They're Getting Levered Up in Bitcoin
Bonds are up! But so is speculative interest in Bitcoin. Will this generation get hurt the way that prior generations did in other speculative investments?
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Before we get to the long-awaited bond rally (!!!) I need to do my now daily update on the speculation in Bitcoin and its related securities.
There was an article Monday in the Wall Street Journal talking about the move in Bitcoin and MicroStrategy. They interviewed a barber who was day trading MSTR (is that today’s equivalent of the shoeshine boy?). But there was also a 25-year-old who thought the ETF that was two times MSTR was a good way to play it.
In fact, his parents let him manage $700,000 of their retirement assets. He thought it would be ‘less dangerous’ if he put 27% of their portfolio in this 2x MSTR ETF. What did he do with the rest of the money? Well that went into MSTR.
I am going to go out on a limb and say I’ll bet he thinks this is what a diversified portfolio looks like!!!
Now let’s get back to the bonds. All that action in the bond proxy stocks last week really did turn out to be precursors to the move in interest rates. The yield on the Ten-Year slipped under 4.3% for the first time this month. Now I am eyeing that blue line which is currently around 4.1%.
It’s not easy to see, but recall when the rates dropped ferociously in July, breaking 4.1% was a big deal (see the low from there in March as well?). That sent the bonds surging, the break of 4.1%. So aside from the fact that the blue line is support on this trip down, there is probably some muscle memory there as well.
But here’s the interesting thing. The Utes were red for the second straight day, churning right up there at resistance. We’ll watch this closely because my take is that the Utes are the leaders here, not the other way around.
Elsewhere, the small caps made a higher high as did the Transports and breadth even eked out a higher high. The indicators themselves have changed very little but new highs did increase, although they fell short of the prior peak reading for now.
On the sentiment front, the put/call ratio on Monday was .75. I guess everyone is banking on the seasonality for this week (typically up). Of course, the S&P and the Russell have been green for six straight days so my guess is the final three trading days of this week are not all green.
I would also note that the DSI for the indexes are not over 80 yet but the VIX is back at 14, so if the market is green the remainder of the week, this will set up as a problem for just after Thanksgiving.
