Bitcoin’s Back

Friday’s small rally did little to boost the market heading into the long weekend.

The major averages retreated for the third-straight week, with the tech-heavy Nasdaq leading the way lower by nearly 2.3%.

But all is not lost. In fact, we probably haven’t seen the last of the bull market for 2019.

“After surging 14% higher in the first five months of the year, it’d be natural to assume that the rally’s running out of gas,” our stat man Jonas Elmerraji notes. “But the data say otherwise.”

To be fair, we’ve already enjoyed a red-hot start to 2019. The S&P 500 is up a little more than 14% year-to-date — a rare showing for stocks less than five full months into the year.

Looking at the S&P 500 in years when it’s up 14.1% or more by this point in the calendar year, Jonas found that the big index rallies a whopping 11.8% in the 12 months that follow.

S&P Returns

“Each grey line in the chart above is a year when the S&P started 14% higher or better,” Jonas explains. “The graph shows how the S&P fares over the trading days from this point of the year onward. Clearly, some years are more volatile than others – but the long-term trendline in blue has consistently pointed up and to the right.”

You might have noticed that the highest point on the blue line represents the end of October. That means the market could rise another 10% in the next five months if 2019 is in line with the other instances of strong starts.

What’s the easiest way to profit from another double-digit rise in the S&P 500? Check out the tech sector.

“In the last two instances when the S&P surged to start the year, the tech sector charged much higher, climbing 14.8% and 65.7%!” Jonas says. “That makes tech stocks look like a particularly good bet for 2019.”

Speaking of major rallies, bitcoin quietly tagged $9,000 while you were grilling out over Memorial Day weekend. 

Bitcoin loves to rally when no one’s paying attention. So I’m not too surprised to see the flagship cryptocurrency posting another powerful rally while equity markets were closed and most of us were welcoming the unofficial start of summer.

“The largest cryptocurrency climbed as much as 10% Monday from levels late Friday, and was trading at $8,826, up 8.8%, as of 9:09 a.m. in New York,” Bloomberg reported late last night. “Rival coins were also stronger at the start of the week. Litecoin added more than 12% while Ether, the second largest digital token, rose 6.8%.”

This latest bitcoin surge notches new 52-week highs — and also marks the best month for the crypto market since 2017, Bloomberg notes.

Rally Extends

Bitcoin’s surge since breaking out in early April has been spectacular. Bitcoin easily topped my $6,500 target after breaking out of a huge base — and it never looked back. After breaking above $7,000 for the first time since September 2018 earlier this month, bitcoin promptly soared to above $8,000, topping off a nearly $3,000 swing since the beginning of May when the stock market began its retreat.

Has the new bitcoin rally moved too far, too fast? Maybe. But keep in mind, Bitcoin has been absolutely crushed since it peaked in December 2017 near $20,000. Even factoring in this year’s incredible comeback rally, the flagship cryptocurrency is just now hitting new one-year highs.

As I noted when the bitcoin rally first accelerated in April, an extended move higher following some consolidation shouldn’t shock anyone.

Finally, I’m keeping a close eye on semiconductors and other tech shares as we kick off a short trading week.

I noted recently the relative weakness in the former-market leading VanEck Vectors Semiconductor ETF (NYSE:SMH). The ETF finished Friday in the red — it’s sixth loss over the past seven trading sessions.

Now at new three-month lows, the semis need to put up or shut up. While it’s not impossible for the broad market to rally without the support of the chip stocks, I’d feel much better about our short-term prospects if buyers would snap up shares at these levels.

Sincerely,

Greg Guenthner

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Greg Guenthner

Greg Guenthner, CMT, is the editor of Opening Bell Fortunes and Seven Figure Signals. He has been with Agora Financial/Seven Figure Publishing since 2005. In 2019, the average position in Greg’s Sunrise Fortunes portfolio outperformed the S&P 500 by 1.65x.

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