intermarket analysis for cybertraders: where bitcoin fits in
TRANSCRIPT
INTERMARKET ANALYSIS
A Global Roadmap including Bitcoin
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.
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.
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.
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.• Greece and EU uncertainty is dollar positive
Who/what is a rising dollar bad for?
• 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.
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.
Deflationary Relationships
• Largely the same relationship except for one.• Stocks and bonds become inversely
correlated.
Currencies
Commodities
Emerging Markets
Europe & Japan & Australia
This is what QE does!
Global Interest Rates
What the hell is going on?
Bitcoin
Correlation does not imply causation
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.
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.
4 factors affecting Bitcoin Price
• The Shanghai• The USD• Interest rates• Off exchange activity, low liquidity on
exchange
Local Bitcoin Volume
Bitfinex Volume vs Price
Bitcoin Conclusions
• The 200 day EMA has been massive resistance, still is.
• Price has broken above the 50 & 100 day EMA’s and is consolidating before a biiger upmove
• Bear markets can end in time or price. If Price were to stay in this range, bear market could end in mid-late July.
• Price action has been really constructive
Conclusions• Shanghai remains in major uptrend look for this to continue, all Chinese Speculation is going
there despite this correction. If it changes will it go back into bitcoin.• USD is also in a major uptrend, but has been consolidating in recent months, look for uptrend
to continue.• Europe looks to be bottoming, do the markets know something?• 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.
