Bitcoin & Traditional markets
Bitcoin is in a weird situation which looks like strong accumulation, while Bitcoin is cheap based on various models and indicators... However across all timeframes it is bearish. It hasn't managed to close above the Monthly + Weekly pivot, it is still below the main Volume Profile PoC (if we include the January area too) and it is below the all major daily moving averages (50-200-300), except the 350 DMA.
Some reasons why Bitcoin and Crypto took such a hit, was that everything got really high really fast, excess leverage & speculations, too many coins, too many new entrants, institutions and most importantly global liquidity was shrinking. The inflation story was overstretched and the reflation/inflation trade was peaking, at least in the short term and the inflation story was driven by speculation and supply shortages, not by monetary expansion and real growth. Those exhaustion signs have been around since early 2021 and in Q2 things started getting more serious. Here I will examine where we are at the moment with tons of graphs. Will try to make it as simple and short as possible, but also describe all major asset classes as I do think that having a clear macro picture will help everyone make better decisions both in crypto and outside crypto.
Stocks as a whole grew substantially over the last year, and we did see several indices go up 10-20% from the beginning of the year. The Nasdaq has been the best performer lately, while smaller stocks and stocks outside the US have been suffering. Asian stocks have performed very poorly although up until a few months ago their performance was incredible. Small caps in the US also a very similar story, but ones yields peaked, they peaked too and as the deflation/disinflation story was slowly taking over US behemoths started rising again as they are acting as 50+ year bonds. Currently the trend is benefiting US tech giants which however have grown quite a bit over the last few months and might eventually get a significant correction. If they correct hard, I can't see how small caps won't be affected, as the Russell 2000 has also been showing signs of exhaustion. Hasn't broken down yet and still looking ok for the long term, but until we get a clear breakout being a little more cautious isn't bad.
In my opinion stocks will really go parabolic at some point, but I also can't ignore the fact that as a whole they are up 30% from their Feb 2020 peak and the financial system is very fragile. So for stocks the best thing is to be bullish but potentially reduce risk. As the VIX is at such low levels during a pandemic, preparing for higher volatility is the right thing to do. We haven't had a big move on the VIX since the Covid crash and before that we'd get one every 12-24 months. Now that the VIX is down 84% from its peak, completed a full cycle and is sitting at support... It is prudent to have less risk on.
The major Meme stocks have had major corrections, but they might not be done yet. At least GME has found perfect support at 180 (talked about it recently). As long as it stays above 160 in my opinion there is hope. Above 220 it could really moon once again.
For AMC things looked way more rough but the bounce yesterday really took me by surprise. It was really strong and managed to bounce hard after sweeping a key low. The 50-55$ area is an area of strong resistance, but if it manages to close above it we could see another major squeeze up. The last squeeze was a fomo rally + gamma squeeze + short squeeze and for now I don't know what this one could be like. I have a feeling that the one that will really squeeze this time around while AMC chops around 30-70$ is GME. Why? Double tops usually break and the one at 340 really looks ready to be broken. GME has consolidated for much longer than AMC too.
One of the most important markets to look at, are US treasuries. Long dated bonds have been going up (yields down) and that's a deflationary move. What we have seen with the Reverse Repo from the Fed, is that the demand for these assets has been quite high and that the bond market isn't buying the strong reflation story. Just to be clear, both bonds and stocks can go higher, but as bonds fall or rise, certain types of stocks benefit from that. For example the 30Y bond goes down in price, small caps benefit, when it goes up, large caps benefit. The rate of change is also very important as big moves in bonds in either direction can create some short term panic in stocks. From their ATHs bonds fell about 28% which over the last 12 years has been a pretty good place for a long term bottom. However right now bonds have found some resistance and haven't broken out to the upside yet which means their downtrend might resume, which would benefit the inflation/reflation assets (people selling safe assets to get into risk assets).
Next most important is the US Dollar. When the USD and Bonds go up together, it's a sign of trouble. Something isn't right... Of course both got significantly oversold and hit key support levels, so this might just be a technical bounce. Neither the USD or bonds have broken out yet. Will show several pairs here like EURUSD, GBPUSD, USDCAD, USDCNH, USDZAR.
EURUSD hasn't broken down yet, but below 1.17 I easily see it go to 1.14-1.15 where it could potentially bottom. Until then EURUSD is in choppy waters as it is flirting with the 300 DMA. It's long term trend is up, medium term sideways and short term down... but the bounce of support so far is quite promising. GBPUSD has broken a key diagonal, however the long term structure is quite bullish. It has formed a massive base and could eventually break higher, but until I see a close above 1.46 I'd play this level by level. Why? Because the 1.35-1.45 was multi decade support, so I'd like to see it fully reclaimed.
On the USD pairs I do believe the USD has shown some extra strength, but nothing is clear there either. For USDCAD looks like a real strong reversal rally but it could just be a dead cat bounce. For USDCNH we have a similar situation, but with a higher chance that this is a real reversal. USDZAR fell so much that it finally bounced, but has so far found resistance on some previous key support levels. Both that and USDMXN have been getting slammed every single time and for now we haven't had a full confirmation of a reversal for those either. Looking just at EURUSD or DXY isn't the right way to evaluate dollar strength.
Finally let's get into the most important commodities. Oil after sweeping its 2018 high by a little bit had an 8% correction and hit some really important support levels. It was a very healthy correction after a very huge rally and it might be over. Oil breaking above 77 again would be very bullish and its current structure is already quite bullish. Getting down to 64-66 would be a very nice buying opportunity. There are huge supply issues for oil and this could take the price much higher over the next few months or years.
Copper failed to sustain above its 2011 ATH and the R3 Yearly, which is quite bearish. In the short term it has formed a bearish trend, but the long term trend is up and Copper has both high demand and supply issues. It's sitting above support and looking more and more bullish by the minute, so going long here isn't a bad idea, with a stop below the current lows. Otherwise wait for a break of the ATHs and buy any dips after that.
Gold had a similar situation with Copper, but at different times. The truth is that the current macro situation is more bullish for Copper if governments start spending on building/creating stuff, especially for technological stuff or regarding renewable energy. We might have a disinflationary backdrop, but the demand for Copper might be much larger than its supply.
Some reasons why Bitcoin and Crypto took such a hit, was that everything got really high really fast, excess leverage & speculations, too many coins, too many new entrants, institutions and most importantly global liquidity was shrinking. The inflation story was overstretched and the reflation/inflation trade was peaking, at least in the short term and the inflation story was driven by speculation and supply shortages, not by monetary expansion and real growth. Those exhaustion signs have been around since early 2021 and in Q2 things started getting more serious. Here I will examine where we are at the moment with tons of graphs. Will try to make it as simple and short as possible, but also describe all major asset classes as I do think that having a clear macro picture will help everyone make better decisions both in crypto and outside crypto.
Stocks as a whole grew substantially over the last year, and we did see several indices go up 10-20% from the beginning of the year. The Nasdaq has been the best performer lately, while smaller stocks and stocks outside the US have been suffering. Asian stocks have performed very poorly although up until a few months ago their performance was incredible. Small caps in the US also a very similar story, but ones yields peaked, they peaked too and as the deflation/disinflation story was slowly taking over US behemoths started rising again as they are acting as 50+ year bonds. Currently the trend is benefiting US tech giants which however have grown quite a bit over the last few months and might eventually get a significant correction. If they correct hard, I can't see how small caps won't be affected, as the Russell 2000 has also been showing signs of exhaustion. Hasn't broken down yet and still looking ok for the long term, but until we get a clear breakout being a little more cautious isn't bad.
In my opinion stocks will really go parabolic at some point, but I also can't ignore the fact that as a whole they are up 30% from their Feb 2020 peak and the financial system is very fragile. So for stocks the best thing is to be bullish but potentially reduce risk. As the VIX is at such low levels during a pandemic, preparing for higher volatility is the right thing to do. We haven't had a big move on the VIX since the Covid crash and before that we'd get one every 12-24 months. Now that the VIX is down 84% from its peak, completed a full cycle and is sitting at support... It is prudent to have less risk on.
The major Meme stocks have had major corrections, but they might not be done yet. At least GME has found perfect support at 180 (talked about it recently). As long as it stays above 160 in my opinion there is hope. Above 220 it could really moon once again.
For AMC things looked way more rough but the bounce yesterday really took me by surprise. It was really strong and managed to bounce hard after sweeping a key low. The 50-55$ area is an area of strong resistance, but if it manages to close above it we could see another major squeeze up. The last squeeze was a fomo rally + gamma squeeze + short squeeze and for now I don't know what this one could be like. I have a feeling that the one that will really squeeze this time around while AMC chops around 30-70$ is GME. Why? Double tops usually break and the one at 340 really looks ready to be broken. GME has consolidated for much longer than AMC too.
One of the most important markets to look at, are US treasuries. Long dated bonds have been going up (yields down) and that's a deflationary move. What we have seen with the Reverse Repo from the Fed, is that the demand for these assets has been quite high and that the bond market isn't buying the strong reflation story. Just to be clear, both bonds and stocks can go higher, but as bonds fall or rise, certain types of stocks benefit from that. For example the 30Y bond goes down in price, small caps benefit, when it goes up, large caps benefit. The rate of change is also very important as big moves in bonds in either direction can create some short term panic in stocks. From their ATHs bonds fell about 28% which over the last 12 years has been a pretty good place for a long term bottom. However right now bonds have found some resistance and haven't broken out to the upside yet which means their downtrend might resume, which would benefit the inflation/reflation assets (people selling safe assets to get into risk assets).
Next most important is the US Dollar. When the USD and Bonds go up together, it's a sign of trouble. Something isn't right... Of course both got significantly oversold and hit key support levels, so this might just be a technical bounce. Neither the USD or bonds have broken out yet. Will show several pairs here like EURUSD, GBPUSD, USDCAD, USDCNH, USDZAR.
EURUSD hasn't broken down yet, but below 1.17 I easily see it go to 1.14-1.15 where it could potentially bottom. Until then EURUSD is in choppy waters as it is flirting with the 300 DMA. It's long term trend is up, medium term sideways and short term down... but the bounce of support so far is quite promising. GBPUSD has broken a key diagonal, however the long term structure is quite bullish. It has formed a massive base and could eventually break higher, but until I see a close above 1.46 I'd play this level by level. Why? Because the 1.35-1.45 was multi decade support, so I'd like to see it fully reclaimed.
On the USD pairs I do believe the USD has shown some extra strength, but nothing is clear there either. For USDCAD looks like a real strong reversal rally but it could just be a dead cat bounce. For USDCNH we have a similar situation, but with a higher chance that this is a real reversal. USDZAR fell so much that it finally bounced, but has so far found resistance on some previous key support levels. Both that and USDMXN have been getting slammed every single time and for now we haven't had a full confirmation of a reversal for those either. Looking just at EURUSD or DXY isn't the right way to evaluate dollar strength.
Finally let's get into the most important commodities. Oil after sweeping its 2018 high by a little bit had an 8% correction and hit some really important support levels. It was a very healthy correction after a very huge rally and it might be over. Oil breaking above 77 again would be very bullish and its current structure is already quite bullish. Getting down to 64-66 would be a very nice buying opportunity. There are huge supply issues for oil and this could take the price much higher over the next few months or years.
Copper failed to sustain above its 2011 ATH and the R3 Yearly, which is quite bearish. In the short term it has formed a bearish trend, but the long term trend is up and Copper has both high demand and supply issues. It's sitting above support and looking more and more bullish by the minute, so going long here isn't a bad idea, with a stop below the current lows. Otherwise wait for a break of the ATHs and buy any dips after that.
Gold had a similar situation with Copper, but at different times. The truth is that the current macro situation is more bullish for Copper if governments start spending on building/creating stuff, especially for technological stuff or regarding renewable energy. We might have a disinflationary backdrop, but the demand for Copper might be much larger than its supply.
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