From Stocks to Crypto: A Macro Analysis of Where We Are Now

BY ON November 11,2020

In this analysis I will go through all major markets and end with crypto. Will go into everything I am looking at both in terms of FA & TA and how I think thing will play out from now on.

1. Stocks

When it comes to EU stocks, they clearly bottomed at key levels right when the lockdowns came. Another buy the lockdown event that was essentially the best play over the last 2 weeks. So far they look really strong and they could keep going higher now that all the major risks are out and a vaccine is in the horizon.

There seems to be a key rotation from growth into value. Nasdaq is suffering while the Chinese, Japanese and Russell broke their 2018 highs. I went through multiple US stocks, mainly the top performers and they all look weak… while the ones that were the worst performers are looking pretty damn good. Many tech names actually had some incredibly ugly candles and topping patterns, while everything else had some incredibly bullish ones.

To be honest I’ve been expecting a continuation of the stock rally, however in the wrong sectors. I still believe the NDX can move much much higher, but it might take some time to cool off before doing so. I’ve been expecting NDX to hit 10500 for quite some time and I still believe it will before moon. Maybe the Nasdaq 100 has topped and it could keep bleeding while everything goes up, but I don’t see that as very sustainable due to the size of big tech. Value is booming because of – Vaccine news, lockdowns move played out, Biden Victory means stimulus is coming and probably a lot which in turns means inflation expectations are on the rise. All this is going on while deflationary pressures are choking the global economy and the US still hasn’t given any money to people yet making liquidity in markets dry up a bit.

2. USD

The USD seems to be totally breaking down and just hanging on from a thread. Like I’ve said repeatedly in the past, I expected EM currencies to do pretty with some exceptions and they’ve done so. Their charts where much clearer than let’s say GBP or EUR. I am even surprised by how well the developed market currencies have done so far as my key target for EURUSD was 1.145-1.15. Not ruling it out as there is some hope for USD bulls, but it looks less likely. Personally I am not a USD permabull or permabear, and I am more in the camp that the USD looks weak short/medium term, but that it will also have a major move up before it goes down the tube and gets replaced by something else.

3. Metals & Oil

Gold and Silver took a massive hit when the vaccine news came out and treasuries yields went up hard (same factor as to why value has done so well). If yields keep going up (bonds down), then I expect Gold Silver to keep going down. 1750 & 1810 are great places to buy if the price gets there. Copper is still in a nice uptrend and oil seems to have joined the party. I expected oil to take a bigger hit as Covid started becoming more of an issue again, but it hasn’t happened. 26-29 still in the cards, but definitely not looking for negative prices again.

4. Crypto

Bitcoin has had a massive rally since early October where it went up by 50% in exactly 30 days. A few weeks ago most metrics looked incredibly bullish and i still see nothing incredibly bearish … yet it does look like the rally got overextended. Yes Druckenmiller saying he owns Bitcoin is great, but this doesn’t mean he bought it quite some time ago or that any of the big guys won’t try to mess with the price. We finally saw funding go around 0.05-0.1% right after the explosive move from 14k to 16k. So some consolidation here before going higher seems quite reasonable to me. No idea how long it takes, and I definitely can’t see the price go below 12k… but this doesn’t mean that Bitcoin will go on a frenzy right now. The price action and the data at least don’t show something like it. Personally I am not selling because I still think it will go to 20k by EOY and there is more upside coming after that.

Now selling BTC for USD at these levels doesn’t make sense, but selling BTC for alts does. In my chats once BTC had a massive rally and alts finally stopped bleeding in USD terms I started realizing something was changing. When BTC pushed from 15500 to 16000 and they didn’t make a new low in BTC terms I realized something had changed. Then I realized most alts had corrected so much and had retraced massive moves. Many down 70-90% vs BTC since Aug-Sep… while the whole altcoin market cap was quite low compared to BTC . Newer coins getting decimated, while older ones getting near their ATLs and some of the top coins in terms of quality where retesting key breakout zones from months ago. ETHBTC hit its 300 DMA and missed the key support zone by just a bit, then closed above the 200 DMA and now about to break the bearish diagonal and monthly P… with ETH 2.0 just a month away. The bull market percentage metric hit 1%, which was extremely low and that was 2+ months after most coins had topped which made several coins take a breath.

Does this mean the bottom is in? It is quite possible given where that bottom came at and how it occurred, even though I expect another dip in ALTBTC pairs mainly to take out the low and then move higher. Expecting a mega trend right after the bottom with BTC not even above 20k, immediately after the bleeding in USD or BTC stopped seems a bit far fetched. Normally I’d have expected BTC to break ATHs before getting bullish on alts, but since the 6th I said ‘stop shorting alts and this is a good period to begin accumulating’. Alts fell a lot more and a lot faster than I had envisioned and BTC also rose faster too, and we have to remember that not all alts are the same. The market is way more mature and full of opportunities than it was a few years ago. When the bearish momentum in alts slows down there can be lots of opportunities even if the market then continues down a few days or weeks later. Most alt seasons have come after a big drop in alts, which was followed by a strong rally that was then followed by a slow bleed as BTC went up and ended with a double bottom or a wick… and then moon.

Overall this crypto cycle looks really strong and for now I don’t really see anything that bearish in the macro landscape. Again in the short term I am bullish on alts until I see BTC getting ready for its next move. Alts going up is definitely medium/long term bullish for BTC even though when they get hot everything could go down short term. I won’t call this an alt season until I see my index close above 31.5, but I am ready to do so if the market tells me alt season is back. Based on my time analysis a bottom around the 8th of December is more likely and the way I read the BM% agrees with me as after getting to 1% there is usually a bounce for 1-2 weeks, then a lower low in prices but a higher low in BM% which indicates that alt season is fully in play. Currently the altcoin market cap as a whole vs BTC is just up ~40% since their bottom in Sep 2019, up ~200% since Nov 11th 2016 and my DeFi heavy index is up 19% after being down 55%… so everything is still very early and the returns this time around will be even larger than the Sep 2019 – Sep 2020 period. I have no doubt in my mind we will see 2 more massive alt seasons in the next 2 years and that BTC will hit 100-150k. So relax, hold plenty of BTC (& ETH) and focus only on alts not USD.

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