intermarket analysis: a global roadmap including bitcoin
TRANSCRIPT
INTERMARKET ANALYSIS
A Global Roadmap including Bitcoin
WHAT INTERMARKET ANALYSIS DOES
Combines All Markets into a Unified and Coherent whole.
Bridges Gap Between Fundamental, Economic, and Technical Analysis.
Examines the Correlations between Four Major Asset Classes: Stocks, Bonds, Commodities, and Currencies.
No Market Moves in Isolation, the World is Connected.
Traditional Intermarket Relationships
The U.S. Dollar trends in the opposite direction of commodities.
A Falling Dollar is bullish for commodities; a rising dollar is bearish.
Commodities trend in the opposite direction of bond prices.
Therefore commodities trend in the same direction as interest rates.
Rising commodities coincide with rising interest rates and falling bond prices.
Falling commodities coincide with falling interest rates and rising bond prices.
Bond prices normally trend in the same direction as stock prices.
Traditional Intermarket Relationships
Rising bond prices are normally good for stocks, falling bond prices are bad.
Therefore, falling interest rates are normally good for stocks; rising interest rates are bad.
The bond market, however, normally changes direction ahead of stocks.
A rising dollar is good for U.S. stocks and bonds, a falling dollar can be bad.
New Normal RelationshipsDollar and Commodities trend in opposite
direction.
Stocks and Commodities trend in the same direction.
Falling Bond Yields have hurt Stocks-until recently.
What Has Changed? Deflation!3 major deflationary events in the last 15 years.
1. Started with the 1997-1998 Asian Crisis.
2. The Dot Com Bubble.
3. Great Financial Crisis.
When deflation is the main threat stocks and commodities become closely related.
During a deflation bond prices rise while stocks fall.
Where are we now? King Dollar rules. Why?
Abenomics is in full swing.
Eurozone in the process of massive QE.
China also easing.
A global easing cycle is underway sans US
Fed Hawks want to raise US interest rates sooner rather than later and the market perceives this.
Still THE flight to safety.
Who/what is a rising dollar bad for?
Everyone and everything (except the US for now) , including bitcoin.
A rising dollar results in lower foreign currencies and stock markets.
Investment funds tend to flow toward countries with stronger currencies.
Stronger currencies are the result of higher or perceived higher interest rates due to stronger economic conditions in a particular country.
Bad for commodities as well.
Inflationary RelationshipsA positive relationship between bonds and
stocks
Bonds usually change direction ahead of stocks
An inverse relationship between bonds and commodities
An inverse relationship between USD and commodities
Stocks react positively to falling interest rates.
Deflationary RelationshipsLargely the same relationship except for one.
Stocks and bonds become inversely correlated.
Currencies
Commodities
Emerging Markets
Europe & Japan & Australia
This is what QE does!
Global Interest RatesWhat the hell is going on?
Global Interest RatesBonds have been getting hammered as rates
rise, even though commodity prices are off the lows.
Monetary Policy has been very easy
Is the bond market smelling a resurgence of growth in the second half of 2015?
Are inflation expectations picking up?
Bitcoin
Correlation does not imply causation
Bitcoin trades like a commodity
Not like a currency, but it is affected by both.
Massively volatile still, even though trading has been rangebound for a few months.
Trades mainly on sentiment and technicals.
Still hard to trade in size without moving the market.
From a correlation standpoint
Still a very young asset, so hard to make definitive correlations.
Doesn’t correlate with anything for long periods of time.
However, there are four factors that appear to be affecting the price.
4 factors affecting Bitcoin Price
The Shanghai
The USD
Interest rates
Off exchange activity, low liquidity on exchange
Local Bitcoin Volume
Bitfinex Volume vs Price
Bitcoin ConclusionsThe 50 day EMA has been massive resistance,
still is.
Volume is anemic, OBV tells us s, not imminent reversal.
Bear markets can end in time or price. If Price were to stay in this range, bear market could end in mid-late July.
I don’t anticipate time ending it. Price will.
Conclusions Shanghai is in a major uptrend look for this to continue, all Chinese
Speculation is going there.
USD is also in a major uptrend, but has been consolidating in recent months, look for uptrend to continue.
Europe has averted disaster, and the equity markets look to be bottoming here.
Interest rates have been repricing from really depressed levels and due to the liquidity paradox. Is it a reset from the depths of hell? Or is more economic growth coming in the 2nd half of 2015? Where is the inflation?
Commodities have gotten a bounce from recent dollar weakness and interest rates ticking up, but downtrend still intact.
