Everything is a Falling Knife
STONKS, shitcoins, Cathie Wood's entire portfolio. Everything is getting beaten to a pulp. Time to buy? I'm not so sure. The key level I'd pay attention to.
Remember about a week ago when I wondered out loud if it was time to go risk on again? Me neither. As it turns out, the resistance line that I had my eye on was soundly rejected and we’ve seen STONKS pretty much fall apart since that post. I'm glad I didn't force it with a trade idea. Gotta have conviction. And right now I don’t have it.
Anyone who has taken a “cash is trash” buy all dips approach to markets has been getting punished lately. Even three weeks ago when the S&P was at its all time high, the Russell 2000 was screaming problems and I highlighted that in The Carnage Beneath the Surface.
Here we are now with charts breaking down left and right. Cathie Wood’s ARK innovation fund is down 50% from the high. Peloton is halting production with demand for bikes languishing. As I type this, Netflix is down 20% after hours having given less than stellar forward guidance. This is a very dangerous market. It’s great for traders. But if you’re not one to jump in and out of positions in a matter of days or hours, it’s probably best to wait until there is some stability before trying to catch one of these falling knives. Part of waiting for stability is seeing if the S&P 500 can hold its fast approaching 200 day moving average of 4427. By that point, we'll probably have an oversold RSI as well and a potential dead cat bounce setup.
Bitcoin certainly appears to be another one of those falling knives as well. As does my beloved Zcash. Bitcoin, after looking like it was poised for a rally, has puked out $4k since lunchtime today. What’s causing all this red one might ask? The mere threat of Fed tapering coupled with an expectation of interest rate hikes? Maybe. I'm not totally convinced the Fed can meaningfully raise rates at all. We'll see. In the meantime, if you're interested in learning how to buy crypto now that Bitcoin has given up $40k again, I'll have something for you tomorrow. If you can’t wait that long, here is my latest on Bitcoin for Seeking Alpha.
Disclaimer: none of this is investment advice.