We do not expect SPY to break out above the upper trend line. Instead, price should break below resulting in the largest correction since the March COVID crash. We expect this major break to unfold shortly and will soon alert our Gold Members when trading the short side becomes prudent.
The S&P 500, the Dow, and the Nasdaq are all above their rising 50-day and 200-day moving averages. Small-caps led the way higher throughout the week with the Russell 2000 closing at its 50-day moving average for the first time since early July. The VIX experienced a volatile week due to the Fed’s highly-anticipated meeting and mixed COVID headlines, but finished the week at 16.5, a two-week low. The week’s key economic releases were bearish with the overall economic picture showing a slowdown in growth. The PMI, personal spending, the Richmond Manufacturing Index, the weekly jobless claims report, and the first revision of the second-quarter GDP print all missed.
September will start with a number of key economic releases: Pending home sales will highlight Monday’s session. The consumer confidence and Chicago PMI numbers will come out on Tuesday followed by the ISM manufacturing and ADP payrolls on Wednesday. Finally, the job cuts estimate will arrive Thursday followed by the government jobs report and ISM services PMI on Friday.
Over the past year, the public has never been more engaged in global markets than they are presently. People are turning away from banks and treasuries in the hopes of earning a satisfactory return on their money, rather than the minuscule amount of interest that these institutions pay. In addition to equities and commodities, capital has been moving into the newest area of finance, cryptocurrencies.
We believe that the everyday investor should position a portion of their portfolio in this sector. Cryptocurrencies have a multitude of innovative and impactful functionalities, and will likely become more and more integrated into the financial system. However, risk still remains high and the volatility in this sector is almost completely unrivaled. Throughout this market, participants have experienced 90% broad market corrections yet have also enjoyed 100x returns. Even though the rewards have the potential to be immense, another risk early adopters face is crypto’s uncertain regulatory environment. For example, Gary Gensler, the current chairman of the Securities and Exchange Commission, has stated on numerous occasions that he believes many tokens are in fact unregistered securities.
The same principles and philosophies which we use to analyze the stock market and commodities also function well in the crypto market. Presently, cryptocurrencies are experiencing a 4-5 year boom and bust cycle. Bitcoin will have a strong upward drift every 4-5 years and Ethereum will closely follow. Each rally will then be concluded with a major run in the altcoins. The altcoin rally typically marks the end of a 4 year cycle, but is where some of the largest gains can be made. Were you to have bought Bitcoin during the 2020 crash and sold at its peak, you would have made 1000% on your investment. However, if you had been invested in a token like Cardano, you would have made multiples more.
Crypto is expected to have a blow-off top into year end. We will continue to update our Gold Members with which coins we favor most to capitalize on the end of this phenomenal run.