Gold & the USDX: Correlations

Grayscale Dives Deeper Into DeFi with Yearn, SushiSwap Trust Filings

BeInCrypto (BeIn News Academy Ltd), we're writing about crypto. BeInCrypto (BeIn News Academy Ltd), we're writing about crypto. 12.02.2021 06:18
Less than a month after institutional crypto fund giant Grayscale first pivoted to decentralized finance (DeFi), it has filed a number of new trust filings, including Yearn Finance and SushiSwap. The world’s largest crypto asset trust for institutional investors, Grayscale, is diving deeper into the DeFi sector, with more trust flings in addition to Aave and Polkadot which it filed last month. The Delaware corporate registry, Grayscale’s statutory trustee for the state, received the filings on Feb. 10, following six filings on Jan. 27. In addition to the two above, uniswap (UNI), cosmos (ATOM), monero (XMR), and cardano (ADA) trust filings were added and on Feb. 1 it registered a theta (THETA) trust. The new filings include DeFi aggregator Yearn Finance, Uniswap clone SushiSwap, Compound Finance, crypto lending stalwart MakerDAO, synthetic asset platform Synthetix, and decentralized storage platform Blockstack. In late 2020, Grayscale also registered trusts for chainlink (LINK), basic attention token (BAT), decentraland (MANA), tezos (XTZ), filecoin (FIL), and livepeer (LPT). Grayscale now has 33 registered trusts in the state, however just nine are currently active. In mid-January 2021, the firm dissolved its XRP trust following Ripple’s ongoing legal battle with the Securities and Exchange Commission. The filings do not mean that these trusts will definitely be launched, they have just been registered as limited liability companies in preparation. AUM Hits $36.8 Billion The firm’s latest assets under management figure is a whopping $36.8 billion, an increase of 47%, since BeInCrypto reported Grayscale’s first DeFi trust filings on Jan. 29. 02/11/21 UPDATE: Net Assets Under Management, Holdings per Share, and Market Price per Share for our Investment Products.Total AUM: $36.8 billion$BTC $BCH $ETH $ETC $ZEN $LTC $XLM $ZEC— Grayscale (@Grayscale) February 11, 2021Grayscale’s current trusts are dominated by bitcoin (BTC), which represents about 82% of the total with $30.2 billion. The ethereum (ETH) trust has around 15%, with $5.5 billion, and the rest is distributed between a number of smaller crypto trusts including litecoin (LTC), bitcoin cash (BCH), stellar lumens (XLM), ethereum classic (ETC), and zcash (ZEC). DeFi Tokens Hit ATHs The news appears to have given a boost to these DeFi-related tokens, as YFI has skyrocketed 26% to reach a new all-time high of $47,400, according to CoinGecko. Following somewhat lackluster price action, YFI has finally awoken and is moving upwards again. SUSHI also hit an ATH a couple of hours ago of $17.30, while COMP is close to its own trading just below $500, at the time of writing. MKR is trading flat on the day just over $2,500, while SNX has also made an all-time high of $27. DeFiPulse is reporting the total TVL across the DeFi sector at a record $40 billion, but it is likely to be higher since some listings are omitted. The post Grayscale Dives Deeper Into DeFi with Yearn, SushiSwap Trust Filings appeared first on BeInCrypto.
Gold & the USDX: Correlations

1inch Exchange and DeFi Pulse Listing Dispute Divides Community

BeInCrypto (BeIn News Academy Ltd), we're writing about crypto. BeInCrypto (BeIn News Academy Ltd), we're writing about crypto. 12.02.2021 03:50
DeFi Pulse has become the go-to stats provider for the industry, so being left off the list could be detrimental for a project. The 1inch exchange is finding this out the hard way. Just like CoinMarketCap (CMC) in 2017/18, DeFi Pulse has become the standard for metrics and protocol performance for the fledgling financial sector. CMC was bought out by Binance and its integrity became questionable, often being accused of inflating exchange volumes. Now, DeFi Pulse is refusing to list 1inch exchange — but there is more to it than meets the eye. 1inch, which launched an airdrop in December 2020, has requested a listing on DeFiPulse several times. Its latest request on Feb. 9 has also been denied. Hey @defipulse! This is our official second request to list 1inch liquidity protocol on your service! #DeFi is about freedom and you shouldn’t ignore our project with more than $2B TVL just because your founder (Scott) is building a competitor project to our aggregator.— (@1inchExchange) February 9, 2021Feuding DeFi Founders The spat goes back to 2019 when 1inch founder, Sergei Kunz, alleged that DeFi Pulse stole its code to build a competing project. DeFi Pulse founder Scott Lewis denied the allegations but the feud escalated epitomizing the state of crypto tribalism that detracts from what the industry is really trying to achieve. There were denial-of-service attacks and even threats of violence between the two founders. Currently, DeFi Pulse refuses to deal with Kunz but said it would cooperate with the 1inch community. It seems that DeFi Prime has also joined forces with Lewis in refusing to list 1inch; Hey @defiprime! Maybe it was not a good idea to remove us from your service? And yes our referrer program works very well: right!? Everyone who promote 1inch, earn rewards in 1INCH tokens: reward balance is $114k!— (@1inchExchange) February 11, 2021DeFiPrime responded; “Everyone already knows about 1inch, and all trading volume in the world lives on 1inch’s 300 servers. There is no point to promote market leaders.” Industry analyst Chris Blec stated that the industry “needs to rid itself of toxic cancel-culture bulls**t.” There is a bizarre editorial campaign underway to try to cancel @1inchExchange & some others from DeFi.The people who control sites like @defipulse and @defiprime are not listing 1inch & other projects they dislike.DeFi needs to rid itself of toxic cancel-culture bullshit.— Chris Blec (@ChrisBlec) February 9, 2021In light of the development a number of leading crypto publications have boycotted DeFi Pulse in favor of competing providers such as DeFi Llama and DappRadar which has also pledged its support for 1inch and DeFi transparency; .@1inchExchange is now listed on our #DeFi rankings page, coming in at #9 with $2.13B total value locked (#TVL) and $1.06B adjusted total value locked (#aTVL).Visit @DappRadar for more information:— DappRadar (@DappRadar) February 10, 2021If DeFi Pulse is selective over its listings, then the TVL figure it reports ($40 billion at the time of press) for the entire industry can also be construed as misleading. Also missing from its DeFi listings is the Binance Smart Chain DEX PancakeSwap and NEO’s DeFi platform Flamingo Finance. 1inch TVL Update Naturally, TVL reported across platforms will differ depending on their listings. DeFi Llama reports a total of $57 billion for the industry with 85 protocols listed (compared to DeFi Pulse’s 67). DappRadar meanwhile reports an industry TVL of $39 billion with just 22 listings. Both of these platforms, however, are reporting similar 1inch TVL figures at $2.2 billion. Its native 1INCH token is also doing pretty well, up 8% since the weekly open, trading at $5.32 at the time of press. This is just slightly off its Feb. 6 ATH of $5.83 according to CoinGecko. The post 1inch Exchange and DeFi Pulse Listing Dispute Divides Community appeared first on BeInCrypto.
Will Tesla Charge Gold With Energy?

Will Tesla Charge Gold With Energy?

Finance Press Release Finance Press Release 11.02.2021 17:08
Tesla has supported the price of Bitcoin, but it can affect gold as well.The bull market in cryptocurrencies continues. As you can see in the chart below, the price of Bitcoin has recently increased to almost $47,000 (as of February 10). The parabolic rise seems to be disturbing, as such quick rallies often end abruptly.However, it’s worth noting that the price of Bitcoin has partially jumped because of the increased acceptance of cryptocurrencies as a legitimate form of currency by the established big companies. In particular, Elon Musk, the CEO of Tesla, has recently published a series of tweets that significantly affected the price of Bitcoin, Dogecoin, and other cryptocurrencies.Furthermore, Tesla updated its investment policy to include alternative assets as possible investments. In the last 10-k filing to the Securities and Exchange Commission in January 2021, Tesla stated:In January 2021, we updated our investment policy to provide us with more flexibility to further diversify and maximize returns on our cash that is not required to maintain adequate operating liquidity.Importantly, these assets also include gold :As part of the policy, which was duly approved by the Audit Committee of our Board of Directors, we may invest a portion of such cash in certain alternative reserve assets including digital assets, gold bullion, gold exchange-traded funds, and other assets as specified in the future.This means that Tesla wants to diminish its position in the U.S. dollar and to diversify its cash holdings. In other words, the company lost some of its confidence in the greenback and started to look for alternatives. So, it seems that Musk and other investors are afraid of expansion in public debt , higher inflation , and the dollar’s debasement .And rightly so! The continued fiscal stimulus will expand the fiscal deficit even further, ballooning the federal debt. With the budget resolution passed last week, only a simple majority will be needed in the Senate to get Biden’s $1.9 trillion package approved, a majority that Democrats have.Remember also that the U.S. economy added only 49,000 jobs in January , while 227,000 jobs were lost in December (revised down by 87,000!). The poor non-farm payrolls will strengthen the odds of a larger fiscal stimulus and easier fiscal and monetary policies.Hence, combined with the ultra-dovish monetary policy and a Fed more tolerant to inflation, the upcoming fiscal support could ultimately be a headwind for the dollar. Initially, the prospect of fiscal support caused positive reactions on the financial markets, but as the euphoria passes, investors start to examine the long-term consequences of easy money and the large expansion of government spending. Importantly, the larger the debt, the deeper the debt trap , and the longer the zero interest rates policy will stay with us, as the Fed won’t try to upset the Treasury.Implications for GoldWhat does Tesla’s move imply for the precious metals market? Well, we are not observing the kind of rally in gold that we are currently witnessing in the cryptocurrencies sphere (see the chart below). And – given the size of the gold market – it’s unlikely that Musk & Co. could ignite a mania similar to the one seen in Dogecoin. The gold market is simply too big. Even the silver market could be too large for similar speculative plays – as the failure of the recent attempt of a short squeeze has shown.However, the update of Tesla’s investment policy is a confirmation of gold as a safe-haven asset and portfolio diversifier . If other big companies follow suit, and we see an actual reallocation of funds from the U.S. dollar towards gold, the price of the yellow metal will get an invigorating electric impulse .If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
Gold & the USDX: Correlations

Feeling the Growing Heat and Tensions in Stocks?

Monica Kingsley Monica Kingsley 11.02.2021 16:03
Yesterday was a prelude, a little preview of things to come. We better get used to brief and shallow corrections again, after being lulled by the many preceding sessions. It appears that we‘re now going to get the consolidation period even as the overall S&P 500 metrics remain in a healthy territory. This is the (print-and-spend-happy) world we live in, and we better not fixate on the premature bubble pop talk too closely. I have been stating repeatedly that things have to get really ridiculous first, and this doesn‘t qualify yet in my view. So, for all the tech bashers, we‘re going higher – like it or not. Let‘s get right into the charts (all courtesy of S&P 500 and Its Internals A second day of hesitation, this time with a thrust to the downside. Comfortably repelled, but still. Is it just one of a kind, or more would follow over the coming sessions? I think this corrective span has a bit further to run in time really. Remember my yesterday‘s words though – the bears are just rocking the boat, that‘s all. The caption describes nicely the mixed momentary situation in market breadth. I am looking especially at new highs new lows right now for whether they would be able to keep the relative high ground, or not, and what would accompany that. Now, it‘s amber light. A supportive warning sign comes from the put/call ratio – we‘re getting a bit too complacent here again. Well worth watching. Credit Markets High yield corporate bonds (HYG ETF) wavered yesterday as well, yet bottom fishers appeared, pushing up the volume. The bond markets are clearly buying the dip here. High yield corporate bonds to short-term Treasuries (HYG:SHY) ratio is still lining up closely with the S&P 500 index. Pulling in tandem, these aren‘t showing any momentary divergence. When it comes to the high yield corporate bonds to all corporate bonds (PHB:$DJCB) ratio, the picture gets different, as the riskier end of the corporate bond spectrum isn‘t firing on all cylinders. That‘s part of the watchout story justification. Technology, Value and Growth Technology (XLK ETF) hadn‘t suffered a profound setback really yesterday. The volume wasn‘t there, and half of the intraday losses were recouped – the bears weren‘t serious, and as the caption says, be wary of tech bubble callers constantly warning about significant corrections with unclear timings. Both tech and S&P 500 are primed to go to much higher levels before things get really ridiculous. Also, remember that since September, the sector has been not at its strongest really. Here comes the rotation between value and growth – given the current status, tech has been underperforming. It‘s the other sectors that are now catching up since the start of Feb. All in all, the chart doesn‘t scream imbalance – the accompanying S&P 500 advance has been relatively orderly. Gold & Silver Today‘s precious metals section will be shorter than usually, because the many bullish factors discussed throughout the week, remain in place. Just check out the metals & miners ratios, or yet another timely call of the dollar top. Let‘s dive into the gold and silver price action that I tweeted about earlier today. My open long position remains profitable, and the very short-term question remains what‘s next. Regardless of the upper knots, I don‘t see the short-term uptrend as exhausted, and you all know pretty well my medium- and long-term bullish case (stronger for silver than for gold in 2021 really). Despite being quite hot in the short run, silver isn‘t willing to correct to any kind of reasonable target. I view the current indecision as part of an ongoing consolidation, and don‘t discount the bullish implications. The key takeaway however is, how much would have to happen to flip this (and gold‘s) chart bearish. I remain cautiously optimistic in the short run, and very optimistic as regards the medium- and long-term. Summary The stock market keeps holding gained ground, having defended yesterday‘s values largely. Given the signs of creeping deterioration, which is however not strong enough to break the bull‘s back, let alone jeopardize it, the short-term caution in the 3,900 vicinity is still warranted. The gold and silver bulls are consolidating gains, and the bullish case for precious metals remains strong. Crucially, it‘s not about the dollar here, but about the sectoral internals, decoupling from rising Treasury yields, and holding firm against corporate ones. The new upleg is knocking on the door, and patience will be richly rewarded. Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for both Stock Trading Signals and Gold Trading Signals.
Soft inflation data keeps USD pressured

Soft inflation data keeps USD pressured

John Benjamin John Benjamin 11.02.2021 08:41
EURUSD Rises To A Two-Week High The euro currency continues to push higher, rising for the third consecutive day, to a two-week high.The gains, however, are slowing as price moves closer to the 1.2144 – 1.2177 level of resistance. We also continue to see the hidden bearish divergence on the chart, which could suggest a pullback.To the downside, price is likely to stall near the 1.2050 level of support for the moment. However, a close below this level could see the Feb 5 lows of 1.1952 come into the picture.If the current bullish moment continues, then the euro currency will need to break out above 1.2177 to confirm further upside.GBPUSD Pushes Higher But Gives Back Gains The British pound sterling continues to rise higher, marking a new high of 1.3866 intraday. But price action is pulling back after testing this level.The Stochastics oscillator is firmly in the overbought levels supporting the upside bias. For the moment, the downside remains limited until we see a lower high forming.Given the current pace of gains, the GBPUSD is seen testing the support area of 1.3790.A strong close on a weekly basis above this level is needed to confirm further upside.For the moment, the untested support level near 1.3759 will be the likely downside target in case of a correction.Oil Price Grinds Higher To A New 13-Month High WTI crude oil prices continue to maintain a strong bullish moment.Price action rose to fresh highs of 58.73. This makes price action likely to test the unfilled gap from January 20 last year at 59.47However, with price now trading below the trend line, this could act as a potential resistance for price action.To the downside, the support level at 57.35 is already tested albeit only slightly.Therefore, any declines could see this level coming under a firm re-test. Only a strong close below 57.35 will confirm a move down to the 53.77 level of support.Gold Prices Rejected Near 1850 The precious metal is struggling to breakout above 1850 as price action was firmly rejected near this level intraday.Overall, gold prices remain trading subdued compared to the gains made in the previous sessions.We expect the precious metal to maintain a sideways range between the 1850 resistance and 1817.80 level of support in the near term.The Stochastics oscillator is also starting to move a bit down from the overbought levels currently. This will likely mark an end to a three-day winning streak in gold.
Platinum Begins Big Breakout Rally

Platinum Begins Big Breakout Rally

Chris Vermeulen Chris Vermeulen 10.02.2021 21:58
If you were not paying attention, Platinum began to rally much higher over the past 3+ days – initiating a new breakout rally and pushing well above the $1250 level.  What you may not have noticed with this breakout move is that commodities are hot – and inflation is starting to heat up.  What does that mean for investors/traders?DAILY PLATINUM CHART SHOWS CLEAR BREAKOUT TRENDFirst, Platinum is used in various forms for industrial and manufacturing, as well as jewelry and numismatic functions (minting/collecting).  This move in Platinum is more likely related to the increasing inflationary pressures we've seen in the Commodity sector coupled with the increasing demand from the surging global economy (nearing a post-COVID-19 recovery).  The most important aspect of this move is the upward pricing pressure that will translate into Gold, Silver, and Palladium.We've long suggested that Platinum would likely lead a rally in precious metals and that a breakout move in platinum could prompt a broader uptrend in other precious metals.  Now, the combination of this type of rally in Platinum combined with the Commodity rally and the inflationary pressures suggests the global markets could be in for a wild ride over the next 12 to 24+ months.This Daily Platinum chart highlights the recent upside breakout rally that has prompted a rally from $1050 to $1250+.  If this rally continues to target the 100% Fibonacci price extension, near $1300, then it will become very clear that Platinum is rallying away from other precious metals.  If this coincides with a continued general Commodity price rally, then we may start to see an inflationary cycle setting up that really change things – very quickly.This type of “triple-whammy” is very similar to the commodity/inflationary price rally that took place in the late 1970s and early 1980s.  For those of you that don't remember this trend, commodities started to rally in the early/min-1970s, prompting Gold to rally a low price near $100 (in 1976) to a higher level near $195 (in 1978) – but that was just the beginning.  After that rally stalled a bit, a bigger commodity price rally took place in 1979 that prompted a much bigger Gold price rally and started an inflationary price cycle that prompted the US Fed to take aggressive action in curtailing inflation.  Gold rallied from $169 in late 1978 to over $870 in early 1980 – a 420% increase.PLATINUM MAY LEAD A COMMODITY PRICE RALLYWe believe the rally in Platinum is a strong signal that a Commodity price rally is initiating and that an inflationary price cycle may be starting.  If our research is correct, evidence of this cycle phase will continue over the next 6+ months where commodities will continue to rally overall and where market inflation will become very tangible in the US and across the globe.  This will prompt the US Fed, and global central banks, to begin to take immediate action to contain any potential run-away inflation concerns – obviously tightening monetary policy and raising interest rates.Be sure to sign up for our free market trend analysis and signals now so you don’t miss our next special report!Platinum may rally above $1500 if this rally extends to the 200% Fibonacci price extension level – and that move may come very quickly.  This weekly Platinum chart, below, shows a green arrow that points to the 200% Fibonacci price extension level (near $1500). Remember, the commodity price rally in 1979/1980 lasted more than 24 months and prompted a big 400%+ rally in Gold.  If that type of rally were to happen today, Gold would rally to levels near $7500 (or higher).Pay attention to what is happening with Platinum and you'll start to understand the inflationary/institutional demand for this unique metal.  If our research is correct, we may see a new rally in Gold and Silver fairly quickly as Platinum acts as a catalyst for an inflationary cycle paired with a Commodity rally (very similar to the 1979 to 1980 rally). It is a great time to be an active trader in these markets.  One of our recent BAN trades just closed out for a 47% gain.  These big trends may be here for the next 24+ months and 2021 is going to be full of these types of trends and setups.  Quite literally, hundreds of these setups and trades will be generated over the next 3 to 6 months using the BAN Trader Pro technology.  The BAN Trader Pro technology does all the work for us.Don’t miss the opportunities in the broad market sectors over the next 6+ months, which will be an incredible year for traders of the BAN strategy.  You can sign up now for my FREE webinar that teaches you how to find, enter, and profit from only those sectors that have the most strength and momentum. Learn how the BAN strategy can help you spot the best trade setups because staying ahead of sector trends is going to be key to success in volatile markets. For those who believe in the power of trading on relative strength, market cycles, and momentum but don’t have the time to do the research every day then my BAN Trader Pro newsletter service does all the work for you with daily market reports, research, and trade alerts. More frequent or experienced traders have been killing it trading options, ETFs, and stocks using my BAN Hotlist ranking the hottest ETFs, which is updated daily for my premium subscribers.Have a great day!
Gold and Silver: Is Recent Rally Cause for Concern?

Gold and Silver: Is Recent Rally Cause for Concern?

Finance Press Release Finance Press Release 10.02.2021 16:54
Does gold’s most recent rally and the inflow of capital into silver change the fundamental outlook of the PMs? If so, what about equities?In short, yes, the U.S. dollar is down, thereby boosting gold. Yes, the recent massive interest in silver has everyone talking about getting in on the action. However, one must remember that markets don’t move in a straight line and countertrend rallies are expected along the way. Keep your eye on the ball. Now, let’s examine what exactly is happening.Gold moved higher once again yesterday (Feb. 9), but it reversed and declined before the closing bell. Miners declined as well. Does it mean that the next top is in or about to be in? That’s exactly what it means. Especially considering that gold’s reversal took place almost right at the triangle-vertex-based reversal and during USD’s breakout’s verification.Figure 1 - USD IndexI previously wrote that because assets don’t move in a straight line, it’s plausible that the USD Index retests its declining resistance line, while gold retests its rising support line. If this occurs, the USDX is likely to decline to the 90.6 range, while gold will receive a short-term boost . I emphasized that the outcome does not change their medium-term trends and the above confirmations signal that the USDX is heading north and gold is heading south.The part that I put in bold is exactly what is being realized right now. The USDX is correcting after the breakout, likely verifying the previous resistance as support.Unless the USDX breaks back below the declining medium-term support line in a meaningful way, the bullish implications for the following weeks will remain intact. At the moment of writing these words, the USD Index is practically right at the support line, which means that it’s quite likely to reverse shortly.Figure 2 - COMEX Gold FuturesGold formed a reversal yesterday, but it ended the session slightly higher. The latter might seem bullish, until one compares that to the size of the daily decline in the USD Index. The move lower in the latter was quite visible, so what we saw in gold should be viewed as USDX’s underperformance and thus a bearish sign.Let’s keep in mind that gold was just at its triangle-vertex-based reversal (based on the declining black resistance line and the rising red support line), which perfectly fits the shape of yesterday’s session – the shooting star reversal candlestick. The implications are bearish.Today, gold moved slightly higher, but the move was too small to change anything. Gold didn’t move above yesterday’s intraday high, which means that the short-term top might already be in.What about silver, did the white metal change anything?Figure 3 - COMEX Silver FuturesNot really. Just like gold, silver is taking a breather after the increased volatility. This is normal.Speaking of silver, please note how big the silver inflows were last week.Figure 4This might seem bullish at first sight – a lot of capital entering the silver market is bound to push the silver price higher, right?Wrong. This could simply be an indication of a temporary (yet massive) increase in the white metal’s potential (which no doubt will be realized, but not necessarily yet), which is something that we tend to see at market tops along with increased interest in terms like “ silver squeeze ” or “ silver manipulation ”.Please compare the first spike that you can see on the above chart with what silver did next (on the following chart).Figure 5Silver declined severely in the first half of 2013. Also please note that at that time, the silver market was already well after the massive monthly volume spike. We saw the same thing in mid-2020.The outlook for silver is very bullish for the next years, but the implications of the above factors are very bearish for the medium term.This is especially the case, since silver and mining stocks tend to decline particularly strongly if the stock market is declining as well. And while the exact timing of the market’s slide is not 100% clear, stocks’ day of reckoning is coming . And it might be very, very close.Eyes Wide ShutAs the NASDAQ Composite records yet another all-time high, investors are sleepwalking through one of the most dangerous equity markets ever.On Feb. 4, I warned that fund managers’ cash positions were frighteningly low.I wrote:Mutual fund managers are now holding less than 2% of their portfolios in cash – an all-time low.Figure 6 - Source: SentimenTraderMoreover, with fear of missing out (FOMO) taking a sledgehammer to valuation, pension funds are also following the bad behavior. If you analyze the chart below, you can see that pension fund cash positions have fallen to 2.6% – also an all-time low.Figure 7 - Source: SentimenTraderAnd with daydreams of riches continuing to transfix rationality, the upward inertia has left equity bears nearly extinct. As of Jan. 15 (the latest data available), S&P 500 short interest has hit its lowest level since the peak of the dot-com bubble.Please see below:Figure 8To explain the importance, fund managers’ cash positions and short sellers are akin to airbags in your car. In the event of a crash, airbags serve their purpose by cushioning the blow. Similarly, when the market crashes, short-sellers cover their positions (by purchasing the underlying asset), helping to alleviate the downward impact. Similarly, when fund managers’ cash positions are high, they have more ‘dry powder’ at their disposal to hit the bid and support prices. As a result, with both variables being excommunicated, nearly every investor is now driving with their pedal to the metal.Also encapsulating the speculative euphoria, last week, technology companies recorded their highest-ever weekly inflow.Please see below:Figure 9And not to be outdone, the Russell 2000 (a proxy for U.S. small caps) is also earning its fair share of speculative gold medals. On Feb. 4, I warned that money was pouring into companies that are on the brink of financial distress.I wrote:Figure 10The red line above represents companies with ‘weak balance sheets.’ Essentially, these are companies with high leverage ratios that rely on a strong economic backdrop to service their debt. At the end of 2019, these companies made up roughly 6% of the Russell 2000 index. Today, that figure has nearly doubled to an all-time high of more than 11%.Moreover, amid investors’ foray into the riskiest corners of the U.S. equity market, they’ve also bid the Russell 2000 (as of Feb. 8) to more than 39% above its 200-day moving average (also an all-time high).Please see below:Figure 11 - Source: thedailyshot.comIgnoring a sound diet, bond investors also continue to feast on junk food. On Feb. 8, the average yield on junk bonds (represented by Barclays U.S. Corporate High-Yield index) fell below 4% for the first-time ever.Please see below:Figure 12In addition, issuances of CCC-rated debt – the riskiest tier of junk – have been massively oversubscribed , as yield-hungry investors throw caution to the wind. More importantly though, the frenzy has lured even riskier companies to the market, with the group raising a record $52 billion in January alone.Even more indicative of the reckless behavior, the riskiest companies are also negotiating the riskiest loan terms. Peddling payment-in-kind (PIK) interest, junk bond issuers are now paying investors with IOUs. Unlike traditional bonds, where fixed cash flows are paid at pre-defined dates, PIK bonds are essentially loans on top of loans. Here, investors forego cash payments and add hypothetical interest payments to their bond’s principal balance. Then, at maturity, investors receive the entire proceeds.And what’s the problem?Well, as I’m sure you can tell, the IOUs are worthless if insolvency strikes first.Moving up the speculative ladder, in January, small traders bought call options at nearly 9x their 2019 pace. For context, ‘ s mall traders’ purchase 10 or less call option contracts and have exposure to 1,000 shares or less. As such, they’re usually the least sophisticated market participants.But because their Delta/Gamma splurge continues to impact dealers’ hedging activity, U.S. equity volume has gone completely parabolic. On Feb. 8, U.S. equities (trading at record prices) exchanged hands at nearly 4x their historical average.Please see below:Figure 13In addition, as more and more first-time buyers dip their toes into the equity pool, the ripple can be felt across Google Search trends. As of Feb. 8, online searches for “penny stocks” have exploded.Figure 14 - Source: thedailyshot.comEven more telling, retail interest in the stock market usually peaks during bouts of volatility. In a nutshell: when the stock market crashes and news outlets cover the story (that otherwise wouldn’t during normal times), it piques the interest of the general public. As a result, crashes tend to bring about investing tourists.Please see below:Figure 15 - Source: SentimenTraderTo explain the chart above, the blue line depicts the trend in “buy stocks” in Google searches over the last ~17 years. If you analyze the first two spikes in October 2008 and March 2020, they occurred alongside extreme market stress. However, if you look at the third spike on the right side of the chart (almost as high as March 2020), it’s occurred alongside U.S. equities current melt-up.The key takeaway?As the equity bubble grows larger, it’s sucking in more and more unsophisticated investors. However, as 2000 proved, overconfidence can give way to fear at the blink of an eye.As the final chart in today’s edition, investors’ belief in a utopian future has also come full circle.Please see below:Figure 16To explain, the white line above depicts the movement of Citigroup’s Global Risk Aversion Macro Index – which uses credit spreads, swap spreads and implied volatility to quantify investors’ perception of risk. As you can see, the index is now back to its pre-pandemic lows. More importantly though, the reading encapsulates all of the above and highlights the excessive complacency underwriting global equities.In conclusion, global stocks are living on a razor’s edge and their margin for error continues to dwindle. And due to gold and silver’s moderate-to-strong correlation with the S&P 500 (250-day correlations of 0.71 and 0.87 respectively), one false step could knock over the entire house of cards. As a result, it’s prudent to consider these cross-asset implications when assessing the future performance of the precious metals. However, once the events reach their precipice, the PMs will be able to resume their long-term uptrend.Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.Przemyslaw Radomski, CFA Founder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care* * * * *All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
That Wasn’t Much of a Down Day..

That Wasn’t Much of a Down Day..

Finance Press Release Finance Press Release 10.02.2021 15:55
Technically, the Dow and S&P snapped their 7-day winning streak.Technically.I hardly consider a decline of 0.03% and 0.11% for the Dow and S&P, respectively, a down day.Meanwhile, the Nasdaq and Russell saw a record close for who knows how many consecutive days.Can the market keep this up? Who even knows anymore. Everything seems to defy expectations and logic. Yeah, it's possible. But I'd be surprised if we don't see at least one sharp pullback before the end of the week.The sentiment is surely rosy right now. The economic recovery appears to be gaining steam, and the Q1 decline everyone predicted might not be as swift as we anticipated- if at all. President Biden's stimulus could officially pass within days as well and provide much-needed relief to struggling businesses and families.Have you seen the vaccine numbers lately, too? More people in the U.S. have now been vaccinated than total cases. On Monday (Feb. 8), vaccine doses outnumbered new cases 10-1. New daily COVID cases have also reached their lowest levels since October.With Johnson and Johnson's (JNJ) one dose vaccine candidate seemingly days away from FDA approval, the outlook is certainly more positive at this point than many anticipated.But we're not out of the woods yet, and three non-pandemic related factors still concern me- complacency, overvaluation, and inflation.Jim Cramer's "Seven Deadly Sins" from Mad Money Monday night (Feb. 8) reflect many of my concerns too:Source: CNBCYes, I know I keep saying to beware. I also know that earnings are on pace to rise by over 20% in 2021. Since 1980, only 12 years have earnings increased by 15% or more. Except for 2018, the market gained an average of 12% in all of those years.But consider some valuation metrics that scream “bubble.”As of February 4, 2021, the Buffett Indicator , or the ratio of the total US stock market valuation to the GDP, was at a level not seen since the dotcom bubble. If you take the US stock market cap of $48.7 trillion and the estimated GDP of $21.7 trillion, we're nearly 224% overvalued and 84% above the historical average.Keep in mind; this chart was dated February 4. This number has only grown since then. Tuesday (Feb. 9) was hardly a down day. If anything, it was plain dull.Fears of a bubble are genuine. The S&P 500’s forward 12-month P/E ratio is back to above 22 and well above the 10-year average of 15.8. The Russell 2000 is also back at a historic high above its 200-day moving average. Tech stock valuations are again approaching dot-com bust levels.Bank of America also believes that a market correction could be on the horizon due to signs of overheating.While I don’t foresee a crash like we saw last March, I still maintain that some correction before the end of Q1 could happen.Corrections are healthy and normal market behavior, and we are long overdue for one. They are also way more common than most realize. Only twice in the last 38 years have we had years WITHOUT a correction (1995 and 2017).A correction could also be an excellent buying opportunity for what could be a great second half of the year.Bank of America also echoed this statement and said that “We expect a buyable 5-10% Q1 correction as the big ‘unknowns’ coincide with exuberant positioning, record equity supply, and ‘as good as it gets’ earnings revisions.”The key word here- buyable.My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one where I could help people who needed help, instead of the ultra-high net worth.With that said, to sum it up:While there is long-term optimism, there are short-term concerns. A short-term correction between now and the end of Q1 2021 is possible. I don't think that a decline above ~20%, leading to a bear market will happen.Hopefully, you find my insights enlightening. I welcome your thoughts and questions and wish you the best of luck. Small-Caps are Officially Overbought Figure 1- iShares Russell 2000 ETF (IWM)This pains me to write this because I love Russell 2000 small-cap index in 2021.But this is getting ridiculous now.As tracked by the iShares Russell 2000 ETF (IWM) , small-cap stocks have been on a rampage since November. Since the close on October 30, the IWM has gained nearly 50% and more than doubled ETFs' returns tracking the larger indices. What happened to the Nasdaq being red hot? This chart makes it look like an igloo.Since the close on January 29, the Russell has done just about the same again and gained 11.10%. It’s outperformed all the other major indices by a minimum of 5% in that period.Not to mention, year-to-date, it’s already up a staggering 18%.Small-caps are funny. They either outperform and underperform and can be swayed easily by the news. I foresaw the pullback two weeks ago coming for over a month, and unfortunately, I see the same thing happening now. But only for the short-term.I remain bullish due to aggressive stimulus, which could be put in motion this week.I also love small-cap stocks for the long-term, especially as the world reopens and this Biden agenda gets put in motion. It seems like things are finally trending in the right direction.For now, though, the index is once again overbought.The RSI is at a scorching 75, and I can't justify calling this a BUY or HOLD right now. It's an excellent time to take profits.SELL and take profits. If and when there is a deeper pullback, BUY for the long-term recovery.Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter - it's absolutely free and if you don't like it, you can unsubscribe with just 2 clicks. If you sign up today, you'll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!Thank you.Matthew Levy, CFA Stock Trading Strategist Sunshine Profits: Effective Investment through Diligence & Care* * * * *All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits' employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

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