Which Is Developing A Bigger Bubble: Bitcoin Or The Stock Market?
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
Bubbles in Nasdaq, bubbles in financial assets, bubbles in cryptos . . . bubbles are being reported everywhere. Moreover, more and more analysts are pointing to some financial crisis after another as each day goes by. Whether it is because of the cessation of QE, or because of the issues in Italy, or trade wars, etc., we are clearly not lacking for any reasons as to why this market should crash.
The problem is that most bubble-callers have no objective perspective through which they can determine that any market is in a bubble. As an example, one article I recently read suggests we are in a bubble in the Nasdaq because we have exceeded the 2000 bubble high in the market. Well, along those lines, maybe the Dow should not have exceeded the “bubble high” it struck in 1929!?
Now, I want to highlight the ultimate intellectual dishonesty and inconsistency in most of their thinking regarding bubbles. You see, many of these same analysts are looking for a massive rally in gold. Yet, one has to wonder why they can logically see gold rally well past its “bubble high” struck in 2011, but they are unable to accept any other market rallying beyond their “bubble highs” struck in recent history? I think one has to start viewing much of the analysis being published today as more emotionally-based rather than analytically-based.
For those that have followed my analysis through the years, you know that I use Elliott Wave analysis to provide me with an objective context through which I am able to analyze markets. This methodology allowed me to identify the high in gold in 2011 within $6 of the high struck, as well as buy back into the market right at the lows almost 2 years ago. This same methodology allowed us to catch the lows in the US Dollar in 2011, and called for a multi-year rally in the DXY to the 103.50 region when most everyone else at the time was looking for a dollar crash, especially when you consider all of the QE thrown at the market (another fundamental analysis failure). And, this methodology has kept us on the correct side of the equity market, as we have been looking to exceed 2600SPX for years, when most others were quite certain this bull market was going to end years ago.
You see, Elliott Wave analysis provides the context for viewing markets objectively, and in a non-linear fashion. So, just because one views a market as having struck a “bubble high” years ago does not mean that the market will not well exceed those highs in the future. And, the perfect example we are seeing set up like that is in the crypto-world as well.
While many have told me that the fundamentals suggest that crypto’s should be closer to zero than they are today, the structure of the market suggests that we could be setting up for a major rally in 2018. And, anyone who really wants to understand the crypto market’s should be following Ryan Wilday, as he is the most accurate crypto-analyst I have seen. In fact, he nailed the bottom we struck in ETH last week, and is now providing guidelines to determine when that bottom is confirmed.
So, based upon Ryan's analysis, it does not look like it is highly likely that the crypto-bubble-callers will be correct in their assessments.
And, I don’t think the bubble-callers for the stock market will fare any better. You see, the action we have seen over the last several months have been corrective, and support our expectation that the S&P500 is still pointing to 3000.
Last weekend, I noted that once we break below 2700SPX, it will have us looking down to the 2600-2650SPX region. While I had initially thought we could see one more micro rally towards my ideal target at 2758SPX, the market only reached a high of 2742SPX, so we came up about 16 points short of my ideal target. It certainly reminds me that there is no way one can be 100% accurate when dealing with our non-linear markets.
But, the break down below 2700SPX still came up short of our target below as well. This now places the market in a position wherein it will likely tell us in the coming week whether the drop below 2700 has completed all the pullback we are going to see before we rally to 3000, or if we are still setting up to drop to the 2600-2650SPX region.
As long as we remain below the 2742/53SPX resistance, the market still retains the potential to drop down to those lower targets. However, if we rally through 2753SPX, then it certainly increases the probabilities we have begun our trek to 3000SPX in 2018.