We live in an era where everything is in a bubble. In bubbles people buy stuff not because they provide value, but because they can quickly find a greater fool to sell it to them. It is the point where everyone is buying because others are buying and want to make easy money. Money without doing any homework, without a plan. As a trader and investor you keep cautiously buying stuff as long as they maintain their momentum and their structure. In such situations you keep on buying dips until the music stops.
For now what I see is a beautiful re-accumulation that looks like the one back in 2015-2016. A really long period of sideways where higher highs and higher lows were forming slowly after the market was really scared the rally was over due to the lower low. It is noteworthy that US stocks have held very well during a period of quantitative tightening and rate hikes. Now more cuts and quantitative easing are coming for sure, while most people have been or have just turned bearish. The US economy is the strongest in the world and its bond market is the healthiest by far. People will most likely prefer it that negative yielding bonds.
To me this will be the last leg up. During 2007-2008 the market first went up when the rate cuts started and then fell. The bond yield curve inverting doesn't tell me too much as people are going into bonds anyways. Yes there are many bearish factors, but this doesn't mean I am going to short stocks. Avoid shorting a bubble as it can stay irrational more than you can stay solvent.
Staying mostly in cash & gold, minimizing exposure to stocks, buying defensive stocks and definitely buying some Bitcoin isn't a bad idea. In my view central banks will lower rates, print more money and ban cash. These will definitely push several markets higher sooner than later. As for the potential crash... Nobody knows when or if it will come. Normally I'd expect 1-2 years of upside from here, but Central banks could print so much and cut rates to -2, -3, -4%. This would makes stocks more attractive than cash, bonds and bank deposits.
For now Central banks struggle producing inflation (which is their moto). They have inflated assets to unreal prices, be that housing, stocks or bonds. Everything is quite expensive right now and it could get much more expensive. Central banks might fail to produce inflation now... But once we reach a tipping point, inflation will spiral out of control. Then when Central Banks try to control it everything will most likely crash.
We are already in a low growth environment and the global growth is definitely slowing down. The global economy is getting worse and worse instead of getting better, and Central banks know that. Their goal is to keep this ponzi going rather than helping countries grow. Many people have already started losing faith in their ability to manage monetary policy effectively. Like with many stock markets in developing countries, we could see stocks go higher and higher as their national currencies is constantly losing value and people find stocks as a safe heaven.
For now what I see is a beautiful re-accumulation that looks like the one back in 2015-2016. A really long period of sideways where higher highs and higher lows were forming slowly after the market was really scared the rally was over due to the lower low. It is noteworthy that US stocks have held very well during a period of quantitative tightening and rate hikes. Now more cuts and quantitative easing are coming for sure, while most people have been or have just turned bearish. The US economy is the strongest in the world and its bond market is the healthiest by far. People will most likely prefer it that negative yielding bonds.
To me this will be the last leg up. During 2007-2008 the market first went up when the rate cuts started and then fell. The bond yield curve inverting doesn't tell me too much as people are going into bonds anyways. Yes there are many bearish factors, but this doesn't mean I am going to short stocks. Avoid shorting a bubble as it can stay irrational more than you can stay solvent.
Staying mostly in cash & gold, minimizing exposure to stocks, buying defensive stocks and definitely buying some Bitcoin isn't a bad idea. In my view central banks will lower rates, print more money and ban cash. These will definitely push several markets higher sooner than later. As for the potential crash... Nobody knows when or if it will come. Normally I'd expect 1-2 years of upside from here, but Central banks could print so much and cut rates to -2, -3, -4%. This would makes stocks more attractive than cash, bonds and bank deposits.
For now Central banks struggle producing inflation (which is their moto). They have inflated assets to unreal prices, be that housing, stocks or bonds. Everything is quite expensive right now and it could get much more expensive. Central banks might fail to produce inflation now... But once we reach a tipping point, inflation will spiral out of control. Then when Central Banks try to control it everything will most likely crash.
We are already in a low growth environment and the global growth is definitely slowing down. The global economy is getting worse and worse instead of getting better, and Central banks know that. Their goal is to keep this ponzi going rather than helping countries grow. Many people have already started losing faith in their ability to manage monetary policy effectively. Like with many stock markets in developing countries, we could see stocks go higher and higher as their national currencies is constantly losing value and people find stocks as a safe heaven.
Central banks haven't started cutting fast or doing QE quickly, and until they do stocks will most likely suffer. Personally like I had explained before, I wouldn't short any index like the SPX500. Shorting European banks is the ideal play in my honest opinion. Any company that is in deep trouble is worth shorting with low leverage. If the SPX500 loses the 2720 level then things could accelerate to the downside.
The key assets still are USD, JPY, XAU, XAG & BTC. Being short certain stocks and certain currencies would also be rational. For example the HKD will most likely lose its peg.
Being long bonds also makes and clearly a lot more sense than being short bonds. However bonds are not something I am a fan off. I'd rather simply lend fiat on crypto exchanges rather than lend fiat. That's clearly if you want your money to work for you slowly rather than riding a bubble.
Bonds are in a bubble and could increase substantially for quite some time as Central banks cut rates and do more QE. When you see a bubble you simply ride it with appropriate risk management. If you ride them make sure you don't look at this really long term due to potential sudden spikes in inflation, deeply negative rates, failing governments and all other related risks.
As for Bitcoin, BTC going down has nothing to do with all this in my honest opinion. Technically it was due for a drop. We went up too fast, too soon and with no major corrections. After a going from 4200 to 13900 in just 85 days and without a prolonged period of accumulation, it is not time yet for Bitcoin to continue its run up.
The reality is that it is has no clear correlation with any other asset class. Yes there are periods of correlation, but correlation does not indicate causation. As it matures it will definitely get more correlated with other majors assets, but I don't think it is time yet.
In some of my previous ideas like the one below, I had mentioned how Bitcoin was due for a correction due to its dominance getting too high, altcoins crumbling and traders were being heavily positioned long. For now my guess is that we are heading down to 7800-8500 where the final bottom of this correction could lie.
Could I be wrong? Of course, I haven't sold anything yet. Simply hedged myself at 10800 and my stop is above 11300. If things get worse I will short more. In case we really start moving to the upside I believe we are heading to new highs pretty fast. Closing above 11.5k and even 12k is key.
As for Gold, to me it doesn't make sense to long it here. Reasons are that it is up 22% of its May lows, 46% off its 2016 lows, it is right at resistance and with some potential dollar strength we could see gold dropping lower to retest some of the areas it broke before moving higher. Silver is also looking attractive as its chart looks pretty good and the Gold/Silver ratio had gone above 90 (a historically really high ratio). A break and close above 1560 (now at 1518) would indicate a bullish breakout.