Bitcoin Stuns Crypto Bears [3 Must-See Charts]
Stocks are stumbling into their final session of the week as Trump doubles down and declares the U.S. is “ready to go” on tariffs affecting more than $500 billion in Chinese goods.
The major averages are all trending lower this morning as traders absorb the newest trade war threat. Will the move stick? Or will stocks once again shake off trade war headlines and push into the green?
Let’s go to the charts to find out…
1. Bitcoin bounces
No one had anything positive to say about the flagship cryptocurrency at the beginning of the week. Not only was bitcoin stuck below $6,400 (not far from its 2018 lows) — the crypto market couldn’t drum up any positive coverage from the financial media.
Even the behemoth asset manager BlackRock said it was staying out of crypto earlier this week…
“I don’t believe any client has sought out crypto exposure,” BlackRock CEO Larry Fink on told Bloomberg. “I’ve not heard from one client who says, ‘I need to be in this.’”
That’s when a quick comeback rally began. Bitcoin surged off its lows on Monday. Not 24 hours later, bitcoin started getting jumpy once again, topping $7,400 following another explosive session.
Bitcoin has held onto its gains so far (it sits at $7,460 as I type).
While we don’t yet know if this is the start of a much bigger comeback rally, it does appear that bitcoin has broken free of the death spiral that threatened to flush the crypto market to new year-to-date lows.
2. Any hope for a gold rally?
While bitcoin enjoys a fresh comeback run, gold continues to find new 2018 lows this week.
Precious metals slipped toward levels not seen since July 2017 earlier this week. After briefly dropping below $1,215 in Thursday trade, gold rebounded to settle back above $1,220.
But even if you factor in this small sign of life near 52-week lows, gold could continue to drop.
Mark Hulbert notes that gold-market exposure measured by his Hulbert Gold Newsletter Sentiment Index currently stands at 0%, “indicating that the typical timer is out of the gold market but not outright short.”
Meanwhile, Hulbert notes that “tradable gold bottoms typically are accompanied by HGNSI readings at least as low as minus 30%.”
Simply put, traders aren’t nearly bearish enough to trigger a contrarian buy at these levels. There’s no reason to bet on gold on the long side for a trade until we see the shorts start to pile in…
3. Industrials improve… but small-caps still rule
The lagging Dow Jones Industrial Average is showing signs of improvement.
The granddaddy of the U.S. stock market indices has finished positive on all but three trading days so far this month. That’s an incredible feat for a group of stocks that investors left for dead during the height of the trade war fears earlier this year.
Yet while the Dow is up more than 3% in July, it continues to lag the red-hot Nasdaq Composite. Tech stocks aren’t the only winners lapping the Dow these days, either. The small-cap Russell 2000 is back on track after slipping lower in late June. It’s now set to revisit its all-time highs…
Small-cap strength is undeniable this year. You can clearly see where the Russell sharply diverged from the mega-cap Dow in April. The Russell 2000 is now up more than 10% year-to-date, while the Dow is barely in the green.
If trade wars continue to dominate the headlines, the Russell could continue to widen the performance gap heading into the dog days of summer…