that altcoin season.
We are obviously still inside of that giant triangle, but approaching a key long term resistance. But we are not there yet folks. If we were to break the triangle on the upside, that would translate to increasing price of ether over bitcoin. This is one of the key factors to look for when looking for the next altcoin cycle.
So there you have it ~ crazy times on the stock market with the Fed manipulating the system blatantly in the midst of already a one hell of a year!. I hope every one stays safe, if not happy then content, and profitable. Roll the endspiel!
Just a reminder to everyone, none of this is financial advice per se. I do not know your financial situation (well most of you, that is :D ) and cannot in all honestly do a personal recommendation. All views above are my own only. Think for yourselves! Money Managers do not give a damn about you or your money. Always manage your risk and be extremely careful with leverage and shorts. Be prosperous!
Your friend,
I hope everyone is well and 2020 sure does not stop to amaze with its new developments.
There have been some fun moments on the markets over the last few weeks and I think, as always, its better to zoom out first to see what the heck is going on in the world and how might events impact the markets.
We have had progressive easing of COVID-19 restrictions aside and the stock market seems to keep on rallying no matter the protests, the civil unrest and the quarantine in the US. Is there more to the plot here?
The Elephant in The Living Room
We have continued to see the SNP 500, DJIA and other indices perform quite well over the last three weeks. Infact the DJIA is back to where it was before the Big Drop and SNP500 continues to be bullish without a hickup. But let's just hold that thought for a second.
So, shouldn't the markets go down when we have a list of things like ~
- A spike in US unemployment
- A drop in Q1 earnings (US) with projected drop in Q2 earnings in Corporate America
- US GDP drop 4.8% (biggest since 2008 Crisis) h
- Mortgage forebearance (US) leaving soon.
- A drop in US Consumer spending / and confidence in the market
And last, but not least ~ a resolving quarantine with civil unrest in the Good Ol' Us of A with troops on the ground.
The answer would likely be a resounding "Yes," yet the Federal Reserve Bank continues to buy treasure bonds and assets to levels unprecedented in recorded human history.
To pontificate, the new dollars find their way to circulation end up in the accounts of hedge funds and so on and from there end up on the stock market in a form of buy (long) orders. With more buys with fiat dollars the market just continues to be bullish and bullish. A fake kind of bullish.
I could even pull up the chart infront of you guys (and gals) and tell you how bullish the picture is on the daily and the weekly. Would I believe the picture? Ofcourse not! This is because the latest series of rallies in SNP, DJIA (ASX and other markets followed) have been created artificially with stocks being more overpriced now than ever before.
If I were in stocks right now (I am not), I would shy away from indices and get to the nitty gritty individual stock selection. But even then, I suspect one in a hundred stocks would be underpriced in these conditions.
And there is no end in sight. Without the Fed Intervention, the market would drop in these conditions, and it is truly hard to say what will it take to get it to drop at this stage.
But there is a happy side to all of this. What does excel during financial crises? Commodities, the US Dollar and in the digital age I would add some stable crypto coins. So let's check those out!
Gold
Gold continues to maintain its positive uptrend, gaining on the daily and weekly charts. Momentum is positive on the weekly, but we are overextending on the MA. Furthermore, volumes decreasing and bearish divergence on the RSI noted. We are probably due for a pullback soon. It's only fair.
Silver
We are still in a weak bearish trend on the daily and the weekly. This is not to say that I would not consider trading this. Stellar performance since late March, closing up on that MACD convergence. My hunch is after making people money, this one is also due for a bit of sidewinding and/or a pull back.
Which leaves me with the thought, or better put a question. Who is in control here?
Trading View actually lets you pull up XAU/XAG (gold/silver) cross. Note we are in a triangle, with strong negative momentum and trend on the daily and the weekly. Gold is getting weaker and weaker in relation to Silver. Conclusions? We may see more volatility and price pushes up on the Silver, Gold may be in the last phase of its stellar run up since the highs of GFC era. If Silver has tomorrow in this crisis, watch for derivative and producer rallies.
FOREX
I just love forex. This is probably the biggest market on the planet, and almost purely technical too from my standpoint. I mentioned above that the USD tends to strengthen in crisis. As a side note, this is historically true, as people run to buy up USD, driving up its price. There is a devaluation, however, as the storm passes. This interesting phenomenon is observed in only a few other currencies and the belief in US Dollar being that safe haven in peoples' minds globally may be a factor here.
Closer to home, lets have a look at AUD/USD pair.
AUD/USD
It looks like we have gone through a healthy consolidation/pulback and are in the middle of the next impulse wave. If we are in the middle of Elliot Wave 3, as I believe we are, we can get this baby past that key level of ~0.70. And it's further up from there if the line is crossed. Momentum is still positive, which is what you want to see if you are holding Aussies.
Crypto
BTC
We got rejected a few days ago, establishing a new resistance at about ~10,400. Basically, the coin got pumped and dumped. No pun intended. We are still looking bullsh on this one. Slowly accelerating MA after a quick bounce back with now low volatility. I am looking for new entry points.
Altcoins
I have had increasing success in the altcoin space. There has been a lot of talk on if and when the next altcoin season will engage, and I have noted some nice rallies on NEO, Tezos and Cardano.
ETH/BTC is a good cross to look at to see about that altcoin season.
We are obviously still inside of that giant triangle, but approaching a key long term resistance. But we are not there yet folks. If we were to break the triangle on the upside, that would translate to increasing price of ether over bitcoin. This is one of the key factors to look for when looking for the next altcoin cycle.
So there you have it ~ crazy times on the stock market with the Fed manipulating the system blatantly in the midst of already a one hell of a year!. I hope every one stays safe, if not happy then content, and profitable. Roll the endspiel!
Just a reminder to everyone, none of this is financial advice per se. I do not know your financial situation (well most of you, that is :D ) and cannot in all honestly do a personal recommendation. All views above are my own only. Think for yourselves! Money Managers do not give a damn about you or your money. Always manage your risk and be extremely careful with leverage and shorts. Be prosperous!
Your friend,