The purpose of this article is to provide some insight into potential upcoming trades and portfolio management across several markets. This is a trimmed down version of the weekly we send out to Expert and Premium subscribers.
Tomorrow on our show, we are going to go over the current correction in Bitcoin and also what Cannabis stocks we like here in this market. You can tune in live at 4:00 PM EST time on WWPR 1490 Bradenton. You can listen to our previous shows on our podcast page, or on podomatic.
Cryptos continue to consolidate and are pointing to a likely swing lower after Bitcoin tested the 8120 level. How far lower can we go or are we looking at a higher low?
After a pretty lackluster NFP number of 75k the market took this as good and rallied Friday afternoon. Unemployment remained low, average hourly earnings increasing 3.1% YoY, and consumer confidence nudging up 2.8 pts to 100, provided more optimism that the economy was still strong.
All in all the economic data was good, and the market likes what it is seeing. I think the market is over pricing in two Fed rate decreases this year.
If there is a China trade deal in June or July, or at least some major progress, there will be no need for the Fed to lower rates twice this year, and this makes the bond market an interesting trade.
With the market pricing in a FED Cut or two, the Dollar is reversing course and setting up for a leg lower. However it is testing the broader trend. We may see a bounce or consolidation before moving lower and with this move we are looking to short the dollar.
Gold has made a solid move and we are expecting the move to continue over the midterm.
BTC Weekly: (Coinbase Chart)
Bitcoin took out the previous weeks low, and there is still some room to run lower, but we do not expect it to push into the low 6k’s. At this point there are a lot of participants that have missed the broader mover and our now nervous about missing the next.
The 6100-7100 area is a good area to start adding for the next leg up and we will attempt to do this by fading the market.
The fact it could not take out the minor resistance level at 8120 is telling that there may be some more selling pressure in the near term.
I am leaning more towards the 6750-7000 level now as an area for a reversal. Had Bitcoin rallied to 8500 then 7400 would be more weighted as an area to reverse. Though it still can form a double bottom here it is likely to push lower.
This weak attempt at a rally is telling order flow is still to the sell side here.
Taking out the two previous lows increases the probability of a broader swing lower for the Dollar Index (DXY). With a double top in place, the market looking for a FED rate cut or two, we are likely to see additional selling pressure.
This is not going to be a straight line down especially as we test the broader bullish trend line. We could see short sellers covering and a bounce to 97.25 before taking out the trend. With that said we are looking to short the Dollar.
The bullish swing is another vertical “V” shape correction, and to be clear this is not the norm. Though positive this was only off the initial support level and we are likely to see another leg lower in the mid term, before setting up for a leg up.
In my view this is just part of a broader multi year correction, and it is may not be over yet, but we are not going to swim against the current here.
We are looking for a pullback or consolidation to go long in the short term. Vertical swings like this are risky to jump into without some sort of a pullback and this is what we will wait for. The instrument we are looking to trade is the IWM.
We will go into this more in our show tomorrow.
Gold has made significant progress since the lows last year and this is the type of structure that is setting up for a broader move higher. We are looking for longs here, and as we mentioned last week, we need to be patient and look for a more favorable setup.
A pullback below 1330 would be enough for us to look for longs, but ideally the 1310-1320 area is the one we are looking at. We will see how the next day or two plays out, but this is one on our radar for a swing trade.
We emphasize patience with our trading strategies, and we often miss a lot of initial moves because we are patient. We also trade numerous markets because generally there is a setup somewhere and being flexible with trades is key to longer term success.
There is always a trade somewhere. Being flexible in trading various markets allow for better trade setups than forcing trades in just one market.
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