Market Update: Macro looking Ominous
I published the FAQs for Premium Subscription for those interested. As mentioned there, one of the things I would like to do going forward is to provide ad-hoc market updates as needed.
In the last update, I mentioned a thought exercise on how BTC could touch 50K, and today talking about ominous macro, it's important to understand these could happen on different time-frames.
Also, a deep pullback shouldn't be really surprising considering the strong up move we have had.
As always we will play it week by week, level by level.
Let's be clear, I am not calling for a market collapse here, at least not yet.
The idea is to call out the warning signs I am seeing for now. Also just because there are warning signs doesn't mean, the worst has to play out. The signs could disappear and we can get back to playing offense.
There are many ways to play defense. Different traders/investors deal with it differently. Some book profits and some reduce position sizes. Some hedge their LONGs by buying PUT options.
So let's get to it.
Last week the model picked up signs that DXY and VIX were showing signs of bullish reversals. Now there's even more confirmation that the trend is getting accelerated there.
Even in the previous updates I had written this
If DXY closes this week above 105, it would open the doors for an extended pullback in Risk On Assets.
To add to it, there's a lot of bullish action in Interest Rates. US10Y
Almost everyone has taken it for granted that peak interest rates are behind us. But are they really? At least US10Y doesn't seem to think so.
Folks think it's the FED who set the interest rates. NO. It's the markets who do it. FED just follows.
Model is also LONG VIX. This means there could a be sharp reaction in Risk On assets.
Model hasn't fully gone long USD and US10Y yet. Will wait for confirmation but if the current price action continues then very likely it will flip bullish on both.
When the holy trinity USD, US10Y, and VIX are pointing towards risk-off then it's worth paying attention to.
SPX and NDX and all the biggies such as Apple, Tesla, Microsoft, Amazon Google, etc all of them reversed exactly from the monthly resistance.
Weekly SPX closing below 3965 and NDX 11850 also would be bearish confirmation for Stocks.
Coming to Crypto, the last few days have been crazy, to say the least.
While many of the models long up are up a lot. in the last 2 days, 2 of its coins did over 100% gains in a single day.
This is pointing towards overheated markets.
It's fascinating to see how soon everyone forgets how the conditions were till last month. Im seeing behaviors of folks letting go of basic risk management.
TL;DR
It's time to play defense.
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