We have commented only a few times on Bitcoin since 2017. The first time we actually made a recommendation was in the recent January 25th edition when we advised buying Bitcoin (along with several other assets) for a bounce. They all went up to some degree or another, but Bitcoin rose by 25%, as of today’s high.
We have been making these astonishingly accurate market calls since 1999, with very few failures along the way. Guess which of these calls has attracted the most comment ever? Yep, that one. Here’s an update on that advice, with the day of the ‘buy for the bounce’ advice marked on each chart with a blue arrow. First the ‘main three’ US indices:
The Cathy Wood fund ETF was also on our ‘buy for a bounce’ list, but has done little, despite a promising increase in short interest. Bitcoin has been as volatile as we have come to expect, this time upwards (don’t forget, we don’t even think of it as a proper asset…):
The question is always: ‘what next?’ This rally is one that should lead to a good place to establish shorts in Equity markets, as we have been saying for some weeks. There is a small chance that the initial ‘leg’ of the rally from the 25th January to the high last Wednesday, 2nd February was all of it. Our idea has been to sell rallies in US stocks that approach the obvious resistance that we have identified in several different indices but most clearly in this Small Cap:
Elsewhere, we have seen some daily-scale bottom extensions in European government bonds, which should mark the end of this ‘leg’ downward. We have been saying for ten months that bonds are in a bear market, starting with the April 20th 2021 edition. Bear markets are difficult to trade (as if bull markets aren’t…) and are characterised by sharp contra-trend moves that are unnerving if you are unprepared. Some kind of reaction within the downtrend should start hereabouts, even if it is just a ‘flat spot’. If you are a bond fund manager, you might ‘lengthen-out’ a bit here from the ultra-short posture we have been recommending but we would advise buying for a bounce only for the very stupid brave. It is worth noting that there was no ‘return-to-compression’ rally once the price had broken down in December. That lack is rare, and we have been expecting exactly that in US Stocks (see above) as part of the important ‘attractor’ nature of compressions (see user guide).
These new signals have occurred in Gilts, Bunds and French OATs, but they all look the same, so here is just a Chart of Bunds:
Energy markets have made top extension signals at a daily scale. We have been bullish since a break upward from weekly-scale compressions (see January 12th edition) and have advised buying dips. Stop doing that and go flat. We wait for a chance to take a fresh view and this should not be considered to be advice to sell short. Once again, all the charts look alike, so here is just Rbob as an example:
Finally, Gold. We are weary bulls, as regular readers will know and here is our latest reason. Prices broke upward yesterday from daily-scale compressions and the prospect is for some more strength. This is intriguing because the market made a weekly-scale compression last week and this could mean that it will develop into a powerful up-move. Buying now might confer an early start to that up-move, with very little risk. Close stops are in order:
All signals generated by software produced by our friends at Parallax Financial Research www.pfr.com
