Let’s start with a few more non-price based charts.
So many markets haven’t been this expensive so early in an expansion in at least 20 years. This chart is the Real Fed funds rate vs the percentage of 70 Equity and FICC markets trading more than one sigma above long-term average based on 1Y forward P/Es, credit spreads, real 10Y rates, real FX rates and real commodity prices.
The % of SPX 500 stocks above their 200 day average just reached a new extreme for the current regime of historic high equity valuation and corporate leverage.
Right on cue. Bitcoin plunged last week before bouncing back. This is the 2nd weekly volume reversal in the last 3 years. The other one was in June 2019. Watch for resistance from daily reversal resistance at 18732 (see below).
11/24 – Bitcoin has reached the noted parallel. High today was $24 below the 2017 high. When a rally is described as a ‘breathtaking rocket ship launch‘, I tend to think that the market in question is near a peak.
Short USD is the consensus view but don’t take my word for it. The article below from WSJ states “…investors think it’ll fall further. The consensus view of a falling dollar is based on a big assumption…” Also, JPM says EURUSD is more than 10% expensive based on the relative downgrade in Euro area growth forecasts (see below).
The Dollar Is Weak. Investors Bet It Will Slide Even More.
Consensus views don’t usually play out. Keep this in mind as EURUSD approaches the September high of 1.2011.
11/24 – EURUSD continues to do a whole lot of nothing. 1.1915 or so has been an important level since late July but the confluence of the line off of highs in March and June and the line off of the 2008 and 2014 highs is just below the September high at 1.2011. Maybe that needs to be tested before ‘something else’ happens?
Gold has reached the long cited target/support of 1780. I am now neutral. If reversal evidence arises, then I’ll let you know. Sit tight for now. Be aware that 2020 VWAP for GLD is slightly lower (see below).
11/23 – Gold tagged proposed resistance on Friday and dumped today…beautiful. Price is quickly approaching the long held support near 1780. This level is an important parallel and the lower channel line from the bearish channel off of the August high. I’ll be paying close attention to 1780 for reversal evidence.
My view is that the rally and drop since 11/19 are waves A and B of a 3 wave correction. Wave C should get underway either now or from near 7.7145 (61.8% retrace).
11/23 – The proposed 3 wave rally is well underway in USDTRY. Watch for support now near 7.78. 8.05 (50% retrace) is possible resistance along with the mentioned 8.17.