Newsletter #22 Okay, Its happening! Part 2
Model's call to exit ALL positions and get into CASH more than a month ago turned out to be a good call. It has managed to sit out this entire correction.
Model continues to sit on 100% cash.
Last week I wrote this
It could get really brutal for Risk assets such as Stocks & Crypto in the next 3 weeks. There's a heightened risk of a major capitulation event.
Both S&P500 and Nasdaq100 had another down week of around 3%. They both are down about 13% since the model signaled bearish on them and continue to look weak. Closing below major weekly and monthly support does not help either.
Crypto on the other hand is holding up really well thus far. It's basically trading flat for weeks while the stocks are getting clobbered. Some are calling the start of the decoupling they have been hoping for. I am not so sure yet. Yes, we need to acknowledge their relative strength but it could just be the lag effect instead of a trend change.
What will change that view? If there is strong positive price action and the model signals LONG in BTC & ETH.
Speaking of relative strength, BTC has been showing it compared to ETH. Model has been bearish ETHBTC for weeks. Its down 16% since. Model continues to be bearish ETHBTC.
Okay so
Macro is Sh*t
Sentiment is Sh*t
Fundamentals are Sh*t
Charts are Sh*t
News-flow is Sh*t
The cherry on top is, over the weekend there are lots of murmurs & 100-part threads on Twitter on how Credit Suisse is surely gonna go bankrupt and is the next Lehman moment for the financial markets.
When everything is so negatively one-sided Markets usually surprise on the upside. If not structural, there's surely a case to be made for a tactical bounce just based on the above. That is why it's such a hard period to trade. The best action IMO is to be on the sidelines and try not to be cute.
So how am I playing this? I have been writing the below for a while and continue to believe so
Bitcoin and Ethereum are entering the value zone, if we do get a market-wide sell off then it would be a great time and price to accumulate these assets for those who believe in this space.
The above logic applies to ALL cryptos/stocks that you believe will survive the next 5 years.
So I will buy either on a complete NUKE aka BTC in the range of 14k-17k if we get one or on a Long signal by the model. It's best to be open-minded and have an allocation plan ready in both scenarios.
Some of you who are old-time readers of the newsletter will remember that the model signaled June lows as the bottom for the crypto. It came dangerously close many times but the call has not been invalidated YET. A persistent close below 18K on Bitcoin and below 700B Marketcap on TOTAL crypto would invalidate that signal. If that were to happen then the model would lose its bragging rights to having called in the bottom perfectly. But it's important to remember we are NOT here for bragging rights, we are here to make money and that's only possible when you manage risks. Model has managed it perfectly by getting into CASH at the opportune time. and the if the price action suggests, then it would go long swiftly regardless of how the sentiment and the macro situation around us.
Speaking of macro
Models bearish call on Oil has done well. Oil is sharply down 30% since the bearish signal. Some profit booking makes sense at these levels.
Model continues to be Bullish on DXY (US Dollar), US10Y (Interest Rates) and VIX (Volatility Index).
Regarding the other 3 big macro variables, there's no change in trend yet but the moves have been so swift that it would make sense if there's some sort of breather/cool down (model has been detecting it on lower timeframes) before the resumption of another big move.
Below are the Models signals on BTC, ETH, and Solana from 2020 to date. I update this every week.
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