The S&P500 in USD terms made a new swing-high overnight.
Some people may be struggling with this given the economic realities, and they should be – the reality is that equities are selling-off.
Given the commitment to monetary expansion of all kinds, regardless of the names given to it, the correct way to now price assets is using a stable store of value – gold.
Gold is the only way to create a rational portfolio that reacts to real events in the real world.
In the gold denominated chart we can see the S&P500 sold overnight. With risk being removed from the S&P500/USD market with monetary expansion, the blow-off valve that matches the economic and rational reality is in gold strength.
Below we can see the index touching the bottom of a channel that it looks likely to break. Selling may occur in equities to some degree, but as stated is more likely to show up in gold strength. To complete a second leg of the move in the chart below puts gold on a significant run to 2100-2200.
It is also one of the weaker parts of the mechanism with a short-squeeze probable all the way into the August 27th Comex futures expiry.
Traders will recognise that the markets dead cat bounce after the Coronavirus risk-off event turned around at a key technical level. Now the market continues to selloff – as it should. Without a major policy change that is probably now impossible to implement, the U.S. dollar denominated index never sells off.
So you can keep buying gold assets until the entire market realises that U.S. dollar is no longer money, and is currency, as it is no longer a store of value.
The major milestone of this flow is when U.S. dollar fixed interest products and future cashflow is hedged in gold.
Elswhere, digital assets have had a bounce in some key projects overnight which has been promising and we are not waiting on Bitcoin to start the show once again.
With David Portnoy mentioning Bitcoin and of getting the Winklevoss twins onto his show, the greatest momentum asset we have ever seen – Bitcoin – may be on a collision course with the greatest momentum phenomenon we have ever seen, the retail/Portnoy/Robinhood/Citadel phenomenon.
The asset has been tricky lately so we will see how it ends if we do see it.
With this weird price behavior – potentially a relic of the sub $10k type of price action – we might be in for a surprise move with the asset in the next 24-48 hours as the market sheds its old rhythm.
Bitcoin last traded at $11,211
24 hr high: $ 11,420
24 hr low: $ 11,000
Bitcoin USD Chart
The Ethereum price action is a little more bearish than what is happening in Bitcoin in some ways. It looks like volatility is being compressed near the high, between 380 and 400, and we can easily imagine a move back to 320-330 after having an incredible (and obvious) run.
24 hr high: $ 404
24 hr low: $ 380
Ethereum USD Chart
There has been strong performance from the DeFi projects. Aave, Synthetix, Tezos, Cardano and Stellar were strong and Chainlink has been on a solid tear.
Technically and without respect for what Chainlink has been doing (which has been great), the asset looks vulnerable to a squeeze back to $6.
- Aave: $ 0.323
- Algorand: $ 0.326
- Cardano: $ 0.144
- Chainlink: $ 9.80
- Compound: $ 131.83
- Maker: $ 584.93
- Ren: $ 0.2062
- Reserve Rights: $ 0.118
- Stellar: $ 0.11
- Synthetix: $ 4.52
- Tezos: $ 3.24