It's Crypto Week, But There's a Lot More Than Bitcoin on My Mind
As Bitcoin as it hits an all-time high, here's what should be on your radar. Plus, what to make of two straight red days for the SOX, and what I watch for during earnings season.
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I read somewhere that it’s "Crypto Week" or some such thing. Quite frankly this market feels like it’s Crypto Week or Coin Week every week so I’m not quite sure what is different this week vs. other weeks.
On television I think every single guest was asked about the breakout in Bitcoin. I rarely comment on Bitcoin, but let me say that the breakout last week has a short-term measured target around $120,000 (longer term is higher). I only tell you this because the Daily Sentiment Indicator (DSI) for Bitcoin chimed in at 83 on Monday. So if there is a frenzy over this being Crypto Week, that DSI should be on your radar.
As for the market as a whole, there was no selling, but was there much buying? It feels like there has been much churning and chop in the last week. In fact most of the indexes are where they were on Thursday July 3.
Is that the overbought condition working itself off (and the too-bullish sentiment) or is it something more? Thus far it is the former, not the latter. But recall that it tends to take time for it to matter.
Breadth was flat on Monday, which is curious because the Russell was up about one half of one percent on the day. Usually when the small-caps are up, breadth is decent. Be that as it may, that means the McClellan Summation Index stopped going up. It has not turned down.
In fact, if breadth is decent on Tuesday it can resume its push upward. If breadth is poor then this indicator ought to begin to falter. A decent negative breadth day would turn it down for the first time in weeks.
There was something else in Monday’s market. It’s also pretty minor, but the SOX was red for the second consecutive day. Generally that is not a big deal but it is the first time it has done so since mid-May, so two months.
Recall last week the software stocks were sold (they rebounded Monday) so this week let’s see if folks decide to sell the semis. Are we going to get group rotation selling or is something else going on? If the Summation Index turns down, then I’d say the group rotation selling will not last; eventually they will all get sold together at some point.
What I like to watch during earnings season is if the "down and outs" report better-than-expected earnings, do they pop and hold on to the pop? For example, Delta Air Lines DAL did just that last week. But also do the stocks that are up and report good earnings see a pop? Or is the good news priced in?
We still have an overbought market with froth that needs to come out.
