The major market averages moved higher on Friday, with the S&P 500, Dow Jones Industrials, and NYSE Composite Indexes all posting a new all-time closing highs while the NASDAQ Composite churned and stalled on weak volume. Volume across the board was lighter, giving the action on Friday a distinct lack of enthusiasm after an allegedly "strong" jobs report. Many broken-down leading stocks have also run into resistance, mostly at their 50-dmas, after logical oversold rallies that took hold on Wednesday, as Gil tweeted they might on that day following a number of undercut & rally types of moves, which we use as "Ugly Duckling" long set-ups that tend to be very effective in a QE market where things tend to rally when they begin to look their ugliest.
An example of one such situation is seen on the daily chart of Micron Technology (MU), which gave up a month's worth of gains in about 4-5 days before undercutting several prior base lows, triggering a logical undercut & rally type of move. In many cases, such a move can be played as a very short-term swing-trade on the long side. Once the stock reaches a potential area of resistance, as MU did once it pushed past the 50-dma and reversed at the confluence of the 10-dma and the 20-dema, one could then flip back to the short side. This is very typical action for a stock that is starting to form a potential head and shoulders top. The question is whether this market lends itself to such "textbook" interpretations. If MU cannot hold near-term support at the 50-dma, then a full-blown H&S pattern may ensue.
It remains to be seen whether these logical, oversold reaction rallies turn these leaders into optimal short-sale targets as we move into this week's action, which will include a Fed policy announcement on Wednesday. We will report on potential short-sale set-ups if and as they occur in real-time during the week. This morning, futures are up slightly, but the stock market isn't the biggest story this morning.
The big story this morning is the new Bitcoin futures contracts that began trading yesterday on the Chicago Board Options Exchange. Bitcoin mania remains one of the main circus attractions of this market, but for those willing to take the risk, it has been a profitable venture as the crypto-currency of choice cleared the $19,000 level this week. We originally identified a subtle pocket pivot within the base in the Bitcoin Investment Trust (GBTC), the single pure-play Bitcoin ETF available to investors, on October 30th when it closed at $726. It has since reached a peak of 1905.55, posted on Tuesday of this past week.
In the midst of the Bitcoin mania, anything related to crypo-currencies or blockchain technology has posted notable price moves, from Overstock (OSTK) to Square (SQ) and even more obscure companies like Riot Blockchain (RIOT), shown below on a daily chart. RIOT was first brought up during a live VoSI Market Webinar on November 16th when it posted a subtle pocket pivot within its base at that time. It then launched some 200% higher from there over the next five days.
So, is this just "pixie dust" hype or something more serious? RIOT was initially a bio-tech/medical device company that went by the name of Bioptics a couple of months ago. But when it announced that it was moving into blockchain technology by buying up crypto-currency miners, its life change dramatically for the better, at least from a stock price perspective! The legitimacy of any such stock, hype or not, will be proven or disproven by its subsequent action following a sharp price move. If the stock is able to build a new base as average volume continues to rise, then that could be a sign that institutional investors are taking notice. Currently, RIOT is attempting to settle down along its 20-dema, where it found support over a week ago. It has since posted two five-day pocket pivots over the past two days, and we view clusters of five-day pocket pivots, in most cases, as favorable developments in lieu of a single, standard ten-day pocket pivot.
With the Chicago Mercantile Exchange set to begin trading its own Bitcoin futures next weekend, it will be interesting to see whether the new source of liquidity (since contracts will settled in dollars, not Bitcoins), will allow sellers an opportunity to sell and take profits. Whether this produces an opportunity in Bitcoin or any of the related "pixie dust" stocks is an open question, and something we'll be watching closely this week. If we see anything actionable anywhere within the overall Bitcoin theme, will will alert members via real-time reports.