As we mentioned a couple weeks ago, and reiterated this week, this is not a bearish market, quite the contrary it is still bullish and there is room to run in both stocks, Bitcoin and Commodities.
Over the past few weeks we have heard from expert after expert on how overbought this market is, and pessimism is everywhere as the market defies economic gravity and continues higher. So now with a pullback across several markets, here comes the "I told you so's" which implies that the market still has room to run higher.
Bitcoin
Bitcoin is still in consolidation mode, but we have a structure that is still conducive to a swing higher. We recently issued a trade signal looking for a swing to 10,400, which performed initially as expected, hitting our first target, but the subsequent swing yesterday tapped us out of the trade. So is this the time to be bearish?
Not really, and though Bitcoin is in a tough spot here, and one could say we printed a lower high, the overall structure is still one of a broad consolidation. The fact we are paring the swing lower yesterday is a good sign as overbought markets do not linger at resistance, they tend to fall apart quickly, as we saw with the S&P.
Technically we have a series of higher lows off consolidation at the upper end of the boundary and an inside candle here would be another aggressive long setup. One may reason, well you had a lower high printed recently, and though potentially it may play out that way, we were looking at the 9000 for support if 9375 broke.
Again we found buyers in the area, which implies Bitcoin is still ranging or consolidating which often leads to a continuation of prior momentum. So though the move may have shaken weak hands, we are still looking for longs.
Technical levels of importance are 9000 and 10,000. A break of 9000, looking for 8600 to trade and it is now on the table with a break of 9350, but if the market retakes 9350 today and we get a continuation with tomorrow's candle, 8600 becomes less likely. A break of 10k, we are now looking for a solid move into the 11k area. The longer the range is in play, the more decisive and strong a breakout is. That simple and in my opinion, as long as we close above 9350 and get a continuation candle, we break the range sooner than later.
S&P
There are still too many pessimists in the stock market for a major pullback IMO. Markets top when they run out of buyers and though it pulled back below our initial support of 3100, it held 3000 and we are looking for a retest of the previous high or potentially a new high at 3325 which is my overall target.
The structure is becoming stronger not weaker, and unlike the slow grind higher we saw in February, this is a clear impulse wave which is often indicative of wave 3's. However in the broader term we expect a pullback into the 2800 area and potentially into the 2400's over the course of two or three months, leading into the uncertainty of the election.
But for now we are still looking for longs, as wave 4's or the most identifiable wave and easiest to trade. Look for resistance in the 3100 area, but overall 3200 is likely to trade again and that is the lower end of our target range.
Until the market becomes overly bullish from a sentiment perspective, we want to stay long, but we are also keeping a decent cash position in the event we are wrong. Right now we are at 25% cash weighting, and will look to increase that weighting as we push into the 3200's.
Just a very clear structure, momentum is still bullish, and even if this was a top, we are looking for the dead cat bounce. Not a time to short regardless of the magnitude of yesterday's swing. Need a better setup before we will consider a short position in the market, but we are hedging with Gold.
Gold
Gold is in a similar situation to Bitcoin. Bullish tail winds, but in a broader wave 4 consolidation. We have been adding Gold to our portfolio via stocks and also have a couple swing trades on with a target above 1800.
An inside candle with a close near 1740 would be another setup to go long and one of my favorite setups being a break-out. The risk is it fakes-out like it did prior, but generally you do not get two fake-outs in a broad consolidation and the fact the 1680 level is finding buyers is supportive of a break higher.
Would not be surprised to see Gold trading at 2200 by the end of the year, but in the near term we are looking for 1820 to trade.
Summary:
Markets do not top when there are pessimists waiting for a pullback, they top when everyone is in the market. This is probably going to be a buy the dip, where those that have missed the majority of this move, finally come off the sidelines and jump in. This results in the final leg of any market where being long is the crowded trade and then a broader selloff can occur.
Over the past few weeks we have heard from expert after expert on how overbought this market is, and pessimism is everywhere as the market defies economic gravity and continues higher. So now with a pullback across several markets, here comes the "I told you so's" which implies that the market still has room to run higher.
Bitcoin
Bitcoin is still in consolidation mode, but we have a structure that is still conducive to a swing higher. We recently issued a trade signal looking for a swing to 10,400, which performed initially as expected, hitting our first target, but the subsequent swing yesterday tapped us out of the trade. So is this the time to be bearish?
Not really, and though Bitcoin is in a tough spot here, and one could say we printed a lower high, the overall structure is still one of a broad consolidation. The fact we are paring the swing lower yesterday is a good sign as overbought markets do not linger at resistance, they tend to fall apart quickly, as we saw with the S&P.
Technically we have a series of higher lows off consolidation at the upper end of the boundary and an inside candle here would be another aggressive long setup. One may reason, well you had a lower high printed recently, and though potentially it may play out that way, we were looking at the 9000 for support if 9375 broke.
Again we found buyers in the area, which implies Bitcoin is still ranging or consolidating which often leads to a continuation of prior momentum. So though the move may have shaken weak hands, we are still looking for longs.
Technical levels of importance are 9000 and 10,000. A break of 9000, looking for 8600 to trade and it is now on the table with a break of 9350, but if the market retakes 9350 today and we get a continuation with tomorrow's candle, 8600 becomes less likely. A break of 10k, we are now looking for a solid move into the 11k area. The longer the range is in play, the more decisive and strong a breakout is. That simple and in my opinion, as long as we close above 9350 and get a continuation candle, we break the range sooner than later.
S&P
There are still too many pessimists in the stock market for a major pullback IMO. Markets top when they run out of buyers and though it pulled back below our initial support of 3100, it held 3000 and we are looking for a retest of the previous high or potentially a new high at 3325 which is my overall target.
The structure is becoming stronger not weaker, and unlike the slow grind higher we saw in February, this is a clear impulse wave which is often indicative of wave 3's. However in the broader term we expect a pullback into the 2800 area and potentially into the 2400's over the course of two or three months, leading into the uncertainty of the election.
But for now we are still looking for longs, as wave 4's or the most identifiable wave and easiest to trade. Look for resistance in the 3100 area, but overall 3200 is likely to trade again and that is the lower end of our target range.
Until the market becomes overly bullish from a sentiment perspective, we want to stay long, but we are also keeping a decent cash position in the event we are wrong. Right now we are at 25% cash weighting, and will look to increase that weighting as we push into the 3200's.
Just a very clear structure, momentum is still bullish, and even if this was a top, we are looking for the dead cat bounce. Not a time to short regardless of the magnitude of yesterday's swing. Need a better setup before we will consider a short position in the market, but we are hedging with Gold.
Gold
Gold is in a similar situation to Bitcoin. Bullish tail winds, but in a broader wave 4 consolidation. We have been adding Gold to our portfolio via stocks and also have a couple swing trades on with a target above 1800.
An inside candle with a close near 1740 would be another setup to go long and one of my favorite setups being a break-out. The risk is it fakes-out like it did prior, but generally you do not get two fake-outs in a broad consolidation and the fact the 1680 level is finding buyers is supportive of a break higher.
Would not be surprised to see Gold trading at 2200 by the end of the year, but in the near term we are looking for 1820 to trade.
Summary:
Markets do not top when there are pessimists waiting for a pullback, they top when everyone is in the market. This is probably going to be a buy the dip, where those that have missed the majority of this move, finally come off the sidelines and jump in. This results in the final leg of any market where being long is the crowded trade and then a broader selloff can occur.
