Intermarket Analysis: A Global Roadmap including bitcoin


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A presentation I am giving to bitcoin exchange Coinsetter on intermarket analysis. Looking at the macroeconomic picture and all the global asset classes including bitcoin to see where we are from an investment and economic perspective.

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  • SPX
  • NDX
  • CRB
  • Russell 2000
  • Last 360 days
  • Last 30 days
  • German yields have reversed on a dime and back above the 65 week MA and down trendline. Looks like a trend change is under way from bear to bull. The Liquidity Paradox has caused this. Herd investing.
  • Double bottom and broken through big resistance to primary bull.
  • Charts Courtesy of Martin Pring. Rising interest rates are bad for equities. Compares World Stock ETF, the ACWI, World Bond Index all Diverging from equities. We have a breakdown in A/D line and the Global Bond Index. Are stocks next?
  • A break above 3.5% area 96 week MA
  • altcoins
  • USD, interest rates rising, Shanghai, off exchange activity
  • Intermarket Analysis: A Global Roadmap including bitcoin

    1. 1. INTERMARKET ANALYSIS A Global Roadmap including Bitcoin
    2. 2. WHAT INTERMARKET ANALYSIS DOES  Combines All Markets into a Unified and Coherent whole.  Bridges Gap Between Fundamental, Economic, and Technical Analysis.  Examines the Correlations between Four Major Asset Classes: Stocks, Bonds, Commodities, and Currencies.  No Market Moves in Isolation, the World is Connected.
    3. 3. Traditional Intermarket Relationships  The U.S. Dollar trends in the opposite direction of commodities.  A Falling Dollar is bullish for commodities; a rising dollar is bearish.  Commodities trend in the opposite direction of bond prices.  Therefore commodities trend in the same direction as interest rates.  Rising commodities coincide with rising interest rates and falling bond prices.  Falling commodities coincide with falling interest rates and rising bond prices.  Bond prices normally trend in the same direction as stock prices.
    4. 4. Traditional Intermarket Relationships  Rising bond prices are normally good for stocks, falling bond prices are bad.  Therefore, falling interest rates are normally good for stocks; rising interest rates are bad.  The bond market, however, normally changes direction ahead of stocks.  A rising dollar is good for U.S. stocks and bonds, a falling dollar can be bad.
    5. 5. New Normal Relationships  Dollar and Commodities trend in opposite direction.  Stocks and Commodities trend in the same direction.  Falling Bond Yields have hurt Stocks-until recently.
    6. 6. What Has Changed? Deflation!  3 major deflationary events in the last 15 years. 1. Started with the 1997-1998 Asian Crisis. 2. The Dot Com Bubble. 3. Great Financial Crisis.  When deflation is the main threat stocks and commodities become closely related.  During a deflation bond prices rise while stocks fall.
    7. 7. Where are we now? King Dollar rules. Why?  Abenomics is in full swing.  Eurozone in the process of massive QE.  China also easing.  A global easing cycle is underway sans US  Fed Hawks want to raise US interest rates sooner rather than later and the market perceives this.  Still THE flight to safety.
    8. 8. Who/what is a rising dollar bad for?  Everyone and everything (except the US for now) , including bitcoin.  A rising dollar results in lower foreign currencies and stock markets.  Investment funds tend to flow toward countries with stronger currencies.  Stronger currencies are the result of higher or perceived higher interest rates due to stronger economic conditions in a particular country.  Bad for commodities as well.
    9. 9. Inflationary Relationships  A positive relationship between bonds and stocks  Bonds usually change direction ahead of stocks  An inverse relationship between bonds and commodities  An inverse relationship between USD and commodities  Stocks react positively to falling interest rates.
    10. 10. Deflationary Relationships  Largely the same relationship except for one.  Stocks and bonds become inversely correlated.
    11. 11. Currencies
    12. 12. Commodities
    13. 13. Emerging Markets
    14. 14. Europe & Japan & Australia
    15. 15. This is what QE does!
    16. 16. Global Interest Rates What the hell is going on?
    17. 17. Global Interest Rates  Bonds have been getting hammered as rates rise, even though commodity prices are off the lows.  Monetary Policy has been very easy  Is the bond market smelling a resurgence of growth in the second half of 2015?  Are inflation expectations picking up?
    18. 18. Bitcoin
    19. 19. Correlation does not imply causation
    20. 20. Bitcoin trades like a commodity  Not like a currency, but it is affected by both.  Massively volatile still, even though trading has been rangebound for a few months.  Trades mainly on sentiment and technicals.  Still hard to trade in size without moving the market.
    21. 21. From a correlation standpoint  Still a very young asset, so hard to make definitive correlations.  Doesn’t correlate with anything for long periods of time.  However, there are four factors that appear to be affecting the price.
    22. 22. 4 factors affecting Bitcoin Price  The Shanghai  The USD  Interest rates  Off exchange activity, low liquidity on exchange
    23. 23. Local Bitcoin Volume
    24. 24. Bitfinex Volume vs Price
    25. 25. Bitcoin Conclusions  The 50 day EMA has been massive resistance, still is.  Volume is anemic, OBV tells us s, not imminent reversal.  Bear markets can end in time or price. If Price were to stay in this range, bear market could end in mid-late July.  I don’t anticipate time ending it. Price will.
    26. 26. Conclusions  Shanghai is in a major uptrend look for this to continue, all Chinese Speculation is going there.  USD is also in a major uptrend, but has been consolidating in recent months, look for uptrend to continue.  Europe has averted disaster, and the equity markets look to be bottoming here.  Interest rates have been repricing from really depressed levels and due to the liquidity paradox. Is it a reset from the depths of hell? Or is more economic growth coming in the 2nd half of 2015? Where is the inflation?  Commodities have gotten a bounce from recent dollar weakness and interest rates ticking up, but downtrend still intact.
    27. 27. Contact me  Email:  Twitter: @sammantic