$100,000 Bitcoin Price Won't Be the Top as Plenty of FOMO Remains
The market became overheated as the bitcoin price broke six figures, but dip buyers are stubborn and will provide support.
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Both stocks and Bitcoin have become overheated, which triggered some profit-taking on Thursday. Tesla TSLA led the Magnificent Seven MAGS to another new high, but the Bitcoin breakout over $100,000 did not hold.
Under the surface, breadth was weak once again, and the Russell 2000 IWM pulled back 1% and filled a gap in the chart.
One of the oddities of this market has been that, despite a series of new highs, the S&P 500 has had negative breadth for four straight sessions. Late in the session on Thursday, only around 200 stocks advanced while 300 declined and the index was close to flat. According to Jason Goepfert of sentimentrader.com, there are only a few instances in history of the S&P 500 hitting a series of new highs on negative breadth.
There are plenty of warning signs like this out there, but as I often write, strong markets stay sticky to the upside. They don’t just suddenly collapse. Dip buyers are stubborn and provide support and there is still plenty of FOMO to bring in buyers.
What we have to watch for is a news catalyst that scares away the dip buyers. On Friday morning, the November jobs report will be released and that has the potential to trigger a large move if it varies too much from the consensus view.
The hardest thing about this market is finding charts with good entry points.
There are still some substantial pockets of momentum, but they require chasing and are at a higher risk.
Although the Bitcoin breakout failed on Thursday, I do not believe that it is a top and expect to see very strong support on pullbacks.
Have a good evening. I’ll see you in the morning.
At the time of publication, DePorre had no positions in any securities mentioned.
