On this 'Market Open' I am going start with in-depth analysis of traditional markets so that we can have a holistic view of the global macro and how could this affect the crypto markets.
1. USD - EM Currencies fell a lot more than I had expected, but also had a much stronger bounce than the rest. The EM currencies I've been bullish are CNH, ZAR & MXN, while I've been bearish on TRY & RUB and I don't see anything that would make me change my mind yet for the long term. The reality is that most of these fiat currencies have many issues and I am currently very bearish on the Euro in particular. USDCNH is at support but looks weak, with USDMXN & USDZAR being in a similar situation but with fundamentals that are definitely much worse. I have no idea how much time could it take for them to go much lower, but for now all the bounces looked more like technical bounces after getting really oversold and hitting key support. As for USDTRY & USDRUB, I think they are going much higher. My reasoning is simple: Turkey and Russia have massive issues for different reasons, the trends are clear and those were two currencies that kept falling vs the USD while everything else was going up. In the doom mix I probably have to add the BRL as well which definitely doesn't look great.
As for the USD vs most developed markets, it is at key support and looks like it has reversed there is more upside before it reverses again. It is sitting at support however before that it had tested key resistance against several currencies, so there is still a chance it could go lower.
2. Bonds - European bonds keep going up as deflationary pressures are getting stronger in Europe. Banks are facing serious problems and people want to be in the safest assets possible, although I don't believe 20Y Greek government bonds with 1.2% make any sense, but whatever. Follow the trend! QE is deflationary contrary to what everyone believes and it is crushing banks. The goal of governments and Central banks is to nationalize banks and create their own digital coins, so that they can have complete control over money printing, interest rates etc etc.
For the US the situation is different because with a new round of fiscal coming, we could see a sell off. After such a parabolic rise I don't think bonds can go straight up even though rates could go negative (bonds going up mean yields are going down). If someone looks at the yield chart it looks like it is forming a bottom (short term) and with Bond volatility hitting all time lows... this could get explosive. Right now everyone is hedged with bonds and the 60-40 stocks-bonds portfolios could take a massive hit and cause another dip as they unwind like they did in March.
3. Oil & Metals - Oil is looking quite bad right now and is definitely not a bullish signal for global growth, as the price remains low despite longs getting wiped out & many production cuts. This is another reason why inflation could stay low for some time as Oil could hit 29$ and even 21$ per barrel. Of course I could be wrong but I wouldn't long oil until I see it close above 44...
Another worrisome sign is Copper which had a pretty strong dip on Thursday, bounced hard on Friday, yet its LTF bullish structure is broken. Gold and Silver still look like they could go lower as their bullish structure is also broken. The main issue I see short term for metals is the USD getting stronger, but this might not stop there as we could get a scenario where inflation stays low and bond yields start going up... so I can really see all metals feeling the heat, especially when they are vulnerable after essentially going up so much. For Gold & Copper what worries me is that they have some weird double/triple bottoms much lower, while Silver went up so much that simply retesting the breakout zone would imply a 20% dip from here.
4. Stocks - On Monday we could see stocks go up as Trump seems to be fine and talking about the stimulus. The fighting over stimulus + uncertainty for a contested election + certain US stocks having rallied so much for so long is definitely not a great mix. So far I haven't seen anything in the charts that is extremely bearish or bullish, however at the moment everything is still within my short/medium term bearish picture... especially when the global picture isn't looking great for sure. For example if major countries like Turkey start defaulting and then that hits Spanish banks which are overexposed to Turkey, this could lead to cascade of defaults and issues globally. Of course the response would be to 'print' and bailout, but I don't how effective that will be as we are talking about pouring water into a leaky bucket and not fixing the bucket.
Many people are expecting stocks to crash again, however in my view this is less likely and I expect them to bleed slowly rather than go down a lot. European indices look pretty week and EM indices look extremely weak especially when you look at them in USD terms. People need to realize that other than the US, global stocks markets have been in a massive depression which for most start in 2000-2010, while for others it started in 2010-2020. For example SPX400 & Russell 2000 haven't made new highs since 2018, so it stock markets aren't booming despite all the 'money printing'.
Right now I don't want to make any big calls or change anything I've said in the past. My view is that there are some key areas that will be swept or tested, which means SPX 3180 and NDX 10500 are my main targets right now, while I think 3080-3100 & 9950-10200 have the potential to be the long term lows. So where am I wrong on my bearish view? If NDX closes above 11750 & SPX 3440 and to the downside. With the VIX being elevated and forming another bottom has me thinking that we'll see it go to 45-55 where it will probably top, but around the election things could get wild. What if Biden has a clear victory and the market already expected it, with most people expecting upside post election like 2016 and the markets tank? In 1999 there were multiple 12-15% corrections before the market went parabolic again, so definitely can't rule that scenario either.
5. Bitcoin & Shitcoins - My view on Shitcoins remains the same and it is that until BTC makes a new ATH there will only be several strong bounces. I've liked and played with coins like THETA that still have a clean uptrend and negative funding, but other than that they are extremely unattractive. I regret not shorting more and closing my shitcoins shorts early, but oh well... Once again I need to clarify that I love shitcoins and that I am ready to play with them once they tell me to get back in, but at the moment nothing is telling me that it is their time again. Not only that, but I don't think it is Bitcoin's time either (for now) so only time will tell. I'd recommend everyone that is reading this to go read the first 3 linked ideas I have below, as they will give you a much much better understanding of the current situation.
The current situation in all markets certainly isn't good and there are many issues with the crypto market too, which doesn't leave much room to be bullish. The issues with Bitmex shouldn't be taken lightly as they could shut down the website and that's where chaos could ensue. Sure the funds are safe, but the uncertainty and several positions being left will definitely not end well. We also don't know whether they are going to go after other exchanges that have followed similar practices and they aren't just a few... Of course all this could create a buy the dip opportunity and not only that, but it opens the door for an ETF as the US finally gets a tighter control over 'unregulated' exchanges. The problem with this is that we are dealing with an unknown timeline, so there isn't that much that can be done.
At the moment I am actually surprised that we haven't dipped more, and that's why I keep a more neutral stance as Bitcoin is still above the Feb highs and trapped in a range. Yes I do believe there is a high chance we go lower for many reasons, yet I can't ignore that we are still in some sort of an uptrend and that fundamentals overall look great. Open interest has been going down for some time and the Bitmex event might have been enough to shakeout some of the longs that were forced to close, so maybe that was it for now. We've seen something similar in the 2017 bull when OKex was having issues due to China bans and premiums were going down. The daily candles are showing that there is some buy pressure and more upside is possible, but don't forget CME is closed and this will create a mini gap up. This could be simply happening because of the Trump news which might quickly reverse once the market opens. So when is my bearish view wrong? If the market closes above 11100, I think we will go higher. So far BTC got rejected on the Montly P, closed below the Weekly P, is sandwiched between the 50 & 128 DMA and volatility is going down. If it reclaims the last breakdown level (11k) that would mean it would close above the 50 DMA and Montly P, which are great indicators that the trend in the short medium term is up. This happening would mean that BTC absorbed all the dumping from alts + Bitmex + Trump which would be another bullish sign.
1. USD - EM Currencies fell a lot more than I had expected, but also had a much stronger bounce than the rest. The EM currencies I've been bullish are CNH, ZAR & MXN, while I've been bearish on TRY & RUB and I don't see anything that would make me change my mind yet for the long term. The reality is that most of these fiat currencies have many issues and I am currently very bearish on the Euro in particular. USDCNH is at support but looks weak, with USDMXN & USDZAR being in a similar situation but with fundamentals that are definitely much worse. I have no idea how much time could it take for them to go much lower, but for now all the bounces looked more like technical bounces after getting really oversold and hitting key support. As for USDTRY & USDRUB, I think they are going much higher. My reasoning is simple: Turkey and Russia have massive issues for different reasons, the trends are clear and those were two currencies that kept falling vs the USD while everything else was going up. In the doom mix I probably have to add the BRL as well which definitely doesn't look great.
As for the USD vs most developed markets, it is at key support and looks like it has reversed there is more upside before it reverses again. It is sitting at support however before that it had tested key resistance against several currencies, so there is still a chance it could go lower.
2. Bonds - European bonds keep going up as deflationary pressures are getting stronger in Europe. Banks are facing serious problems and people want to be in the safest assets possible, although I don't believe 20Y Greek government bonds with 1.2% make any sense, but whatever. Follow the trend! QE is deflationary contrary to what everyone believes and it is crushing banks. The goal of governments and Central banks is to nationalize banks and create their own digital coins, so that they can have complete control over money printing, interest rates etc etc.
For the US the situation is different because with a new round of fiscal coming, we could see a sell off. After such a parabolic rise I don't think bonds can go straight up even though rates could go negative (bonds going up mean yields are going down). If someone looks at the yield chart it looks like it is forming a bottom (short term) and with Bond volatility hitting all time lows... this could get explosive. Right now everyone is hedged with bonds and the 60-40 stocks-bonds portfolios could take a massive hit and cause another dip as they unwind like they did in March.
3. Oil & Metals - Oil is looking quite bad right now and is definitely not a bullish signal for global growth, as the price remains low despite longs getting wiped out & many production cuts. This is another reason why inflation could stay low for some time as Oil could hit 29$ and even 21$ per barrel. Of course I could be wrong but I wouldn't long oil until I see it close above 44...
Another worrisome sign is Copper which had a pretty strong dip on Thursday, bounced hard on Friday, yet its LTF bullish structure is broken. Gold and Silver still look like they could go lower as their bullish structure is also broken. The main issue I see short term for metals is the USD getting stronger, but this might not stop there as we could get a scenario where inflation stays low and bond yields start going up... so I can really see all metals feeling the heat, especially when they are vulnerable after essentially going up so much. For Gold & Copper what worries me is that they have some weird double/triple bottoms much lower, while Silver went up so much that simply retesting the breakout zone would imply a 20% dip from here.
4. Stocks - On Monday we could see stocks go up as Trump seems to be fine and talking about the stimulus. The fighting over stimulus + uncertainty for a contested election + certain US stocks having rallied so much for so long is definitely not a great mix. So far I haven't seen anything in the charts that is extremely bearish or bullish, however at the moment everything is still within my short/medium term bearish picture... especially when the global picture isn't looking great for sure. For example if major countries like Turkey start defaulting and then that hits Spanish banks which are overexposed to Turkey, this could lead to cascade of defaults and issues globally. Of course the response would be to 'print' and bailout, but I don't how effective that will be as we are talking about pouring water into a leaky bucket and not fixing the bucket.
Many people are expecting stocks to crash again, however in my view this is less likely and I expect them to bleed slowly rather than go down a lot. European indices look pretty week and EM indices look extremely weak especially when you look at them in USD terms. People need to realize that other than the US, global stocks markets have been in a massive depression which for most start in 2000-2010, while for others it started in 2010-2020. For example SPX400 & Russell 2000 haven't made new highs since 2018, so it stock markets aren't booming despite all the 'money printing'.
Right now I don't want to make any big calls or change anything I've said in the past. My view is that there are some key areas that will be swept or tested, which means SPX 3180 and NDX 10500 are my main targets right now, while I think 3080-3100 & 9950-10200 have the potential to be the long term lows. So where am I wrong on my bearish view? If NDX closes above 11750 & SPX 3440 and to the downside. With the VIX being elevated and forming another bottom has me thinking that we'll see it go to 45-55 where it will probably top, but around the election things could get wild. What if Biden has a clear victory and the market already expected it, with most people expecting upside post election like 2016 and the markets tank? In 1999 there were multiple 12-15% corrections before the market went parabolic again, so definitely can't rule that scenario either.
5. Bitcoin & Shitcoins - My view on Shitcoins remains the same and it is that until BTC makes a new ATH there will only be several strong bounces. I've liked and played with coins like THETA that still have a clean uptrend and negative funding, but other than that they are extremely unattractive. I regret not shorting more and closing my shitcoins shorts early, but oh well... Once again I need to clarify that I love shitcoins and that I am ready to play with them once they tell me to get back in, but at the moment nothing is telling me that it is their time again. Not only that, but I don't think it is Bitcoin's time either (for now) so only time will tell. I'd recommend everyone that is reading this to go read the first 3 linked ideas I have below, as they will give you a much much better understanding of the current situation.
The current situation in all markets certainly isn't good and there are many issues with the crypto market too, which doesn't leave much room to be bullish. The issues with Bitmex shouldn't be taken lightly as they could shut down the website and that's where chaos could ensue. Sure the funds are safe, but the uncertainty and several positions being left will definitely not end well. We also don't know whether they are going to go after other exchanges that have followed similar practices and they aren't just a few... Of course all this could create a buy the dip opportunity and not only that, but it opens the door for an ETF as the US finally gets a tighter control over 'unregulated' exchanges. The problem with this is that we are dealing with an unknown timeline, so there isn't that much that can be done.
At the moment I am actually surprised that we haven't dipped more, and that's why I keep a more neutral stance as Bitcoin is still above the Feb highs and trapped in a range. Yes I do believe there is a high chance we go lower for many reasons, yet I can't ignore that we are still in some sort of an uptrend and that fundamentals overall look great. Open interest has been going down for some time and the Bitmex event might have been enough to shakeout some of the longs that were forced to close, so maybe that was it for now. We've seen something similar in the 2017 bull when OKex was having issues due to China bans and premiums were going down. The daily candles are showing that there is some buy pressure and more upside is possible, but don't forget CME is closed and this will create a mini gap up. This could be simply happening because of the Trump news which might quickly reverse once the market opens. So when is my bearish view wrong? If the market closes above 11100, I think we will go higher. So far BTC got rejected on the Montly P, closed below the Weekly P, is sandwiched between the 50 & 128 DMA and volatility is going down. If it reclaims the last breakdown level (11k) that would mean it would close above the 50 DMA and Montly P, which are great indicators that the trend in the short medium term is up. This happening would mean that BTC absorbed all the dumping from alts + Bitmex + Trump which would be another bullish sign.
