Markets have been uneasy for a rather long time now. Well, uneasy is perhaps a mild way to put it. Markets have been uneasy for the last few months, maybe, but just over a year ago markets were in a full-blown panic. Thankfully those crazy times have passed. Over the last two weeks, we’ve even seen the VIX below 20, which is something that has not happened in a mighty long time. Lower volatility signals higher risk appetite and we think a VIX below 20 signals risk on in equity markets.
Markets bounced hard in the second half of last week. It’s almost hard to believe how fast things are changing in the current landscape. Although there are so very many reasons to be cautious, if not flat out bearish, the market is just pulling its ears back and making its way higher despite the conditions of the world around it. Thus, given the strong footing the market ended on last week, and of course the charts, we think that we’ll likely see new highs in the week ahead.
Over the last few weeks, markets have remained rather strong in the face of many challenges. Last week we finally got confirmation that more stimulus cheques are in the mail for Americans, although it seems that $1.9 trillion was not enough to help equity indices end the week in the green. Risks remain elevated and volatility is stubbornly not abating, thus we are starting to think that it is time for a pullback. There are a few long indeas in precious metals and commodities, but for the most part, caution is advised.
Once again the U.S. Fed has tossed the kitchen sink across the room in a bid to keep the music going. We’re still to see how markets react, but from what we’ve seen so far, once the stimulus cheques are in the mail, stonks only go up!
Well, after all that bearishness, all we got was one day of #marketcrash trending on twitter and a bounce so glorious I’m sure people will be singing songs about it at some point in the future. It seems that ‘buy the dip’ is not dead just yet. In truth, the irrationality of this whole market is starting to scare me a little, although I am not going to fight the ‘buy the dip’ crowd.
As equity valuations reach closer and closer to the stratosphere, trading Gold has become a little more tricky than what it was when all the stimulus was just announced. In fact, Gold has been fading ever since August last year. Now, after all is said and done, we’re finally starting to see Bond Yields start to rise and the Dollar start to strengthen. These two forces might be enough to catch some the bulls trading Gold offside. Things are looking fairly bleak for the shiny yellow metal.
The fast paced world out there always tries to get us to take action immediately. There is a sense of urgency that is ever pressing. You have to buy this useless trinked right now! You have to act now to make money on the stock market! Cryptocurrencies are exploding and you must act immediately lest you want to ‘enjoy staying poor’. This is all garbage. The reality is that there is a lot of patience needed if you want to make any sustainable, long-term progress. The same is true with trading. The patience needed to wait for the right trades, at the right levels is something that almost never talked about. So although there are a few decent setups this week, there are a few markets on which we have to respect the patience needed and wait for a more clear setup.
The U.S. market is closed on Monday for Presidents’ Day, which means that our market will likely be rather quiet at the start of the week. Overall though, the bullish trend is strong and has been for some time. I rang some alarm bells last week, although it seems that I was wrong. This doesn’t mean that we should all rush out and put on a thousand new long positions. Patience, caution, always.
This week I am keeping things a little less ‘opinion’ and focusing just on technical trade ideas. Well, trying to keep opinion out of it at least and just following what the chart says. So let’s get into it.
Oh, the madness that is 2021! Never in my life did I think I would see a bunch of internet nerds take down hedge funds and brokerages… just for the lols. But here we are; Robinhood is basically dead in the water, Melvin Capital has offered a job to u/DeepFuckingValue (who made $46 million on GameStop since October 2020), Wall Street losses on GameStop and other heavily shorted stocks are tracking well over $70 billion and there is no sign at all that the Redditors have any intention of stopping. It boggles the mind!