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.
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.