Model's call to exit ALL positions and get into CASH more than a month ago continues to be a good call as its managed to sit out this entire correction and possibly more to come.
Model continues to sit on 100% cash.
Markets sometimes are very kind to you. Last week's letter was one of those, where everything that was said came true. Let's review them one by one.
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.
We got a very steep tactical bounce earlier in the week and then sell off toward the end. To rub salt into the wounds, Credit Suisse was up 25% for the week. RIP late FOMO shorts!
I continue to maintain that it's a hard period to trade on lower time frames. The best action IMO is to be on the sidelines and try not to be cute.
Model continues to be bearish S&P500 & Nasdaq100.
Crypto is still holding up better than Stocks but NOT strong enough to go Long.
Continue to maintain the below stance on Crypto which I have maintained for a while.
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
Speaking of long-term assets to accumulate, hope you guys read my investment thesis on Galaxy Digital published on Friday.
Coming to 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.
Last week I wrote about booking profits in Oil which turned out to be a good call. Model has turned from bearish to neutral. If there's follow-through and confirmation then it would be time to go long. Let's wait for confirmation though.
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.
We got the cool-down, is it time for the big move now?
Model continues to be Bullish on DXY (US Dollar), US10Y (Interest Rates), and VIX (Volatility Index). Which traditionally doesn't bode well for risk assets.
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.
One week has passed. Could we see the capitulation in the next 2 weeks or is it asking for too much?
Sitting on 100% Cash. Waiting for capitulation or breakout to Buy.
Below are the Models signals on BTC, ETH, and Solana from 2020 to date. I have been publishing this every week since I went live in May and will continue to do so.
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