Disclaimer: Nothing contained in this article should be considered as investment or trading advice.
[First published: 20th Sept 2021]
Ok just a quick update to the previous article from Sept 1st. That article made the argument that now is a good time to buy crypto based on the crypto market cycle. That’s still true, if you look solely on that cycle. However, if bigger markets with much more money in them decide to crash, they will unfortunately take crypto down with them, at least for some time.
Stonks only go up?
The stock market isn’t crashing yet exactly, but it is rolling over and does not look good. The top signal was probably Federal Reserve execs selling their stocks for “ethical” (sic) reasons.
The proximate cause seems to be unease about the Chinese property developer Evergrande. They are about to default on some of their debt, and some big Western investment banks own large amounts of their bonds, which are losing value very fast. Therefore, there is the potential for contagion – the very mention of which brings fearful comparison with the 2008 Global Financial Crisis. Debts and leverage are way higher than they were in 2008, and I think a bigger badder sequel is inevitable.
Is Evergrande the first domino? If so, how long until the next one falls? What will the Chinese and US and other governments do and how successful will they be? It’s hard to tell and by the time I could try and figure it out it would have long since happened.
All I want to say is: if there’s a financial crisis, everything will go down. Crypto will go down hard. All stocks, even extremely undervalued ones like precious metals miners, will fall. That wonderful store of value gold will also lose value. Even commodities, which are in the beginnings of a very long bull market, will be depressed temporarily.
Yet external events don’t cancel out cycles, they only delay them. You can see this very clearly in the response of Bitcoin price to the March 2020 crash. Undervalued sectors will rise again more sharply than before, once the panic-selling subsides.
I’m watching stocks and Bitcoin to see whether and when to exit spot alt positions and look for leveraged shorts.
S&P: My own Counter-Strike indicator just flipped bearish on the weekly scale (the week has only just started though) and has been short on the daily for 7 days, the longest since September 2020. A spike below the 89D EMA (orange line) is ok, and a pop back up would be a “pro” bear trap, but hanging out below is an invitation to visit the 200 (red ribbon), which would bring a huge loss of confidence.
Bitcoin: We want to hold the green support zone. Lose that, and the 200 EMA below, and talk of a bear market, or bearish interlude, begins. Note the daily Counter-Strike sell signal today.
It’s all to play for
There’s a Fed meeting on Wednesday, and whatever our clown overlords say then will have a big effect. Although inflation is starting to be perceived as more a reality than a conspiracy theory, there is more money yet to be printed. The stock market can be artificially inflated still and the can kicked a bit further down the road.
The truth is no-one knows what’s going to happen next. But, I’d be extra cautious for now. Cautious in panic-selling and cautious in buying the dip, until the direction is a bit clearer.
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