Credit of any and all types has performed extremely well this week, outpacing equities by a wide margin.
That was positive and while NVDA sold-off after earnings, dragging broad markets down with them, that situation stabilized as well.
That brings into play the possibility of a nice holiday rally – one of the things we mentioned looked out for in last weekend’s T-Report – We Laughed, We Cried.
I was getting very comfortable moving from neutral to bullish, but this morning, cryptocurrencies are flailing again. There have been a couple steep declines this morning and I’m not sure what is happening. If it was responding to a “hawkish” Fed, that move could be explained (DXY, the dollar index is down for the past 2 weeks). So something is potentially up, and since I’m bearish crypto, I think this move could develop into something bigger.
Since, I think crypto is a leading indicator for risk assets due to Disruptive Portfolio Construction, I think risk assets could face pressure.
(The S&P 500 is up on the week by a solid margin, but the Nasdaq 100 is barely up and hit new lows closing lows, which the S&P didn’t).
[ZH: Bitcoin found support at $28,000 and bounced back notably and we remind readers the earlier puke in crypto comes shortly after JPMorgan signaled bullish upside]
We still see inflows into TQQQ and ARKK (my proxy for aggressive risk taking) and my stream is filled with bottom calling trade ideas.
I was there with them, until this latest crypto sell-off.
Maybe, stocks have decoupled from crypto, which would be great...
...but I’m at best neutral here and if anything would look to be adding hedges on the risk side of things (some short dated, deep out of the money, puts on equities would hit the spot, I think).