Is The Bitcoin Mania Finally At An End?
Last week the Chicago Mercantile Exchange announced that after the June 2019 futures contract expired in Bit Coin that it will no longer list the product on the exchange. What began as a grand experiment during the maniac rally in 2017 is ending with a thud. Bit coin is down 80% from its market high in December of 2017 when it reached $19,800 a coin to todays level of around $4,000. The total volume of all bit coins outstanding is down 85% since that date.
Since its inception almost ten years ago Bitcoin has had a wild ride. It has seen numerous ups and downs and has seen drawdowns as much as 95% after the silk road website was busted. The Mount Gox farce also saw the crypto currency dive by over 85% in just a few days. The idea of the crypto currency was to bring more stability to the world of finance and not let the worlds central banks run the show.
That idea has been a total failure. Crypto currency was designed to reduce the price fluctuation among international currencies, but instead it did the opposite. It exaggerated the problem and made any kind of stability unobtainable. The truth be told no matter how much you despise central banks they do have control over the supply and demand for money and can do much to change interest rates to influence international policy.
Now investors that have lost billions to the initial speculators are seeking to recoup their investment from a revival of the block chain technology that they believe could be in the billions and may be the future of computing. It is possible that this will be their salvation and the new technology will work. As far as Bitcoin itself, I quote the Oracle of Omaha “it is snake oil” and I wouldn’t touch it with all the money in the world!
Ask Mr. Seifert
I am constantly asked questions about trading and how to exploit certain market factors to insure success. Each week I will answer one of those questions with a short paragraph which will cover the trading subject.
What is the VIX Index and how is it calculated?
Answer: VIX is the ticker symbol for the CBOE’s Volatility Index. It shows the market’s expectation of 30-day volatility. It is constructed using the implied volatilities of a wide range of S&P 500 index options This volatility is meant to be forward looking and is calculated from both calls and puts and is a widely used measure of market risk as to the “investor fear gauge”. The CBOE designed the VIX to create various volatility products. Introduced in 1993, it was originally a weighted measure of the implied volatility of eight S&P 100 at-the-money put and call options. Ten years later, in 2004, it expanded to use options based on a broader index, the S&P 500, which allows for a more accurate view of investors’ expectations on future market volatility. VIX values greater than 30 are generally associated with a large amount of volatility because of investor fear or uncertainty, while values below 20 generally correspond to less stressful, even complacent, times in the markets.
The VIX is a computed index, much like the S&P 500 itself although it is not derived based on stock prices. Instead, it uses the price of options on the S&P 500 and then estimates how volatile those options will be between the current date and the option’s expiration date. The CBOE combines the price of multiple options and derives an aggregate value of volatility, which the index tracks.
While there is not a way to directly trade the VIX, the CBOE does offer VIX options, which have a value based on VIX futures and not the VIX itself. Additionally, there are 24 other volatility exchange-traded products (ETPs) for the VIX, bringing the total number to 25.
The Wise Guy Report: The View From The Floor
Each week I talk about what I think the Wise Guys (floor traders) are up to with the Big Three commodity contracts: Gold (GC), Crude Oil (CL) and Long-Term Interest Rates (ZB). I also track the Market Edge (www.marketedge.com) ‘Market Posture’ which has a twenty-six year record of forecasting the intermediate-term direction of the stock market as measure by the DJIA with around 70% accuracy.
T-Notes
Broke out to the upside late in the week. I took profit at the double top and took a shot from the short side at 123.30, the old high. So far the trade hasn’t worked out as there appeared to be a flight to quality when the equities market had its first big selloff of the year. Whether the short entry was too early will be known probably this week. If we take out the blow off highs it will be time to take the loss and look for a new spot to trade. The previous trade was a nice winner, so lets hope that Fridays explosion in price was a one day wonder.
Crude Oil
Continued to climb early in the week but had a sharp selloff on Friday, ending the week virtually unchanged. The market my be taking a breather after this substantial run to the upside. This coming week should give us a good videa of where the next move is going. This has been a nice winner and if it should violate downside support it would be a good spot to cash and look for the next move. On the other hand, if it continues to look like a trend, I will stick with the trade.
Gold
This week gold saw a gain of a few dollars and at one point it almost was back to a scratch on my trade. It appears that it is trying to break out of upside resistance and is getting more support on every sell off. If this pattern continues, I think that the market either remains in congestion or we try to challenge the old top made in mid-February. If support fails, I will take my loser and wait for a new spot to enter the market.
| The Big Three Commodities Contracts
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The Market Edge – Market Posture
| Market Timing Models | Current Reading | Prior Week | Connotation | ||||
| Cyclical Trend Index (CTI): | -2 | 4 | Negative | ||||
| Momentum Index: | 2 | 9 | Neutral | ||||
| Sentiment Index: | 1 | 1 | Neutral | ||||
| Strength Index – DJIA (DIA): | 31.0 | 51.7 | Negative | ||||
| Strength Index – NASDAQ 100 (QQQ): | 18.0 | 35.3 | Negative | ||||
| Strength Index – S&P 100 (OEX): | 21.3 | 43.8 | Negative | ||||
The Market Edge ‘Market Posture’, which has been Bullish since the week ending 1/04/2019 (DJIA 23433.16) is now regarded a Neutral.
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