Bitcoin

A Volatility Spike!

Posted on by George Mahfouz

A volatility spike in November spooked plenty of investors which sent the markets into a tailspin! Volatility (see chart here) woke up last month as the markets digested the constant news flow and fears of an A.I. bubble (click here). This fear also spilt over into the crypto space where we saw Bitcoin, Ethereum and other Altcoins crash as much as 35% last month. For crypto, this is not an unusual drawdown, many times over a 30 plus percent correction has occurred in this sector. What’s different this time was the fear mongering over an A.I. bubble which has been a daily occurrence. This dynamic sent the tech sector down as a whole while also dragging crypto coins and crypto related stocks with it.

What was good to see for the bulls last week was the rally that occurred during the Thanksgiving holiday shortened trading week. This rally which has provided some calm to the market has once again taken the S&P 500 (see chart here) close to its record high. I was just happy to see a short-term bottom seemingly put in from last month’s sell-off.

As we enter the final month of the year the question now on every investor or traders mind is “can the markets muster up a Santa Clause rally?” Each year this is what the bulls hope to see and that is a year-end rally that takes stocks higher. The case for a Santa rally can be made. First, we have the Federal Reserve Open Market Committee interest rate policy meeting coming up on December 9th & 10th. All eyes and ears will be on this meeting to see not only if the Fed will cut interest rates, but even more so, the messaging and tone that comes out of the meeting on future rate cuts. One could say it was the hawkish comments (click here) made by the Federal Reserve chairman Jerome Powell that spooked investors which then spooked the markets and spiked volatility. In the last Fed meeting Chairman Powell stated there was no assurance of a December rate cut and that they will rely on the economic data to provide the necessary guidance as to cut or not.

Suffice to say, the economic data coming out continues to favor a cut in December in which inflation seems to be at least pausing while the unemployment rate is going higher. These are the two key factors in whether the Fed will cut rates again in December.

Good luck to all 🙂

~George

 

Record Highs Continue…

Posted on by George Mahfouz

Record highs continue for the Dow Jones Industrial Average (see chart here) and for the S&P 500 (see chart here). In February, the Dow Jones Industrials hit an all-time high of 39282 while for the first time ever, the S&P 500 (see chart here) crossed the 5000 mark trading as high as 5111. These two indexes continue to demonstrate impressive strength along with the Nasdaq Composite (see chart here). It appears that the Nasdaq Composite just might join the Dow Jones Industrials and S&P 500 in hitting a fresh all-time high anytime. The small-cap Russell 2000 (see chart here & below) still has a way to go to reach its all-time high but at least this index is trending up.

Stocks aren’t the only asset class at or near all-time highs, Bitcoin has broken out as of late and has surpassed $60,000 per coin mark. The momentum continues here since Bitcoin ETFs were approved. Now this asset class in not for the faint of heart. As much as Bitcoin continues to rip, sell-offs in this asset class can be dramatic and fast.

So, what is going on with these all-time highs and the “risk on” spirit from institutional investors and retail investors alike? For one, I think the strength of the economy has something do to with this, however, I believe that rampant speculation is also play a role. Especially out of the artificial intelligence sectors as stocks there also continue to make all-time highs. My concern is how long this most recent rally has lasted. For example, the S&P 500 (see chart here) has seen gains in 15 of the last 17 weeks which is rarely seen.

With that being said, as I look at the technical shape of the aforementioned indexes, they are not in overbought territory according to the relative strength index aka the RSI. Many market technicians use this key technical indicator to gage whether a stock or index is overbought. 70 is the key value level of the RSI that would indicate an overbought condition and the major averages are trading below this mark. Now this is only one technical indicator and there are clearly many other factors that determine the state of the markets, but as of now nothing appears to be getting in the way of this impressive months long rally.

Good luck to all 🙂

~George

All Time Highs Continue - Paula Mahfouz

Dow 24,000 – Bitcoin $10,000 – Why Not?

Posted on by George Mahfouz

Is this really happening? Stocks exploded to the upside on the last trading day of November. For the first time in its history, the Dow Jones Industrial Average (see chart below) traded, blew through and closed above the 24,000 mark. The Dow started the year just under 20,000 and no one and I mean no one in the who’s who of finance, analysis, technical analysis, hedge funds, institutional investors and the like, ever predicted this type of performance for stocks and the key indices on the year. I cannot even count the number of record highs that have occurred this year not only in the Dow Jones Industrials, but also the S&P 500 (chart), the Nasdaq composite (chart), and the small-cap Russell 2000 (chart). Let’s throw in Bitcoin and its year to date 10X performance and we are truly in party mode.

I am not even sure what to think? This eerily feels like the irrational exuberance environment that occurred in the mid to late 90’s and before the internet bubble imploded. However the bullish pundits are quick to point out that this time is different. Back then, whoever came out with an announcement that they just launched a website saw their stock go up. Now the pundits are pointing out that it is earnings and growth that are responsible for this torrid record setting pace we have been on all year long. This is true to some degree. But what about the euphoria in Bitcoin? What is the catalyst that has propelled this so call asset to fly up over 10 times this year? This is why the other side of the camp thinks we are approaching a bubble or at the very least nose bleed territory. Without question I feel that something is going on that makes one have to pause and take a breather here. But as we have seen all year long, don’t underestimate the power of momentum, a low interest rate environment and the Trump trade. Is it possible that the Dow Jones Industrials actually could close above 25,000 by year end? As much as I want to say and think “no way”, way! Not saying the Dow will go up another 800 points by year end, but if we do, I would not be at the very least surprised.

Good luck to all 🙂

~George

Dow Jones Industrial Average - George Mahfouz Jr