In the world of crypto, there's one overarching relative theme that governs the entire asset class.
That is, Bitcoin vs everything else.
Over the years, this simple trend has dominated the asset class for so long. Due to the sheer size of Bitcoin compared to the others, when it's in a leadership position, it scoops up so much capital that most of the other coins are forced to wait for their turn.
Could this change?
It would only make sense, especially as the market-caps of the other altcoins grow.
Key takeaway: Sentiment continues to argue a case for caution. Pessimism remains near historical lows. Nasdaq trading volume dwindles along with risk-seeking behavior. And with the economic surprise index slipping below zero, better than expected economic data no longer provides a tailwind. Yet, pockets of strength remain (including the earnings revision trend) and optimism has ticked higher across our sentiment indicators. Active investment managers have increased their exposure, throwing caution to the wind during a seasonally challenging period. All this does not lessen the real risks associated with the lopsided sentiment that tilts toward extended optimism.
In this week's Three Charts For The Week Ahead, we discussed the strength in Top 10 largecap stocks and a critical resistance level in the midcap index.
The latest Follow the Flow report is out, and as always there is a play therein that caught my attention.
It's a bullish idea, but I'm going to play this one in a unique way in order to hedge myself a bit in a tape that feels a little sluggish at the moment. I want to get paid to wait out the slow times we're likely to "enjoy" from now until Labor Day weekend, and possibly beyond. So this will involve a calendar spread, but with a twist...
Welcome to our latest RPP Report, where we publish return tables for a variety of different asset classes and categories along with commentary on each.
Looking at the past helps put the future into context. In this post, we review the absolute and relative trends at play and preview some of the things we’re watching to profit in the weeks and months ahead.
We consider this our weekly state of the union address as we break down and reiterate both our tactical and structural outlook on various asset classes and discuss the most important themes and developments currently playing out in markets all around the world.
As market participants, we have to keep an open mind and remain nimble as new data comes in.
There's nothing wrong with flipping our approach as the weight of the evidence shifts. In fact, we pride ourselves on never being dogmatic and always keeping an objective lens on the market.
And that's precisely where we stand with Bitcoin right now.
With prices pushing up against support from February and April, we're anticipating some form corrective action from this impressive rally at this pretty logical level of overhead supply.
How long will this former support act as resistance?
From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley
The US Dollar Index $DXY has been a good reminder that price doesn’t always move in a straight line.
Paul Tudor Jones has been quoted saying “markets only trend about 15% of the time.” The textbooks will tell you it’s somewhere between 20% and 30%. But it all comes down to how you’re measuring it.
We think it’s fair to say most markets trend about 25% of the time on a structural basis.
And the present year two market conditions have been a great illustration of what they look like the other 75% of the time… range-bound... sideways... a hot mess.
Speaking of which, last week, we pointed out that Dollar strength had stalled and that things were beginning to look messy on shorter time frames.
The overall weight of evidence continues to argue for caution and we have yet to see a decisive shift toward a risk-on environment. But we have made some changes to our dynamic portfolios to stay in harmony with the shifting trends within the equity market.
In the Cyclical portfolio we’ve thrown in the towel on our Energy sector exposure and are positioning to benefit from the resumption of the uptrend on bond yields. Financials and other cyclical value areas appear poised for another round of leadership.
In the Tactical Opportunity portfolio we are putting some of our cash to work (though continue to have a healthy amount on the sidelines - remember cash is an asset class). We are adding to strength within our domestic equity exposure and see an opportunity to add global exposure at a time when many foreign ETF have already been struggling with overhead supply.
Viewers are asked to count how many times basketball players wearing white shirts passed a ball while someone in a gorilla suit walks into the middle of the scene, thumps their chest, and walks off.
Despite looking straight at the gorilla, over half of the people who watch the video completely miss it.
It's a hilarious showcase of how we can often miss what's right in front of our very own eyes. Psychologists call it inattentional blindness, and it's a very real thing.
People are always trying to find a narrative about why the market's behaving as it is. This is arguably more prevalent in crypto, where people base their investment decisions on stories of a new "global currency", or god forbid the arguments of Bitcoin being a "better store of value."
But in occupying ourselves with all these stories, we can often miss what's right in front of us.
This is one of our favorite bottom-up scans: Follow The Flow. In this note, we simply create a universe of stocks that experienced the most unusual options activity — either bullish or bearish… but NOT both.
We utilize options experts, both internally and through our partnership with The TradeXchange. Then, we dig through the level 2 details and do all the work upfront for our clients. Our goal is to isolate only those options market splashes that represent levered and high-conviction, directional bets.
We also weed out hedging activity and ensure there are no offsetting trades that either neutralize or cap the risk on these unusual options trades. What remains is a list of stocks that large financial institutions are putting big money behind… and they’re doing so for one reason only: Because they think the stock is about to move in their direction and make them a pretty penny.
Key Takeaway: Bond yields ready to move higher. Trends are still rising and inflation is proving persistent rather than transitory. Financials have been resilient but look for Growth to struggle if bond yields rise.
