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Market Lab Report - Premarket Pulse 7/8/19

U.S. non-farm employers added 224,000 employees for the month, above estimates of 165,000, and a big jump from the 75,000 new  jobs reported in May. This has pushed the odds of 3 rate cuts over the next four meetings down to two rate cuts which pushed futures lower by around -1%. Nevertheless, more rate cuts are coming, and a happy, buoyant economy still seems a chimera, a Potemkin village as one decent jobs report does not a strong economy make.

The action of stocks since the follow through on 6/7 has been somewhat lackluster with mostly only small gains in leading stocks as the major averages trade higher. The gap up on Monday after the favorable talks between the U.S. and China at the G20 meeting was less than impressive as the major averages closed in the bottom half of their respective trading ranges. A resolution could still be a ways off. Volumes since then have been light as could be expected during the holiday shortened week.

Meanwhile, bitcoin is attempting a bounce after correcting about -31% down to $9614 which is in line with historical corrections which have ranged typically between -28% and -42%. This of course does not include the once-every-blue-moon mega bubbles where bitcoin has corrected well beyond two-thirds of its value from peak-to-trough. Bitcoin price/volume action suggests it may retest or undercut $9614 lows though numerous tailwinds remain thus its first break of its upside parabolic rise on May 17 did not result in a typical correction of -28% or greater for the first time in its price history.

The current correction stands at -30.8% peak-to-trough. Should tailwinds prevail, especially QEndless, bitcoin does not have to retest or undercut $9614 lows. It may just trade sideways before going higher once again.

Grayscale ETN ETCG tends to well overshoot both the upside and downside thus handle with care. GBTC also overshoots but not by such extremes.

QE remains in full force. Keep in mind that before the trade wars, the global economy was on thin ice thus central banks had no choice but to continue to print. Therefore even if a trade truce is reached between the U.S. and China as well as with other countries, it does not solve the issues that caused the problems with the economy in the first place.

The price of gold and bitcoin have started to correlate more recently due to the diminishment of the value of fiat from the excessive printing of money. Both tend to react bullishly to announcements from central banks that more QE-based capital is on the way.

Ray Dalio of Bridgerwater among other luminaries have said they expect a major devaluation of fiat in the years to come. When any country has overprinted their currency, hyperinflation has been the result. When central banks print their respective mainstream fiat currencies excessively, there is little reason to assume the outcome will be any different. Meanwhile, hard assets and alt currencies, especially the flagship bitcoin, continue to benefit. More of something reduces its value when demand stays constant. Demand for fiat may start to fall as demand for alt-currencies and gold increases as a consequence of fiscal uncertainties around fiat.

The innovations around various alt-coins such as Chainlink who recently secured major deals with both juggernaut tech companies Google and Oracle validates the concept of decentralized tech, in this case with the ability to eliminate trusted third parties even when data is moved off the blockchain. Google sees what they call enterprise blockchain as a massive revolution that will take place. Chainlink is at the epicenter.

Other innovations are on the way, some of which are showcased in the alt coins highlighted in the crypto table. Keep in mind that just as with the dot-coms, most crypto companies will fail as their tech either falls short, fails to compete, is an impossibility, or worse, is just a scam.

As one example of scams, I investigated every AI trading platform that claimed big gains. None were legitimate. One company even used the image of one of the MP’s in Australia and claimed him as their CEO lol. That said, any AI trading platform that is legitimate will either remain silent as the creators make money for themselves, or will become well known in the public arena with doors presumably shut to new investment just as all-star traders such as market wizard Gil Blake did back in his day. Such funds tend to reach a maximum rather quickly then close their doors to new capital.

Of course, the space is still embryonic and laden with scams, so legitimate strategies may have a tougher time attracting capital until they post evidence of a track record that runs a sufficient length of time. But I have yet to see even a posted track record of any length. Maybe that’s because the average cryptofund was down -70.1% last year.

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