Bitcoin Price All-Time High Shows No Sign of Top as Market Surges
As Magnificent Seven names like Nvidia see investors rotate out, bitcoin has gained remarkable momentum.
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The market continued to perform extremely well on Friday, with the DJIA, S&P 500, and Russell 2000 producing good gains while the Nasdaq, Nasdaq 100 QQQ and Magnificent Seven MAGS struggled. Breadth was very strong, with more than three advancers for each loser. New 12-month highs expanded to over 900 names.
Bitcoin IBIT hit a new all-time high and has incredible momentum, but volatility picked up in miners and related names due to speculation. Although Bitcoin is very extended, there is no indication of a top.
The theme of the day was rotation out of Magnificent Seven and into the rest of the market. While there are a lot of folks who are unhappy about weakness in Nvidia NVDA, Amazon AMZN and Google GOOGL, it actually is healthy that the market has broadened and that there are questions about the valuation of some of the mega caps that single handily carried the market for a long time.
The biggest obstacle that the market faces is that the action is too good and there is extreme bullishness. A parade of pundits on CNBC on Friday proclaimed that they are bullish through the end of the year. According to Jason Goepfert, there is 12-times as much money invested in leveraged-long ETF index funds as there is short in leveraged ETF index funds. That is the highest level in two years. Just in the last two days, Rydex funds had their largest two-day spike in leveraged bull assets in their 24 years of existence.
There are many other statistics like this, which point to what some might call "irrational exuberance." This is catnip for the contrary bulls that try to time market tops by the level of euphoria. The theory is that, when everyone is bullish, there isn’t anyone left to buy. There are indeed some indications that there isn’t a lot of idle cash on the sidelines.
However, as the old saying goes, the trend is your friend until it ends. There isn’t any indication that a turn is about to occur, but the market will probably need a rest.
Don’t forget that next week is Thanksgiving, which typically triggers pockets of speculative trading.
Have a great weekend. I’ll see you on Monday.
At the time of publication, AUTHOR was long NVDA and IBIT.
