View the analysis: https://www.tradingview.com/chart/GBTC/TpXknNbo-Open-Season-Accumulate-Bitcoin-via-GBTC/
"After the most recent bear market, price volatility and volume
have subsided, but price has held constant. This appears to be the
"doll drum" phase before the next bull cycle. In fact, I believe (based
on current price action) that we have reached the tipping point, passed
the 50% mark, where prices are now going to be rising (on average) at
ever increasing rates instead of falling on average at ever decreasing
rates until we get to another parabolic climax. Consider that there have
been at least 2 prior major bull/bear cycles prior to this that have
behaved in a similar fashion.
GBTC 0.41%
has been an excellent contrarian indicator. Since it is a closed-end
fund, it generally trades at a premium to net asset value. As bitcoin -0.47% rises, this premium swings wildly, sometimes in a ridiculous optimistic excess.
Shown on the chart is my version of a premium to net asset value
indicator, meaning I coded it myself. It is publicly available to be
applied to your charts in tradingview. Although it does not take into
account the fund's net asset value decreasing at a rate of 2% per year,
if we assume this is negligible, we can clearly see that premium is at
lows. Every other time in the past premium as been at lows, a bitcoin -0.47% price rally, and premium rally, was immediately forthcoming.
Perhaps this time it is different. And perhaps the bitcoin -0.47%
price will suddenly decline. However, with strong institutional
interest (which should become evident after clarification of regulations
which is rumored to occur in mid 2019), and frankly a lack of selling
and public interest, it seems evident that strong hands are accumulating
bitcoin -0.47% and have been doing so in anticipation of the next moves higher.
One of the best ways to gain exposure to bitcoin -0.47% (in traditional markets) is with GBTC 0.41% ...largely because of the huge premium appreciation which occurs as bitcoin -0.47% price rises. I have, during the last bull run, had instances where premium appreciation has resulted in GBTC 0.41% gains which have far outpaced bitcoin's price appreciation. Although there are now bitcoin futures -0.08% products and likely bitcoin -0.47% etfs in the future, not all investors have access to the futures , and the futures
have a habit of trading at a premium to price when price is rising
also, as well as requiring one to constantly roll from contract to
contract.
Now appears to be the time to take a long-term capital gains style position in bitcoin -0.47% , specifically GBTC 0.41%
. I plan to do this by allocating 30% of my portfolio to a position in
this fund. I plan to place limit orders below the current price in a
staggered fashion, with the aim of accumulating if the price of GBTC 0.41%
continues to fall. I plan on having a 20% stop on my final average
position cost, which works out to a 7% loss on the portfolio if the stop
is triggered.
We don't know exactly what price will do, but if history is any guide,
given the landscape, the probabilities of an outsized gain appear (in my
opinion) to be far greater than those of a loss. And that is all we can
hope for when planning an investment or a trade.
I am not a financial advisor."
Tuesday, October 16, 2018
Buy the Dip! 10-16-18
When in the course of current events it comes time to consider buying the dip once again, in these times of heightened uncertainty and extended markets it is prudent to consider the relevant factors in an effort to divine whether the bounce will continue.
1) PE ratios
2) Volatility episodes
3) Current strength and Convergence of buying indicators
4) Which instrument to prefer, Initial profit targets and reward:risk
5) Summary and Plan of action
PE Ratios:
Shiller PE Ratio http://www.multpl.com/shiller-pe/
PE Ratio http://www.multpl.com/
Nifty Fifty PE:
PE ratios confirm what we already knew: prices are not shall we say cheap. Which is why extra caution is warranted. However, they are trending higher and can continue to do so, although the Nifty 50 PE index suggests prices need to stagnate or decline until earnings catch up, casting doubt on strong upside in the near future.
Volatility Episodes:
Significant volatility episodes (date is peak) in which there was a clearly identifiable (prolonged) spike over Vix = 20 since 2009 are as follows. Date, high, days from prior peak:
Nov 2009, 31, NA
Jan 2010, 27, 84 d
May 2010, 47, 105 d
Mar 2011, 30, 313 d
Aug 2011, 48, 142 d
May 2012, 27, 287 d
Dec 2012, 23, 224 d
Jun 2013, 21, 175 d
Oct 2013, 21, 110 d
Feb 2014, 21, 118 d
Oct 2014, 31, 255 d
Dec 2014, 25, 62 d
Aug 2015, 53, 252 d
Jan 2016, 32, 149 d
Jun 2016, 26, 156 d
Nov 2016, 23, 129 d
Feb 2018, 50, 459 d
Oct 2018, 28, 248 d
Notice the long period beginning with President Trump's election (459 d). He is right to say there was a significant market shift as a result. However, it appears markets have now "returned to normal" so to speak. Vix has clearly declined from its most recent peak of 27. Oftentimes, however, there is a double peak each Vix episode, with the second peak frequently reaching a higher reading than the first. However, this is certainly not always the case, and there are a minority of episodes where price declines quickly to baseline after spike instead of making a second high.
Current Strength:
Instruments:
As can be seen, from the initial lows in February 2018, Nasdaq, Russel 2000, S&P 500, and Dow 30 weighing in, in order of performance. The strongest instrument is clearly the Nasdaq although it also has the worst Reward/Risk in terms of reaching new highs vs new lows. This also means, statistically, that reaching new highs is more likely than reaching new lows for the Nasdaq vs any of the other instruments:
Symbol, to highs (%) / from lows = ratio
NQ- 4.78/6.57= 0.72
ES- 4.52/3.85=1.17
RTY-8.32/4.58=1.82
YM- 4.35/3.66=1.19
Conclusion:
Overnight action in the futures will determine exactly what trading style is undertaken early tomorrow morning. There is a high likelihood of higher highs tomorrow, and higher highs in general, although there is a significant possibility of a "double dip" and that prices will not continue to go straight up as they did this session.
I am hoping for an overnight consolidation, a break of which will enable me to place a highly levered futures trade long, and hopefully move stops past break even after price moves up in case this move upwards is "fake" although it strikes me as decidedly genuine. Furthermore, movement may well occur at 7:30 Central time. To be early for the game, market observation should resume at 6:30 central.
In terms of a long position, there is good reason to now move stops directly below the most recent swing low, especially in the Nasdaq which has shown considerable strength and doesn't tend to double dip enough to knock out the stops. This is a welcome occurrence since it allows one to continue to lock in profits against a bear market.
Price should be able to surpass previous daily highs on this buying impulse, although once done will most likely develop a multi-month gradual continuation upwards
It is generally best to buy the strongest instrument when bullish and sell the weakest instrument when bearish. Thus the Nasdaq futures are in my sights.
1) PE ratios
2) Volatility episodes
3) Current strength and Convergence of buying indicators
4) Which instrument to prefer, Initial profit targets and reward:risk
5) Summary and Plan of action
PE Ratios:
Shiller PE Ratio http://www.multpl.com/shiller-pe/
PE Ratio http://www.multpl.com/
Nifty Fifty PE:
PE ratios confirm what we already knew: prices are not shall we say cheap. Which is why extra caution is warranted. However, they are trending higher and can continue to do so, although the Nifty 50 PE index suggests prices need to stagnate or decline until earnings catch up, casting doubt on strong upside in the near future.
Volatility Episodes:
Significant volatility episodes (date is peak) in which there was a clearly identifiable (prolonged) spike over Vix = 20 since 2009 are as follows. Date, high, days from prior peak:
Nov 2009, 31, NA
Jan 2010, 27, 84 d
May 2010, 47, 105 d
Mar 2011, 30, 313 d
Aug 2011, 48, 142 d
May 2012, 27, 287 d
Dec 2012, 23, 224 d
Jun 2013, 21, 175 d
Oct 2013, 21, 110 d
Feb 2014, 21, 118 d
Oct 2014, 31, 255 d
Dec 2014, 25, 62 d
Aug 2015, 53, 252 d
Jan 2016, 32, 149 d
Jun 2016, 26, 156 d
Nov 2016, 23, 129 d
Feb 2018, 50, 459 d
Oct 2018, 28, 248 d
Notice the long period beginning with President Trump's election (459 d). He is right to say there was a significant market shift as a result. However, it appears markets have now "returned to normal" so to speak. Vix has clearly declined from its most recent peak of 27. Oftentimes, however, there is a double peak each Vix episode, with the second peak frequently reaching a higher reading than the first. However, this is certainly not always the case, and there are a minority of episodes where price declines quickly to baseline after spike instead of making a second high.
Current Strength:
- Currently, volatility is seeming to be making a quick, single-peak decline to baseline. (which is a less-probable experience overall, but more common for spikes under 30).
- Price Charts show break out of consolidation and significant strength. 15 minute below:
- Daily charts show a setup for two different strategies: Vince at Tradingwin's engulfing on dip setup
- Barry Rudd's stock patterns for swing trading suggest that the current wide range bar could be a sell short if gaps down and then starts going down. Otherwise, it could be a reversal pattern.
- As can be seen with a daily chart, the Stochastics indicated a buy upon touch of the 200 day moving average, 200 day moving average has provided support, we are in a bull cycle.
- On a cautionary note, however, price on the Nasdaq is flirting with the green 9 period moving average. In sustained down trends this is typically the level at which price will reverse and head back down. Also, it typically provides some resistance to an uptrend, whereby price will often retreat to the red line afterwards.
Instruments:
As can be seen, from the initial lows in February 2018, Nasdaq, Russel 2000, S&P 500, and Dow 30 weighing in, in order of performance. The strongest instrument is clearly the Nasdaq although it also has the worst Reward/Risk in terms of reaching new highs vs new lows. This also means, statistically, that reaching new highs is more likely than reaching new lows for the Nasdaq vs any of the other instruments:
Symbol, to highs (%) / from lows = ratio
NQ- 4.78/6.57= 0.72
ES- 4.52/3.85=1.17
RTY-8.32/4.58=1.82
YM- 4.35/3.66=1.19
Conclusion:
Overnight action in the futures will determine exactly what trading style is undertaken early tomorrow morning. There is a high likelihood of higher highs tomorrow, and higher highs in general, although there is a significant possibility of a "double dip" and that prices will not continue to go straight up as they did this session.
I am hoping for an overnight consolidation, a break of which will enable me to place a highly levered futures trade long, and hopefully move stops past break even after price moves up in case this move upwards is "fake" although it strikes me as decidedly genuine. Furthermore, movement may well occur at 7:30 Central time. To be early for the game, market observation should resume at 6:30 central.
In terms of a long position, there is good reason to now move stops directly below the most recent swing low, especially in the Nasdaq which has shown considerable strength and doesn't tend to double dip enough to knock out the stops. This is a welcome occurrence since it allows one to continue to lock in profits against a bear market.
Price should be able to surpass previous daily highs on this buying impulse, although once done will most likely develop a multi-month gradual continuation upwards
It is generally best to buy the strongest instrument when bullish and sell the weakest instrument when bearish. Thus the Nasdaq futures are in my sights.
Tuesday, June 5, 2018
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