Wednesday, December 15th 2021 -
Technical Update (SPX 500, 10 YR Bond yields, US Dollar, Bitcoin)
If only we knew what the future held...
What a wacky year it's been in stocks (at least for me) ... Success at the beginning of 2021 faded and as I pissed away early returns, I began to divert my attention to Crypto and eventually NFTs, but thats not to say there hasn't been money to be made in stocks, there has been. Matter of fact while 2nd half of the year has been tough for those chasing gains in the stock market, the S&P 500 index is up over a cool 25% YTD.
Which brings me to my next point...
It's time to be more selective. When you look at the chart of the S&P 500, it's hard to ignore the massive recovery we've seen since March of 2020. What once looked like the end of the world resulted in a massive recovery fueled by monetary inflation. Let's stay away from the "why" for a moment and respect price as it is to see if we can form in unbiased view of what price may do over the next 1-2 weeks to close the year.
S&P 500 Futures chart - Daily Candles
Returns are shrinking, and 2022 brings nothing but uncertainty. I'll be honest, I wouldn't recommend anyone jump into "trading" anything right now, especially without an existing strategy in place. While It may be a good time to average into investments you own that are working for you or that you plan to keep, I'd caution anyone looking for new swing positions in markets over the coming weeks/months. For those willing and able to take on some risk, there is a potential pattern if last weeks lows hold, which I'll review into the end of the week along with some stocks and an ETF I like into 2022 should we see another advance play out in S&P 500 index.
US 10 Year Bond Yields - Daily Candles
Higher rates especially over a period of time, are bad for stocks. The mortgage market is in easy place for me to gauge consumer sentiment around rates. I don't see a reason to be concerned about rates at this point in time, but it's something to keep an eye on with the new year approaching.
US Dollar Index - Daily Candles
Now let's be clear, a lot of the younger crowd is interested in crypto, unless they've already been exposed to stocks, but Bitcoin doesn't seem to be detaching itself from the broader market so far. Matter of fact most risk assets that have done well this year have done so pretty uniformly. Meaning when bitcoin goes up, stocks and commodities usually perform well on those days also. Conversely the thing that makes them seem to all struggle is a higher US Dollar.
Well shit... The dollars breaking out of continuation pattern... Something to monitor.
Bitcoin - Weekly Candles
I'd like to assume that this isn't a massive double top especially since we did close above the previous high. Not a bad place to add to a long term position down to 40k if you believe in the narrative like I do. The only thing that I think stops bitcoin from achieving mainstream status in this cycle is a massive market crash that takes months to recover and at this point with all the influence the fed has on the market I can't see a change from the status quo in terms of the Feds accommodative stance.
Inflation will run hot like water in a pot....
By, Michael J. Maio