Could stocks and crypto go much higher? If yes, when?
On this analysis I'd like to expand a bit on my previous analysis where I spoke about a potential Bitcoin correction. I still do believe that Bitcoin and altcoins could fall significantly from here, but only in the short-medium term... Here are a few reasons why I don't think the stock market bull run is over and that most assets will follow (charts at the bottom of the page):
1. Nasdaq 100 fractal. Breaking the log channel usually leads to a strong parabolic move. In my opinion, NDX could go to 19k or higher! People underestimate for how long a massive rally can last, but this doesn't mean corrections won't occur. Maybe the market chops here for a bit like in the fractal. As to why permabears are getting this wrong, even though there are many reasons why things could go down, here are my reasons why this rally is so strong and why it will most likely continue:
a. US exceptionalism (US companies have done much better than their global peers and the strong dollar benefited them)
b. Money printing from Commecial banks and Central banks have flooded the markets with the total money supply being up more than 2x since the peak of 2000
c. The yield of SPX is at 1.7%, while in 2000 it was at 1%... while interest rates were much higher. Low rates benefit big corporations who borrow cheaply and can keep eating the world. That means these companies are 'undervalued' and have no competion. If the Yield of a 10Y bond is at 0.6%, why not buy Apple which is a tech giant, has tons of cash, no debt etc... and buy the debt of a broke government?
d. The Fed doesn't actually print money, but is out there convincing people that it can support the market and that it will flood the market with money. Most people don't actually know what the Fed does...
e. Companies bought 4 Trillions of their own stock over the last 10 years. Scarcity!
f. The rise of passive investing and indexation.
g. Tech is booming with the changes Covid brought. In the Dot Com bubble things got crazy but the technology and companies weren't mature. Now they are eating the world and everything is going digital.
h. Some other reasons are that people keep shorting hard, others buy call options like crazy which push prices higher, gamblers have come to stocks due to sports betting not being available during Covid, stimulus checks gave a lot of people money that they saved/invested and finally investing in stocks is now extremely cheap & easy.
2. SPX has held its ATH pretty well and might not even dip lower as I am expecting. Usually when an ATH breaks like this, it leads to a strong rally and then a strong pullback before going higher.
3. European markets are looking pretty bullish. DAX, CAC and IBEX all look pretty good and ready for a move up. Others might not look as good, but these are the only indices that look bullish. During this correction, they didn't even move much.
4. Most currencies look bullish against the dollar and look like they have significantly more upside, even though the USD is sitting at support and is significantly oversold. Even if it goes up 2%, I think its bear market will continue... which in turn will fuel the stock rally even more. For now the DXY could get up to 96-97, mostly due to EUR weakness and not dollar bullishness... and then much lower.
5. Copper, SIlver and Gold look pretty bullish. Copper is really pushing higher and it isn't named Dr. Copper accidentally. Copper is giving very bullish signals right now and is definitely something I can't ignore. On the one hand Gold could go to 1750-1810 & Silver could pull all the way back to 19$, but I find it extremely unlikely until I see their structures really break. What is worrying however is Oil, which looks like it could go to 26-28$ and then even down to 20$ before going much much higher.
6. In May & June I analysed most of the reasons why I thought Bitcoin & Altcoins would go much higher. Many of the reasons that are driving stocks higher and many more, are telling me that the Crypto space is going much higher, and for now this is just a correction. I don't believe what happened in March and April will repeat. I don't believe Oil will go sub 0 again or that stocks will crash. Stocks had major corrections in Q4 2019 and Q1 2020 and I don't think that 5-6 months later that markets would top again and then drop 40-50% as many are predicting.
So to sum it all up and explain what I am thinking right now. At them moment waiting for a deeper correction in altcoins and Bitcoin, as many of the altcoin charts look like they could drop a lot more before they go up again. Many probably won't go up to those levels again as their bubbles are bursting and crypto traders are going to find new toys to play with. Due to the strong correlation with the traditional markets that arised after the March crash, I'd expect these corrections to happen together. Maybe Bitcoin drops on its own before stocks drop. Maybe it goes up to 11.2k before a drop occurs without traditional markets being involved. Where would I think this isn't a correction and is a reversal? When NDX closes below 10k and Bitcoin closes below 8k. In my opinion NDX is going to retest the log channel at least once again before going higher and this extremely obvious trend will break to shakeout the weak hands.
Once again thanks for reading and don't forget to visit CryptoCube(.io), where you can read my posts in a different format and find the best crypto talent!
1. Nasdaq 100 fractal. Breaking the log channel usually leads to a strong parabolic move. In my opinion, NDX could go to 19k or higher! People underestimate for how long a massive rally can last, but this doesn't mean corrections won't occur. Maybe the market chops here for a bit like in the fractal. As to why permabears are getting this wrong, even though there are many reasons why things could go down, here are my reasons why this rally is so strong and why it will most likely continue:
a. US exceptionalism (US companies have done much better than their global peers and the strong dollar benefited them)
b. Money printing from Commecial banks and Central banks have flooded the markets with the total money supply being up more than 2x since the peak of 2000
c. The yield of SPX is at 1.7%, while in 2000 it was at 1%... while interest rates were much higher. Low rates benefit big corporations who borrow cheaply and can keep eating the world. That means these companies are 'undervalued' and have no competion. If the Yield of a 10Y bond is at 0.6%, why not buy Apple which is a tech giant, has tons of cash, no debt etc... and buy the debt of a broke government?
d. The Fed doesn't actually print money, but is out there convincing people that it can support the market and that it will flood the market with money. Most people don't actually know what the Fed does...
e. Companies bought 4 Trillions of their own stock over the last 10 years. Scarcity!
f. The rise of passive investing and indexation.
g. Tech is booming with the changes Covid brought. In the Dot Com bubble things got crazy but the technology and companies weren't mature. Now they are eating the world and everything is going digital.
h. Some other reasons are that people keep shorting hard, others buy call options like crazy which push prices higher, gamblers have come to stocks due to sports betting not being available during Covid, stimulus checks gave a lot of people money that they saved/invested and finally investing in stocks is now extremely cheap & easy.
2. SPX has held its ATH pretty well and might not even dip lower as I am expecting. Usually when an ATH breaks like this, it leads to a strong rally and then a strong pullback before going higher.
3. European markets are looking pretty bullish. DAX, CAC and IBEX all look pretty good and ready for a move up. Others might not look as good, but these are the only indices that look bullish. During this correction, they didn't even move much.
4. Most currencies look bullish against the dollar and look like they have significantly more upside, even though the USD is sitting at support and is significantly oversold. Even if it goes up 2%, I think its bear market will continue... which in turn will fuel the stock rally even more. For now the DXY could get up to 96-97, mostly due to EUR weakness and not dollar bullishness... and then much lower.
5. Copper, SIlver and Gold look pretty bullish. Copper is really pushing higher and it isn't named Dr. Copper accidentally. Copper is giving very bullish signals right now and is definitely something I can't ignore. On the one hand Gold could go to 1750-1810 & Silver could pull all the way back to 19$, but I find it extremely unlikely until I see their structures really break. What is worrying however is Oil, which looks like it could go to 26-28$ and then even down to 20$ before going much much higher.
6. In May & June I analysed most of the reasons why I thought Bitcoin & Altcoins would go much higher. Many of the reasons that are driving stocks higher and many more, are telling me that the Crypto space is going much higher, and for now this is just a correction. I don't believe what happened in March and April will repeat. I don't believe Oil will go sub 0 again or that stocks will crash. Stocks had major corrections in Q4 2019 and Q1 2020 and I don't think that 5-6 months later that markets would top again and then drop 40-50% as many are predicting.
So to sum it all up and explain what I am thinking right now. At them moment waiting for a deeper correction in altcoins and Bitcoin, as many of the altcoin charts look like they could drop a lot more before they go up again. Many probably won't go up to those levels again as their bubbles are bursting and crypto traders are going to find new toys to play with. Due to the strong correlation with the traditional markets that arised after the March crash, I'd expect these corrections to happen together. Maybe Bitcoin drops on its own before stocks drop. Maybe it goes up to 11.2k before a drop occurs without traditional markets being involved. Where would I think this isn't a correction and is a reversal? When NDX closes below 10k and Bitcoin closes below 8k. In my opinion NDX is going to retest the log channel at least once again before going higher and this extremely obvious trend will break to shakeout the weak hands.
Once again thanks for reading and don't forget to visit CryptoCube(.io), where you can read my posts in a different format and find the best crypto talent!
Wanted to add a few things as to why stocks could go higher, and what people are missing when they compare this to 2000:
A. When I said yields are low, I meant that people will chase yield and mostly on stock price appeciation. However SPX still yields more than 2x the 10Y bond and is still 70% better than where it was in 2000. Yet this isn't just it... Big companies can borrow more money and perform well, while their competition can't. Essentially this makes these companies too big to fail and explains the appreciation
B. Many people use various metrics to compare this bubble to the previous ones. Yet I think 2000 and now is very different as based on many things, stocks aren't that overvalued. What do you compare that to? If you think of stocks based on Gold, the global money supply or US M2, the US10Y etc... you quickly find out that stocks aren't that expensive. Also just looking at what worked in the past once isn't enough and especially if the conditions were very different.
C. US companies dominating, US people having an investing culture, people buying indices and holding them passively (not management, no selling), stock buybacks, the USD losing its purchasing power, people believing the Fed has their back, investors front running inflation, easier/cheaper access, retail getting in the game etc etc. These all sum up my points above, so you can see it isn't all just doom & gloom. Things don't repeat the same way they did before, and if most people expect things to go down because of similar previous situations... then most of those people have sold or are short, meaning that they are the fuel that pushes the market higher as they buy back much higher.