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BitCoin And Sexy Investing

Terence Reilly profile picture
Terence Reilly
1.56K Followers

We have been telling you to keep an eye on Bitcoin as an indicator of risk. Since we last wrote about bitcoin two weeks ago, it rallied 14% and we saw a subsequent rally in equity markets here in the US. Coincidence? Probably not. Bitcoin is an illiquid, fast-moving market. It may be giving us hints as we try and understand the valuation of this market and how it is going to break out of its current seven-month range. Will the bears or bulls take charge?

Bitcoin's price action may give us clues as to the direction of the slower-moving equity market. As speculators gain confidence in bitcoin and join the rally, speculators in equity markets gain confidence as well. Equity markets have had two very good weeks back to back, and the S&P 500 has rallied just over 3%. Keep an eye on bitcoin. Disclosure: We are not trading bitcoin nor have much interest in it beyond using it as a temperature gauge for risk sentiment and how that may apply to the stock and bond markets.

Two weeks ago, we thought markets might be a bit oversold and due for a bounce. The moving averages have held, and the bulls took the advantage. The S&P has since rallied 3% in two weeks. The S&P closed the week at 2801. While we are still stuck in our 2550-2800 range, we have finally gotten back to the upper level of that range at 2800 - a level we have not seen since March. While equity markets are a touch overbought here, the series of higher lows put in since March give the edge to the bulls. We are anxious to see if the bulls can break free of this trading range that we have been in for the past 7 months. An upside breakout of this range could lead to an assault on 3000.

This article was written by

Terence Reilly profile picture
1.56K Followers
Former Member of the NYSE, currently a Registered Investment Advisor, concentrating on developing long term investing portfolios for High Net Worth investors and families.

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