Market High - Mine Digital
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Market High

August 24, 2020 • 
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It has been a quiet week in markets with the S&P500 making new highs. We take a look at that as well as Bitcoin, Gold and the US Dollar.

The Numbers

Although lumber is obviously a major anomale over the last week, there is very little movement across the range of assets.

This could be the quietest week in markets since before the coronavirus started.

The Events

With such an anomalous quiet week the last week, it is worth taking a look at the overall state of markets. The S&P500 has traded to new highs and many analysts are talking about the potential for a megaphone type setup.

So although it would not be crazy for the S&P500 to turn around here, more or less making a double-top in equities, the fed put and also the lack of alternative assets to invest in mean that it is not out of the question to continue.

One significant question for markets is whether they require a specific event – probably a financial event – to sell-off.

One potential event is fiscal stimulus on which American senators currently disagree on the appropriate size. The Republican side are touting $1 trillion and the Democrat side $3.4 trillion. It could be a matter of selling the fact.

The way we have preferred to look at the US Equity market is through pricing it in gold. The chart has recently jumped out of its trend to the upside, suggesting a much weaker equity market or much stronger gold. With the USD looking more like an asset forming a low it is hard to say where the path of least resistance is, but with risk being taken on in USD and risk taken off in gold, some imminent reckoning is expected between the set of assets.

We had discussed the possibility of a short squeeze into the contract end for gold, which would resolve the conflict between the different ways of looking at risk, but the key to doing this effectively would be buying in the Asian session which we haven’t seen.

One of the more interesting things over the week has been the number of developments in nations that are adjacent to major powers.

The middle-east has found a way for some arab countries to open diplomatic relations with Israel a short time after the enormous explosion in Lebanon. The most unstable place could be Saudi Arabia who will have to adjust to a new reality where perhaps they hold fewer cards in maintaining/controlling the region.

There was news that Kim Jong Un is in a coma and is not expected to survive, with his sister – who was essentially introduced as a key political figure after a rumour Kim had passed away only months ago. This would likely change things in China/NK and potentially with the US relationship, although it is difficult to make meaningful conclusions.

And Belarus has had significant protests against their leader Lukashenko who is talking about NATO being ‘at the gates’.

Bitcoin

Bitcoin is starting to look like an asset in no-mans land, taking its time to make a move. We can see where it stands on the long-term chart and shorter term it looks like it can’t decide if it wants to be a flag/trend channel or another rising wedge.

Bitcoin/USD Chart (Weekly)

Bitcoin/USD Chart (1 Hour)

Volume

Volatility

Sentiment

Sentiment in crypto is at extreme greed, lower on last week.

BTC Dominance

BTC dominance is trading almost exactly between the two long-term markers we placed as guidelines for historical trading.

Money

There could be a turn-around in money at the moment, where the US Dollar index may have formed a low, with some bullish bidding/covering in the red boxes. The market could be considered to have reversed when it trades above the red resistance line.

Gold has been undergoing a consolidation phase that it also needs to make a decision on this week.

Gold

DXY

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