Bitcoin’s new US ETFs launched – with a thud
A hugely significant financial event occurred last week with the much anticipated launch of the first US ETF in cryptocurrencies on 10 January. It was met with at first a shrug and then yesterday, a full scale thud with the Bitcoin price down 8.6% to $43,000.
Earlier, I had suggested to VIP Traders Club members that the date-certain event might well be a ‘Buy the Rumour, Sell the News’ event since so much excitement had been built into the expected SEC approval. And that is precisely how it is playing out. (Incidentally, these are not the first Bitcoin ETFs available for trading – the Canadians have had some for some time.)
This is the weekly chart of a a popular Bitcoin ETF and shows last week’s key reversal (these often pinpoint ,major reversals especially after a strong run) – and on notably record high volume. Thus yesterday saw a huge transfer from strong hands to weak. Weak hands always buy at major tops and sell at major bottoms. And note the top chart showing extreme RSI Relative Strength well above the dangerous ‘overbought’ level with the MACD rolling over. And the rally is a clear a-b-c form (corrective).
That is about as reliable a signpost as I have ever seen (but no100% guarantees!).
So, with this setback, does it mark the end of the huge rally off the November 2022 low of $17,000? With the Fib 2/3 retrace off the $65,000 ATH of November 2021 and last week’s key reversal (higher high and closing below the previous weeks’ low, odds are good further upside progress will be very hard to attain.
The crypto bulls must surely be disappointed with this post-ETF performance in light of the plethora of new easily-accessible ETFs now available with attendant publicity.
And that brings up my much-noted in-synch relationship with US shares indexes. Thus, if Bitcoin has topped out, can US shares be far behind? I believe not.
Further thoughts on the Post Office scandal
Last week I attempted to explain why this landmark over-20-year scandal has only now in early 2024 been thrust into the public’s – and politician’s – attention after years of being below the radar. Last week saw the start of the long-overdue process of justice restored (but no gurantees given our slippery politicians) and the main theme of journalists last week was ‘why now after all this time’?
If they had read my blog, I could have satisfied them! In five words – abrupt changes in social mood around the start of the New year highlighted by reversals in stocks.
The public anger generated in recent days is extreme – and indicates the start of the public’s gradual switch from forgiveness of sins to extreme punishment. MSM opinion writers have been scathing in their condemnation of the ass-covering elite that rule us and making the lives of many ‘little people’ a sheer hell.
The Trumpian calls for ‘draining the swamp’ are surfacing. But who is to do it? Surely not another set of the same old cloned pass-the-parcel over-paid and over-promoted ‘leaders’ surely?
A brick wall looms (with I am sure more extreme scandals to be uncovered). When provoked enough, the French public in 1789 took matters into their own hands to overthrow their elite with the guillotine prominently restoring justice!
Of course, we British are not known for mass rioting in the streets or the use of the guillotine, but we may be due for our own versions of rebellion – and the course of the stock market will be the leading indicator lighting the way.
As the foremost indicator of social mood, the stock indexes have historically served that purpose – with the US indexes most accurately in alignment. Thus, confirmation of a growing negative social mood (such as more calls for retribution for past wrongdoings) will be a decline in the stock indexes.
If, on the other hand, the PO ‘culprits’ are let off the hook in the coming weeks, then stocks will likely continue their advance. But just today, I have seen the first calls from political circles for prison terms for those responsible. Social mood will not show an improvement if these calls spread.
More thoughts on trading financial markets
We all know that you can guess the general direction of the market correctly but still lose money. Stops can be hit on small adverse fluctuations for a loss before the market continues in your direction. And a loss is a loss. And that is the same as being wrong. You are right and wrong at the same time!
As in life, trading is full of contradictions.
But this is the mark of a trader: It is certainly frustrating to have the above experience but getting really upset and even angry does no good at all. It is far better to take the small loss and move on. If you do not, then the loss will fester in your mind and you will be in no mental condition to plan your next trade/campaign. Worse mistakes can then occur when ‘revenge trading’..
And if it is tough to make money even when correct, how much harder is it to make it when you are at least one step behind?
Yes, the MSM is full of stories explaining/rationalising what has just happened after a significant event. This recent headline:’ What was behind today’s Tech eruption? Goldman’s top Tech trader explains’.
Can anyone please tell me what actual use that hindsight piece would be to anyone contemplating a trade in Tech? It’s pure rationalisation with 20/20 hindsight. Of course, many are avid followers of after-the-match analysis of their team’s latest football results. But will it help forecast the result of the next match?
A market is simply a place where buyers and sellers come together and agree to trade. In any stock market, there is an equal number of shares sold as there is bought at any time, even though the price rises if in a bull trend. So the price rise cannot be due to the common misconception that ‘there are more buyers than sellers’.
Prices rise when the buyers (and/or short coverers) are more determined than the sellers. This is reflected in the overall level of sentiment. Of course, sentiment is very difficult to measure but there are many clues available.
Going back to the headline above, The Nasdaq – as the closest general measure of trading in Tech – made an ATH on 28 December and had been falling in the first trading week of 2024. But over the weekend, I identified a potentially complete five down pattern on the hourly chart.
And because such a pattern coming after a strong rally phase is the first clue the major trend was rolling over, I advised members that when the five down had completed, we should see a three up correction starting Monday/Tuesday. Note that is exactly what we are seeing in Bitcoin.
And in fact, that is precisely what occurred. I had called the short term trajectory before the event.
On Monday, the market rallied off my ‘b’ wave low set on Friday and has been moving up in the ‘c’ of 2 wave ever since (not to scale).
The problem then was to judge how high that wave would carry. If it could carry to a new high above the marked ATH then it would not be a second wave but something else, probably a B wave as in the Dow. But the outlook would be the same – rising to a reversal since sentiment is totally compatible with a reversal and not the start of another major bull run. Bull markets start from deep suspicion, not manic exuberance as exists especially in Tech.
Finally, NatGas traders have woken up – this is winter!
NatGas has been in the doldrums for months since the giddy heights of 2022 when the Ukraine/Russia war was the driving force from the sanctions on Russian gas restricting supplies. But with the US in particular upping production since, importing nations took the great opportunity to re-fill their underground storage as prices collapsed a year ago and since then, have been range-bound.
But since I am a (mature) student at the age-old Buy Low/Sell High School, I advised members to load up in advance of this year’s winter season that could excite the market again.
And with last week’s action around the Gulf, it certainly appears winter has arrived. Already, the first major storm in Canada and the US has hit with frigid temperatures.
The rally off the wave 2 low on 12 December has been sharp and looks impulsive (wave 3). A sharp push above the wave 1 high just ahead would solidify my very bullish outlook.
