Bitcoin and the Stock Market

I been saying for a bit, the top is around end of January since my post Dec 2nd 'Resuming the March Decline ahead'. 

 Quote ", I expect between now and February the market to decline materially from the high (unlikely the day I am writing this is the high, but who knows!)  The setup for next year is not good.  The market will need to lose 40-60% of its valuation to be a good buy once again, and will likely take years to play out and fully recover. (a decade? 30 years like Japan?) 

This is excluding the print our way out option as I expect Republicans to enforce fiscal discipline much more than they did with in 2016-2020 during 'good times'.  With a crippled economy they will double down the pain in hopes of winning elections.  The easy money train will end in January, unless Democrats takes the senate in Georgia."

So we have a Democratic leadership, free money for everyone.  As long as the free money flows,  I do think the market downturn will NOT be a decade.  It maybe as quick as a few weeks to a year.  Free money to the people will flow, heavily, to gambling, ala Gamestop style or the market in general.  It will also flow heavily to Bitcoin.

That doesn't mean we wont see a punch in the face, as I stated in "Preparing for a GBTC punch in the face" on January 7th.  GBTC hit 48 on January 8th and hasn't come close to that since.

I am hoping that GBTC hits 22, if it does, I may allocate as much as 50% to GBTC.   The other half will be divided 25% Gold Miners and 25% INDA.   India doesn't have any Fed debt trap, and they have 1.2 billion people.  I think looking ahead this will be the decade of India.

So the week ahead will validate there is a downturn, of weeks or a year (I am not THAT good to know exactly how long!).  But once we bottom, I really do think the market will never look back.  We will see inflation go right to the market, and it will be a rocket that never stops.  But that depends on US pumping free money AND the rest of the world doing things like it. 

If the rest of the world doesn't enter the debt race to keep up with the USA, we will have constraints.  Specifically, the USD will be in danger of losing credibility in the world with new lows in value.   The USD dropped 10% last year and was solely responsible for the rally.  Not Trump, not a real comeback, just free money that devalued the USD.  To learn more see my post January 2nd 'waiting for a new market high".  

The USD bottomed January the 6th, the same time I called Bitcoin top.   This is VERY interesting,  or coincidence, its something to watch for ahead.  And the USD jumped Wednesday , the day of the market downturn, again coincidence? I don't think so.

Lastly, we have a new problem in America, first was S&L debt (90's) , then housing market debt (2008), now stock margin debt.  Each time we blow a debt bubble it must unwind once we reach peak debt.  The question really is was last week peak margin debt? Whenever it is, that is the true top.  And the unwind will be ugly.  

Check out "I am tapping out" from Jan 25th to learn more about how extreme margin debt is.

Everything I posted is just educated guesses, so we will see in the weeks ahead if this is a downturn, and how long and how deep.  At some point Trillions more will be released and we should see markets fly until the USD collapses or we show restraint.   Hence Bitcoin, Gold, and India will be my next multi-year play.

I am tapping out

 The market may keep soaring, but it can do it without me.  I tapped out 1/25/21.  I am net short the market now.  Margin is the ability for a trader/investor to buy more stock than the money they own.  Its a great multiplier for profits going your way, and a terrible multiplier for markets going against you.

I have one picture below, full article by clicking here:

The Pending Market Crash up

 The US has become delusional on monetary policy, and there will be consequences.
We now have a political environment of infinite money, and a new Treasury Secretary Janet Yellen formerly Federal Reserve Bank.    What is happening in the last year is a new union between the US Treasury and The Federal Reserve Bank.  The government prints infinite money, and the Fed buys it to artificially suppress interest rates.  Back in 2009 I called it the bond wall, but since then the government figured a way out of the problem I called out, just have the Fed give itself money and buy the bonds!

With this trick firmly in hand, we have also had the Fed buy assets from banks, resulting in the Fed owning 1/3rd of all mortgages!  Next up is market indexes and corporate debt.  All of this results in a market infinitely moving up with no downside risk.  To solidify this reality we will need a market crack to motivate a bazooka larger than 2020 to be fired to ensure a market rocket.

The question is, do we have conditions for the market rocket now, or must the market crack first to release a new volley.  Only time will tell.

In any event, my obsession with crypto currencies, foreign investments (INDA), and gold miners is in preparation for this future event.

I encourage you to watch these videos to understand in detail my concern.  If you disagree with the conclusion, I urge you to stop reading or following my stock chatter, for my entire perspective is skewed by this view.

Charts for Bitcoin, Ethereum, SPX500, Nasdaq, IBB, Inda, GDX, Gold, and SPX500

Today we have post of charts!  I created a video with a summary of this post , watch here.

I have a bunch of charts below, all with my own view, I am not a professional trader or financial advisor.
This is just a way to share what I am looking at with those who ask me 'what are you looking at'?

Bitcoin / GTBC - Its the new digital gold, to learn more about excitement in crypto read article on Defi .  I want to buy and sell GBTC based on bitcoin action, and also to sell GBTC when the premium is high and buy when the premium is negative or very low.

S&P 500 / Nasdaq - Stock market indexes that represent USA stocks and technology.
IBB - Index for Biotech, a growth sector in the decade ahead.
INDA - I am a huge fan of India growth in the 20 years ahead, perfect for my retirement account.
           - It is also a play outside of USD valuation.

Gold/GDX - Gold and gold miners, I am bullish only due to the money printing in 2020, Europe changing gold reserve requirements for European banks, plus India will be buying more gold.

updated Ethereum 1/24/21

Asset                           SMA reading                Level to watch                              4 year reading

Bitcoin                         negative                       Stop loss 29K, buy 35k+               very positive
Ethereum                     positive                    Stop loss 1280,                                negative (for value)
S&P500 / Nasdaq        Positive                        SPX stop loss 3150                        negative 20%+
IBB                              Positive                        Stop-loss at 129                               neutral
INDA                            positive                        Stop loss at 36                                very positive
Gold (barrick)              low negative                  Stop loss at 21                                positive, 40+
GDX                            low negative                  Stop loss at 33                                positive, 80+ 

Bitcoin

Bitcoin over the 4 years ahead I believe will hit 100K, and may hit up to 1 million a coin in the decade ahead.  However, my opinion isn't a certainty, but in my head its likely.  Perspectives can change with new information.  Bitcoin this past week  had news of a 'flaw' called double spend.  it was not true.  Janet Yellen made comments about regulating bitcoin.  this is actually a plus providing the US Government doesn't view bitcoin as a threat to itself.  Better regulation equals higher trust, equals higher investment.  

Since it is a great long term buy, the first area is short-term view for direction.  

Bitcoin punching below 28974 is of a concern, next levels of support are 26,000 and 21,000.

We need bitcoin to go above 35000 to get optimistic, and above 40k to aim for moving to new highs.

For this reason, I put sell orders for most of my bitcoin in at 34500, if I had did this charting yesterday I'd probably had my sell in at 33k.  This chart does not look good, I may sell my GBTC on Monday and wait for Bitcoin to have the 24/48 hour SMA cross in a positive trend before buying again.

Examples of buy/sell if using 24/48 hour SMA, I want to start using it for buying GBTC.
I'll be late in, and late out, but the trades are favorable.

Ethereum

Why?   Ethereum is the basis for all the DeFi innovation that got me into crypto in 2020, to read more, click here.   I am not convinced Ethereum will go to 10K or higher.  Its purpose isn't a value store, but to enable financial automation.  I believe the destiny of Ethereum in some future revision to sell an Ethereum token for a price, when the contract is executed, the coin is burned.  This will enable users to pay upfront for 'gas cost' at a known price.  It is the ONLY way to enable Ethereum to take over global finance.  In the near term, the attention to Ethereum is causing price variance.

One opensource effort to fix this 'gas cost' can be found here.  To see how pervasive this problem is, check out this open insurance project switching to xDai.  This is unsustainable, and therefore I am not a believer in Ethereum as a value proposition over the 5 year horizon.  Ethereum is controlled by a non-profit trying to maximize its utility value, therefore high Ethereum prices and unpredictable gas costs are not wanted by those who control it.  There is no limit to Ethereum coins, unlike bitcoin.  They could issue 5x more coins per month starting tomorrow if they wanted.

Now, to the charts! Below is a pulled back view of a Fibonacci fan since late 2020, and then a close up of recent price action.

Summary:  When the 48 hour SMA crosses above the 24 hour SMA, Ethereum is a buy and hold until it flips.  It has been a very good indicator. As of this chart, it is still in a down trend.  (1/23 @10 am est)

Crossing above 1320 indicates a target of 1500 for Ethereum.   Crossing below 1080 will likely bring a target of 880.   Right now the key line is about its current value , ~1200.  It need to push up to  have the 48/24 hour SMA cross or risk another downturn to test 1080. My gut says more pain before it gets better. I put a stop loss in at 1210-1200 to sell 5 of my 7 Ethereum.  Two Ethereum is at a sell limit of 1490. 

Update 1/24/21

S&P 500

I use the S&P 500 because it better represents a wide array of stocks, not just the top 30 like the DOW.

We are in an upswing that started in November, and it remains intact.  The last few downturns have been short and 5-10 %.  The downturn in Feb was more extreme.

Until the indicator crosses, the market is smooth sailing ahead.  I am concerned with the new administration actual real facts must be stated and 'hard choices' articulated to clean up the economic disaster of the last 4 years.

Critical levels: 

Below 3200-3100 range is bad, next stops are 2700 and 2200.

Outlook: Mixed leaning negative.

Upside is infinite , however using historic measures for the market, the ROI should be -2% over the next 10 years.  I expect the new Treasury Secretary, Janet Yellin, who headed the Federal Reserve Bank under Obama, is going to mix things up a bit.  She is a strong proponent of helping the bottom 90%, and she must realize the trillions of free money to the top 1% has exasperated the financial divide.  I expect instead of advocating trillions more to the top, she will advocate 'free money' to the people via government handouts and work in concert with the Fed to minimize the negative distortions.  The question is, were will the free money flow to (aside from basic living costs)?  It maybe the stock market, cryptos, people actually paying down their debt, or a mix of all of these things.   If the top 1% doesn't get their free handout, we will see if the market suffers.

Just to put the S&P 500 into historical perspective.

NASDAQ

I decided to add the NASDAQ index since US based economic growth maybe better represented by this index than S&P 500, since it is comprised of newer technology based companies.

What an explosion since 2016!  View for NASDAQ is similar to S&P 500, except there are core companies that are very well positioned for growth ahead.  I would like to think the downside is a lower risk.

Critical Levels

10900, 6880-6000,  then 4185.  At this point 4185 would be an economic destruction, so I have to even list it.  But it is the high of the 2000 bubble and now its a floor.

To bring context to the chart above, below is NASDAQ movement since 2000.

IBB

Biotech has been huge over the last decade and it should continue to extend as new processes continue to improve to develop better products.   Right now the IBB ETF is positive, with levels to watch are 129 with good support between 85-96.  

INDA

I am a huge fan of the prospects of India.  They are the worlds largest democracy, with a population 4 times larger than America.  It is also a good play to diversify outside of USA and produces income. (unlike gold/Bitcoin).  

Stop loss levels are 36, 32, and 24.

GOLD - Barrick Gold

I am tracking Barrick gold separate from GDX simply because it is a company that has been getting positive press.  Warren Buffet who famously never buys gold miners, recently bought their shares.

This is at a good spot, not great for a buy.  Its at 23.4, and we have a stop loss level at 21.80, with additional levels at 20 then 15.  On this chart I added stochastics, and indicator for overbought or oversold.  GOLD is in oversold territory.

GDX

GDX is an ETF of gold miners.  The reasons why I follow gold miners is before Bitcoin became the new gold, gold has been an a way to hedge against financial uncertainty, fiat currency challenges, and countries like India and China as they get wealthier, they historically buy more gold.

Critical levels

GDX is a buy right now, with a stop at 33, and a major stop at 26.  The stochastics are favorable for more upside.  The upside in 2021 is about 50, with an upside by 2024 of 90-100.

.

Bitcoin patience vs greed

 Buying GBTC around 15-20 and selling most of it at about 44 was the best trade in the last year.  

It is very hard to sell when everything is going your way, it looks like the rocket will never end.   In this case most of my funds was in GBTC.   The tell that drove me to sell was the very high premium GBTC was trading at vs the underlying fund value.    On January 6th the premium was 33%, I figured the premium would come out which would result in a lower GBTC price.   But GBTC kept going, Thursday trading at 24%, culminating Friday at 17% with GBTC hitting $48 a share.

There was a market euphoria that hit both Bitcoin and GBTC.  Honestly when I looked at GBTC I thought every sell was a mistake.  But at the end of Friday Jan 8th I sold more.

To see the premium you can go-to Grayscale web site to view the data.  I found another site below.

https://ycharts.com/companies/GBTC/discount_or_premium_to_nav

 Bitcoin and GBTC are starting the capitulation process. My hope is to buy GBTC  26-33 range.  I believe things will ramp up once democrats give more free money to people.  The extra money will go to bitcoin and certain stocks as people try to make a quick buck.

As of Thursday nite, the 21st,

I am 75% back into btc and eth coins, and looking to get 75% into GBTC Friday, especially if it's a gap down open.

Good luck!

I

Went HEAVY short the market

One of the chart people I pay for issued an unusual recommendation, short the market index.  I have previously wrote I expect the market top around the 20th through 28th, a Bradley turn date.

Because I was already predisposition to short the market around this time, I went in a little heavy short.  Purchased SDOW and bought some March dated puts, and sold a call dated pretty far out in the market.

I am watching Bitcoin tonight to break down lower or higher out of a trading channel it has been in.

I am extremely light bitcoin ATM, with about 1/5th the bitcoin I had a couple of weeks ago.

To watch the bitcoin channel, click here:

UPDATE:

If the DOW does start to go lower, the low should be above 25K, there is a very good chance we can even go lower.

Watching Bitcoin

 I am watching Bitcoin to send a signal of a new lower low, or moving to next level of highs.

The range I am watching is depicted below.  Any new high would force my hand to buy back into GBTC.  I am waiting to see what direction bitcoin chooses.  My hope is to buy back into GBTC at 26-33 range.

If/when the stock market does to move lower, I do expect Bitcoin to follow.

When to buy back into Bitcoin

 On Thursday I wrote post Preparing for a GBTC punch .  Looking at the price of Bitcoin Sunday, I expect the punch to arrive Monday.  We shall see!

Last week I sold a little less than 60% of all my GBTC by Friday.  I did actually sell more into Friday's close, not liking the price action.  I also sold BLOK and some Bitcoin miners I repurchased Thursday.

So the next question is, is it over for bitcoin? The high is about 43K for 2021?

Hardly!  I expect this downswing to get plenty of public news.  Friends who know you had Bitcoin say something like "how are you doing?".   But fear not! I think there is more Bitcoin upside til January 28th.  Why then? In the stock market that day is a Bradley turn date which indicates +/- a few days should be the stock market top.  If the market does turn, unfortunately, all assets go down, including likely bitcoin and gold.

So right now we are looking for a bitcoin capitulation day this week, for the rally to resume.  I am thinking Bitcoin should make a high for the quarter around 50-60 k, before we re-enter a consolidation period over the months ahead before 100K at end of this year or early next year.

How can we figure out when is the right time? One was to help with a guess is stock charting.

My stock charting says these are the Bitcoin buy levels : 33K,  26.5K, then 21.5K.

I really have no idea how far this bitcoin correction will go in the week ahead.  I say week since I think by next week the rally will resume in earnest ahead of the 28th.

My gut says 33K will be the low area and we will resume back to new highs.  I believe 26.5k is probably the lowest it will go before new highs, but theoretically 21.5K is possible.   If Bitcoin hit 21.5K, I would feel the urge to sell my other stock positions and just buy all bitcoin.

For GBTC, unfortunately, what we will see is a LOWER price than bitcoin.  If there is a run, Bitcoin may hit 33K and GBTC maybe $29 a share.  The reason is GBTC isn't a peg to bitcoin, but can swing higher or lower depending on supply/demand.

I am looking for a price of GBTC to hit 33 for me to start purchasing, with expectation it could hit 21-25 range.  So I can't go all in at 33, and see if it can get down to 25.  Key is to go in slow, and go out slow, always buying on a down and selling on a material up.  A good trade is good, it doesn't have to be a buy at the low and a sell at the top.

Bitcoin to me is destined to 100K in the year ahead.  So in some ways, all buys are good.  But holding a position seeing the price cut 30-50% is pretty hard to hold.  And new news can come out to change my view that Bitcoin will not hit 100K.  An example is if Biden puts radical tax laws or regulation in to stifle Crypto currencies.

Good luck!

Preparing for a GBTC punch

GBTC had an epic run late two weeks.  I sold positions over the last two days, but I did keep my core positions.  If GBTC his 33, it is a must repurchase.  

I think the highe for GBTC will be 50-60 this month, but nothing runs into a straight line.

Good luck!

Sold Crypto Miners

 I am out of all crypto miners, initial buy started in July in post What Next Gold, Crypto, or Both?

RIOT ~17, initial buy at 2.19 , gains of  776%
HVBTF ~2.30  , initial buy at .60 gains of  383%
HUTMF ~ 3.25, initial buy at .80 gains of  406%

I did not go all in at these prices, nor did I hold and sell all at these prices.
I started to buy in at these prices, and eased out on heavy up days.

With the new year, I am consolidating my positions in:

GBTC
GDX
GDXJ
JNJ
IBB
MJ

Various shorts, Wynn, Tesla, DVA, and own some SPXS, and 2023 'puts' on the DJIA.

Small positions in:
BLOK, OGI

Bunch of small miners, GPL, HL, GOLD, FSM, FFMGF, LUNMF, SVM, AUY, HMY, etc.

Waiting for a new market high

CORRECTION: 1/5/21 - admitted to SPX 500 not DJIA

The press has called the market at new all time highs, some indexes are.  I always use the S&P 500 for it represents the top 500 companies presenting a more realistic value in the market health, over cherry picking the top 30.

Recently Tesla and Etsy have been admitted to the Dow Jones Industrial average AFTER they had an epic run in value appreciation.   Would have been nice if they put these stocks into the index BEFORE their epic run.    We will see if in 2021 these two stocks beat the value appreciation now that they are in the index.  I suspect smart money is unloading their positions at a profit to the people buying the index.  We shall see.

Back to my point about the S&P 500, currently SPX stands at 3,756, which beats the old high in February 19th 2020 at 3,386.    The USD was valued at  99 compared to other currencies, and is now valued at 89.   That is a full 10.1% drop in US based asset values.  Adjusting the latest high at 3,756 we get  3,380.

So the overall US stock market still hasn't beat it's old high after the US Government spent Trillions of dollars, with the FED spending 4 Trillion buying private assets.

I wrote this previously in Resuming the Market Decline ahead on December 2nd, I am of the opinion once Biden takes office the Republicans will start to beat the deficit drum and curtail all government spending after the worst economic downturn since the Great Depression.   The irony of course is during the greatest economic era ever declared in January 2020 we had an annual deficit spending of  1 Trillion. (984 Billion on the books).

So with the fragile economy, its a no brainer 3 Trillion isn't outrageous with such huge economic challenges.  If the Democrats win both senate seats in Georgia, the market should stay within a 25% lower low in my opinion as the Democrats dish out free money to everyone.   Assuming they don't win those seats, the cut in spending will result in sky rocketing foreclosures and cascading deflationary outcome. A stock market 60% lower over the next 4 years would not surprise me.

I am writing this for the benefit of my future self, when I can hear as we enter the 2024 election how the Democrats wrecked the economy  and we need to elect a super-right wing person to whip this nation into shape.  For the record, above is what will determine the outcome.

If the Democrats do get full control, I do expect the USD to hit new lows relative the the world.  We could have a market that hits SPX 4,000 but USD is down 30% from the highs.  In a deflationary collapse the USD will regain its value but the market will suffer greatly.  Remember all imports get more expensive as each USD is worth less.

Either way, that is why I am in Gold and Bitcoin.  Bitcoin hit 33K and I still think 100K is a possibility in 2021.  My target date to get nervous is after Biden assumes office and Trump has admitted he is no longer president.

Good luck!