Newsletter #18 Did Crypto & Stocks just put in Higher-Lows?
Last week when Bitcoin went sub 19K it looked like Models' bottom call was going to get invalidated but it dint and then since there's been a great recovery across the board in both Crypto and Stocks. Macro variables are also showing positive signs.
In last week's letter, I mentioned the below
While SPY & NDX took a beating this week, both BTC and ETH held up relatively well. Is it a start of a new trend? Well, it's too early to tell. Model would need more positive data and confirmation to go long crypto again.
Is there a silver lining at all? Well yes, Bitcoin and Ethereum are entering the value zone, if we do get a market-wide sell off then it would be a great time and price to accumulate these assets for those who believe in this space.
Model has NOT gone long yet but it's picking up bullish signs underneath the surface across the board in Crypto and Stocks on lower time-frames. Should there be confirmation and follow-through, it would go long.
For now, it appears that cryptos and stocks seem to have put in some kind of higher lows / double bottom in place and trying to build momentum on the upside.
Models' bearish call on Oil did particularly well last week as Oil dropped 7% intra-week. It continues to be bearish.
Next Crude Oil, model has flipped from neutral to bearish again. This is really interesting considering the news that came out last week. Maybe the markets haven't priced this in and the model could be wrong. We will find out soon.
Model has turned from Bullish to Neutral on DXY which is the key ingredient for the sustainability of the rally in risk assets. The reversal in DXY has been swift but the model needs more confirmation to signal bearish on it.
There has been NO signal in US10Y yet but the trend looks mature and ripe for reversal. From experience, it's always best to wait for confirmation before positioning.
Model was bullish on VIX, but after the 30% up move it has calmed down which is good news for risk assets too. Model is neutral on it.
I would like to remind the readers that macro is only relevant to the model to establish a regime and manage risk. Good macro conditions are always desired but to make big money, all we need is Macro to be either
1. Neutral or
2. Go from bad to neutral.
Coz there will always be a bull market somewhere in some themes (in both Alts and Stonks) and the model will sniff them out.
For example, in the brief period that model signaled bullish a few weeks ago, it was able to capture good performance in Fan Tokens and ETH merge themes.
SANTOS was up 5x
OG & PORTO were up 3x
BAR & LAZIO were 2x
and many others were up 70%-90%.
All of this performance was on SPOT positions (no leverage) and within 3 weeks of the model going long on them. The best part was after the model's long positions were published, readers had ample time to accumulate before they started performing. Among 16 long positions, $AUTO was the only one that didn't perform.
Below is the updated chart of Bitcoin, Ethereum & Solana with Models signals from 2020 to date.
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