December 22, 2018    Market  Commentary

December 22, 2018 Market Commentary

Due to the holidays, my weekly blog is a few days behind, but the major theme is still the same.  With one significant change.

US Equity indexes remain under pressure, while the VIX is well bid.  Gold is still a desired holding, but has yet to truly break out to the upside.

The major change is in the digital asset market.  Buyers came in with significant capital and the volume was there to back it up.

In many instances in life, the outcome is the portion that is looked at in the highest regard.  In this piece, I want to focus on the relationships in digital assets and how an increase in certain currencies vs. Bitcoin is extremely important.

I will focus on the charts below and give brief opinions or explanations on each of them.

SP 500 Futures

The darling trade of many for the first ten months of the year has had some year end selling pressure.  With Emerging Market equities at multi year lows for most of the the year, many were trying to convince themselves that the US equity markets could be near all time highs while the rest of the world was in free fall ?  Some realization has set in.


NASDAQ 100 Futures

Remain under selling pressure as fund managers scramble at the end of the year.


VIX Futures

Generally moving the opposite way as equity index futures.


US Dollar Index Futures

Stuck in a range.  The Dollar has been strong during the year, and is one of the few trades that has yet to break it longer term uptrend.  I have no major opinion on this.


Gold Futures

Gold seems to have a solid bid beneath the market, but will need to clear the $1,271 level for a break out to the upside.



US Ten Year Treasury Futures

As equity markets have fallen, the entire treasury complex has caught a bid.  If US Equities continue to move lower, US rates will continue to fall.  In the event the US Equity market starts to get very ugly, do not be surprised to hear the FED talk about Quantitative Easing again.


All of the Charts below are courtesy of Digital asset index total market capitalization.

Since my last piece the digital asset sector has risen 23 billion dollars and is back to its late November valuation.  But, there is far more to the rally than meets the eye if one is only looking at this chart.  I have a few specific assets below which will show this, in more depth.


Bitcoin Cash  (BCH)

This has more than doubled in the past ten days, and I noted the strength vs BTC as this is one of the mega caps that is the beneficiary of outflows from Bitcoin.


Ethereum (ETH)

ETH began strengthening vs BTC in Mid December, and has risen more than 30% vs Bitcoin during that time.  This asset is another of the mega caps that illustrates money flowing from Bitcoin to another Digital Asset.


Litecoin (LTC)

In mid December, LTC reached lows in it’s Bitcoin pairing not seen in multiple years near the 660,000 satoshi level.  As luck would have it, the lows LTC made were near the exact same time sequence as other mega caps.  Rumors were swirling about some large leveraged funds getting blown out of positions.  One will never know if they are true or not, but judging from the chart patterns an things I have seen in my career, we will likely hear about funds that went out of business in Mid December 2018 in the near future.  In its BTC pairing, Litecoin has increased nearly 30% in the past week.


PAC has seen a small rally vs. Bitcoin, as buyers start to look at some of the smaller cap projects.


In summary, I have found that looking at pairs and multiple assets within an a sector is more useful than simply saying something is priced “too high,” or “too low.”  I was taught early on in my career that in order to make that statement, I needed to explain what relationship I was looking at when making a statement on price.  In my opinion, watching some of the mega cap exchange rates  versus Bitcoin will be a key moving forward.



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