How Low Can It Go?

by JDH on January 22, 2022

S&P 500

How low indeed.  What is “it”?  Let’s start with the S&P 500 index:

The chart looks brutal.  The SPX is back to where it was on July 23, 2021.  I’ve marked the lows for the last year, which may or may not act as support, and there are lots of stopping points from 4281 down to 4056.  3693 is a possibility.  I didn’t show it, but if you extend the chart back to the bottom of the March 2020 crash, that would be around 2200.

The bad news is that since the peak on January 3, 2022, the market is down almost 9%.  The good news is that the market is still up around 100% from the bottom in March 2020.

The March 2020 may not be an appropriate basis for comparison.  Another approach would be to measure from the peak just before the pandemic, in Feburary 2020, to now, and the SPX is still up about 30%.

Should you buy the dip?

“Buy the Dip” has been the correct strategy for the last decade, so if you want me to take a guess I would say yes, you should buy the dip.

I will not be buying the dip, at least not yet.  However, if you are not faint of heart, you could look to the RSI, which is now around 30, which is a typically very oversold level, and may therefore represent great opportunity.  Or not.  You decide.

Gold

While the stock market collapses, the gold market is on a roll.  Or is it?

Since December 15 gold is up 4.5%, so that’s nice.  Here’s a longer term view:

The uptrend since the $1,200 level in September, 2018 is intact (depending on how you want to draw the blue lines).  It is also true that the red downtrend line drawn from the September 2020 peak is also unbroken.  The RSI is in moderate territory, which is good, so I can see gold continuing to edge higher.

Higher up to $2,000?  I don’t see it.  I’ll start getting interested around $1,900.  Until then, I watch and wait.  (I did sell some gold stocks two weeks ago, so that’s where my head is at).

Bitcoin

And now for the fun one: Bitcoin.  The chart is brutal:

Bitcoin is down 50% since November 8.  Of course that’s not unusual.  Bitcoin was down 50% from April through July of 2021, and then over the next 112 days was up over 130% to a new all-time high.

Will Bitcoin do it again?  Or is this time different?

Has something fundamentally changed?

One answer may be that what has changed is that China has banned Bitcoin mining, and Russia is floating the idea of banning Bitcoin.  If citizens can’t own it, that reduces buying pressure, and that lowers the price.

That’s a factor, but I don’t think that’s the main factor.

I think the market is down, so Bitcoin is down.  If you are an investor, and your stocks are down, and perhaps you are getting margin calls, what do you do?  You sell whatever liquid assets you have, and there is nothing more liquid than Bitcoin.

I see relatively solid support just under the $30,000 level, so if you are a gambler, place your orders at $29,500, and you may get the deal of a lifetime.  (By “lifetime”, I mean the deal of the last six months, because six months is a lifetime in the Bitcoin world).

A more prudent approach would be to wait for a “double bottom” where Bitcoin, and the stock market in general, hits a bottom, bounces back up, and tests it again.  That would be prudent.

I will decide this week whether or not “prudent” is a word in my volcabulary.

Enjoy.  Have fun.  Stay warm.

The start of something?

by JDH on January 15, 2022

Are we at the start of a change in the market?  Is the general market finally approaching a top?

Possibly.  It does not appear that governments have the will, or the ability, to print money at the same pace they did in 2020 and 2021, and that money printing is all that is keeping the market afloat.

It also appears that wages, while growing, are growing at a rate slower than the growth in inflation, so the small retail investor doesn’t have the extra cash necessary to pump the crypto market.  Or GME.

Will that change?

I have no idea.

My long term thesis continues to be that Bitcoin will continue to grab a share of the “store of value” market.  Even a small share sends Bitcoin much higher, so if you have a long term perspective, Bitcoin is more attractive now than it was when it was trading at an all time high.

Take that advice for what it’s worth.  (Not much, likely).

I also believe the current wave of the virus will likely peak before the end of January, so that may or may not help the economy.

I will continue to monitor, and let you know if I have any actual insights.

Stay warm.

What We Learned in 2021, and What We Can Expect in 2022

January 1, 2022

What we learned in 2021 is that no one knows anything. Bear that in mind as you read the endless “Top 10 predictions for 2022” articles. I myself know nothing.  For months I have been predicting that Bitcoin would hit $100,000 by the end of 2021.  At midnight on December 31, 2021 Bitcoin was trading […]

Read the full article →

Still Nothing Happening

December 18, 2021

I hate to give you nothing to read, but nothing is happening. It’s tax loss season, so the market is under pressure.  There may be a Santa Claus rally next week, but probably not. Bitcoin is stuck in a trading range. So is gold. And everything. So sit, wait, and let’s see what happens. Out.

Read the full article →

Nothing to Report

December 11, 2021

I have nothing to report this week.  Nothing has changed.  The stock market is bouncing around.  Bitcoin is stuck around $50,000.  Tax loss season is in full swing. That’s it. That’s what’s happening. Check back next week and see if anything has changed.

Read the full article →

The Bitcoin Crash

December 4, 2021

That was epic, eh?  At around 11:30 pm Toronto time Friday Bitcoin was trading at around $52,000. By 12:30 am it touched $42,000.  A 20% drop in an hour doesn’t happen that frequently.  As I write this at 7:00 am on Saturday morning, Bitcoin has recovered to $46,600, so it’s “only” down 13% on the […]

Read the full article →

Stock Market and Bitcoin Crash: Is the World Ending?

November 27, 2021

No. No, the world is not ending. The stock market, and real estate, and Bitcoin, will continue to make new highs, forever. Perhaps not forever, but for the foreseeable future, for one simple reason: We are up to our eyeballs in debt.  Past our eyeballs, actually.  We are only able to stay afloat due to […]

Read the full article →

Bitcoin: Draw the Lines However You Want

November 20, 2021

As I write this at 7:00 am on Saturday, November 20, 2021, Bitcoin is up 3% in the last 24 hours, but down 7.7% in the last week.  Volatile, eh? Is this the start of the bear market, or a correction in a bull market? It depends on how you draw the lines: Bitcoin made […]

Read the full article →

Bitcoin: The Sideways Movement Continues (but Gold on the Move)

November 13, 2021

I know some of you are tired of my constant rantings about Bitcoin, but what else is there to talk about?  The stock market is over-hyped and continues to make new highs, but is that a story? Gold I will admit that gold is getting interesting.  Since the peak in August, 2020 well over $2,000 […]

Read the full article →

Bitcoin and Inflation

November 6, 2021

As mentioned last week, I continue to believe that Bitcoin is set up for a rocket ride.  I don’t know if it will be this week, or next week, or next month, but the spring is loaded. As I write this on Saturday morning, Bitcoin has weakened (down 6% from the high on November 2, […]

Read the full article →