Wednesday, January 19, 2022

01-19-2022 Market Update

Guess who? :)

0.0 MARKET OUTLOOK:

TS: 11:09am pst (will update as time permits)

Holiday related concerns are history. New Year, New set up. The QE/QT Gorilla is in the room now.

Crypto Market has dipped again mildly in the ALTs but mildly, wee wee hour fire sales have slid forward to more decent hours (hooray!). Guess the algos need more volume for their ops now, who knows.

Market stable, but volatility increasing. Correlations to broader markets returning---reason?: the risk on/risk off macro that walks about with QE/QT changes from the Fed is the obvious actor. Interestingly, Europe is not in FED mode, but the reverse. (So much for the fundamentalists that think what the FED does, the world must follow.)

Am I surprised? No. We got some black swan FED speak out of Skynet Central, and that has been preflagged in these Outlooks for quite a while. It happened. It can happen again. So episodic non trending volatility has occurred....and now is becoming non episodic-but trending up.

That is market unstable canary song. This is a material change. Despite my sheep bleated thesis of big money will grind this up-this is a real shot across the bow and has to be watched carefully. Could I be wrong? Of course. But I am sticking to that macro set up, until it proves me ms. wong***. ;)***

Nonetheless, still looking for slow grind up trend (not to be confused with "day") in crypto, from here. Same reasons: relative bargains abound with huge cash hordes on sidelines seeking a place to go, (FOMO is almost as strong as gravity).

Interest rates headed up, going to kill a market that runs crazy gains like Crypto?

Um: NO.

Do the math! What does single digit interest have to do with potential triple digit gains? (Very little.)

They laughed at Saylor when he borrowed $ at 6.5% interest in Q1 2021 to buy more bitcoin. Had he sold at any 2021 ATH (3 total), he would have killed that! And yet they laugh-and yet he buys more on the dips.....as in here.

6.5% meant nothing, and FED interest is going nowhere near there!

How do the geniuses that posit such nonsensical narrative, pencil that one out different? (You got me!)

Can higher interest rates hurt the performance of something like the S&P that might on average rise <15%/year? Yes! Why? Look at how closely related the numbers are: single digit interest rates are a very material portion of a very low double digit average gain. But THAT meager gain is not the environ of the cryptoverse, where ~9%/yr is available on stable coin irregardless.

The play today is the same: short scalp longs near supports, dump them at resistances, and short the wild extension breakout ducks-cover as they test old resistance/new support. Rinse and repeat.

1.0 MARKET UP FACTORS:

Bubble "Gone" (stuff is on relative sale-so 'price up!' probability is de facto higher)

Huge amount of cash on the sidelines seeking a place to go to work.

The 8000lb Gorilla Event In The Room (the Fed Speaky), is O-V-E-R.....markets are still adjusting!

Broader Markets slammed to running sideways-correlations are coming back, (\see chart at item 5.1)*

VIX Pattern Reversed-THIS IS HUGE- scary bits now in view*

VIX of VIX doing ditto, as noted in 01/06/2022 Outlook

Wee Wee Hour Fire Sales have moved forward into broader market hours (correlations perhaps why)

Seasonality (January Pattern for General Purchasing) running, albeit slowly! (see chart in item 5.9).

DOW THEORY Signal 100% Positive (general 'risk on' orientation ok)-but w/secondary reaction warning is now active and threatening reversal. (I do not think this signal will complete.)

Covid Fears Stable-Lockdown Damage Potential Stable (low political will here in the world landscape)

Hedge Fund Positioning Trend Reversing Slightly (=slight market down signal, see item 5.2 chart)

Broader Market Sentiment Trend is 'risk off', which is a contrarian buy signal (see cutesy chart at item 5.3, and this piece: https://www.reddit.com/r/DorothysDirtyDitch/comments/rk719b/the_80000_lb_gorilla_ever_in_any_market_room/)

2.0 MARKET DOWN FACTORS:

FED Taper said to be more aggressive than thought & interest rates to rise ( a "surprise black swan")

FED QE turning to QT in Q1/Q2

Hedge Funds Are Heavy Short, Institutionals Turning Down (=market down/nervous, see item 5.2 chart)

Covid Based Econ Damage Ramping = 'risk off' and dampens FOMO sentiment to SLOMO set up

3.0 MY SCALP TRADE POSITIONING: (unchanged-and working very well)

Long Bias.....limited reversal trades short as a direct result

Shorts-"duck hunt"* shorts sought actively, (*ie: "over priced" shorts on wild pumper action).

No Meme Coin Longs (hopium has flagged and may stay weak/risk off in this sector)

Small Range/Shorter Parry Advisable (tight choppy market not likely to run far here)

4.0 TARGETS I PREFER: (unchanged & working well, may need to switch out some horses in 2022)

4.1) Solid Industrial FAAMNG type value stuff that has not run way up recently, (or if it has, dips huge\*);*

ADA, ALGO, ATOM, AVAX**, BNB, DOT, FIL, LUNA**, One, SOL, UNI, ===>(all long)

4.2) Solid project small cap stuff that has been beaten down;

AKT, AUDIO, DVPN, CAKE, KCS, CELO, CTK, FTM, HBAR, SRM, VGX, ===>(all long)

4.3) META & Exchange Buzz small cap stuff with some cap mojo that is being FOMO bid and "influenced";

CRO, MANA, SAND....(long & short, TA signal dependent)

4.4) Duck Hunts (short targets)

Any that pop up-anywhere at anytime......this is not the time for high flying. ;)

5.0 RANDOM CHARTS OF INTEREST TO NOTE

5.1 Broader Market Correlations

Correlations Are Back!

Correlations mean that DOW Theory (as modified for DDT Scalping), are back-and that is very helpful.

5.2 Fast $ vs Slow $ Positioning

All Turning Shorter Here

This is new, and should be watched.

5.3 The "Are We Having Fun"-O-Meter

Stuck In The Mud

*yawn*

5.4 Volume

Volume Up!

Dip Buying Happening!

Dip buyers no longer snoozing this market "correction"......

5.5 Largest Cap Trends:

Still Down-and deepening a tad

Boo Boo Bears-for now

No Change: Full Bear "Trends" Remain

That said, see the Green Shoots as called repeatedly in earlier Outlooks, this is a positive Canary Song:

Bullish Divergence!

"Market Realized Gradient (MRG) compares the momentum in Market Cap (speculative value) versus the Realized Cap (real capital inflows). Positive values signal that a bull trend is intact, and upwards momentum in spot markets is growing. Negative values signal that a bear trend is in play, and momentum favors the bears. Large values signal that Bitcoin is possibly overbought (positive) or oversold (negative), as market valuation deviates from more fundamental capital inflows or outflows, respectively."

To catch fish (trends) you have to start out early, that is what the chart above (and below) are showing-early shoots of green (up stuff). These are Canary Songs.....they may fail, but watch them closely as they often portend material moves in volatile assets-before they occur.

The above is confirmed here:

Now Headed Negative After Hitting Resistance Consistently

"This metric is calculated as the difference between the daily change of LTH and STH realized caps. Negative Values (red) signal that the STH Realized Cap is increasing more on a daily basis than the LTH Realized Cap. This occurs during bull runs when long term holders distribute supply into new holders.  Positive Values (green) signal that the LTH Realized Cap is increasing more on a daily basis than the STH Realized Cap, which occurs during bearish accumulation markets as STH activity decreases, and unspent coins mature into the LTH cohort."

As you can see, the distribution reversal that coincided with Nov ATH has burned off, and NOT managed to retrend as the May crash acted. Instead it has hit firm overhead resistance, stalled, and is turning down. That is "market up" divergence.

We Have Left Quad 2 (the 2021 Setup)-and have entered Quad 1 (its messy)

We are in a weird transition here, and have been for the last 1 month+. Some Quad 1 & 3 metrics present. This is clarifying now and is a key area to watch.

Meanwhile, this one is interesting:

\"Short term HODLr\"....???....isn't that an oxymoron? haha

The speculation in swing trading BTC has been on the decline since those heady Hopium Days of Yore, (which I say are not coming back). The narrative nerds can sing their $illy $ongs-but the data is clear as day here. The Canary Song is: "Ding Dong The #1 Market Cap Rocket Schlong Is Gone". ;)

5.6 BTC Futures:

This has been bouncing in and out of sync nervously....

Futures Have Fallen, but were just in sync week over week.

5.7 Volatility:

Turning Up Slightly....

Increasing Mildly-IVOL Trend Reversal!

Volatility Up = Prices Down......that is a solid correlation, and now the broader markets are correlated, so watch the VIX for canary clues here......that is how I called the DEC 2020 Crash. My guess is the correlations will stay for a short time (weeks), and then break as crypto begins to outperform broader markets. We'll see. There is little herstorical data to draw from-so this is a tough call.

5.8 Margin Matters

Margined BTC at Y/Y Lows

Gee, I guess that margined trade gig is not so fun for so many-burnt & learned from May 2021.

Question is, will it return, or have peeps figured out that trying to game this market longer term is a fool's errand? (That is certainly my firm opinion-which is precisely why I scalp, and not invest/hodl.)


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