With the 10-year anniversary of the giant bull market in equities hitting in a matter of days, we see a major rollover in stocks unfolding.
Simply, we see the trade “deal” euphoria leading to an overnight rally as a climax that brings an end to the irrational, vertical rally from January to February 2019.
The Crypto.IQ Trading Desk accurately predicted that S&P (SPY) would sweep the recent highs at a big Fib number (Figure 1). This created liquidity for big players to sell to weaker hands before a dramatic decline begins.
The theme of a massive rollover in stocks and other risk assets could spread. Brexit fears will resurface during March. The chart of the Pound vs. the Dollar (GBPUSD) shows a similar sweep of highs and subsequent rollover (Figure 2).
This could mean that bad Brexit news is coming. To keep it simple, if the UK’s exit from the EU is ugly, there could be dramatic negative implications for the UK economy and global capital markets. This is enhanced by major problems in Italy.
And GBPUSD is not the only fiat currency in trouble.
Technical trouble for the Dollar looms (Figure 3). We see resistance from Fib speed resistance lines. Also, the 50-day moving average (red line) in the Dollar Index (DXY) could cross below the 200-day moving average (black line).
Any such event would be known in technical analysis vernacular as the “death cross.”
One possible catalyst for Dollar problems could be the president being investigated. Historically, when the House changes to the opposite of the president’s party, the president is investigated.
The dollar could also be impacted by problems with the Treasury bond market. Ideas like modern monetary theory, Medicare for All, and the Green New Deal could triple the national debt. These are powerful and scary to many. That said, these ideas are backed by politicians with massive social media followings. That matters in an era when a big chunk of the 2020 electorate will be young people. Many of those people have big student debt burdens.
Many have not recognized the recent fall in bonds (TLT) in the face of very weak global economic data. That could be the result of rhetoric from the parties and personalities who advocate these positions that could explode the national debt and make printing money commonplace.
Technically, bonds (TLT) took out stops above peaks from last year. This could create a major top in bonds (Figure 4). Conversely, (TLT) may go up if stocks go down — but, then again, they might not.
The national debt is $22 trillion, and the government is both dysfunctional and non-functional at the moment.
Bottom Line: We’ll give it you straight. Equities bottomed in early March 2009. Markets love symmetry. Equities could be topping right now near the 10-year anniversary of that bull market.
We don’t know who Satoshi Nakamoto really is, but we do know one thing: 10-years ago he, she, they helped bring Bitcoin (BTC) forth for a day like today. It was meant to be the harbor in the storm. In finance-speak, it was designed as a “negative beta,” asset — the thing that went up when everything else went down.
This macro setup has that “now or never” feel to it for crypto.
Hat tip to the Crypto.IQ Trading Desk for helping me see the topping formations in SPY, GBPUSD, and TLT more clearly.
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