Weekly Market Overview October 24, 2021

For the past few weeks I've been doing a video version of the Weekly Market Overview, and have gotten a lot of good feedback. But of course, we can't please all the people all the time, many of you have reached out expressing your desire for the written version. I actually enjoy doing both versions, so depending on how expressive my fingers or voice is feeling will determine the weekly medium I deliver. 

Today, the pen (keyboard) has control...

 This past week I had some discussions with investors across different asset classes, commercial real estate, residential real estate, distressed debt, corporate debt, value (equity) investors, long/short equities, emerging markets and crypto, to name a few of the contingents. 

To be clear I don't identify as anything other than a quantitative cross asset investor, so I basically run the gambit of all of those, with the distinction being, I use quantitative analytic models to formulate my investments/trades.

I don't claim to be 100% accurate, 60-70% is my sweet spot. 

There were a number of topics discussed, as you'd imagine, from politics (yawn), to global security, to the Fed, to inflation, shipping, and just how any and all of this is sustainable, when it'll end, and what would be the catalyst. 

That isn't a question that I have an answer to, but can speculate with the best of them (maybe). 

But it does lead me to asking the more tactical question, in the financial markets that I am currently interested in, is our current trajectory sustainable for much longer?

I've shared this chart in the past, and I think it is the single best ratio to contextualize how "expensive" (or cheap) the S&P 500 Index is compared to the amount of money that is circulating, and how that compares to the last 60+ years of data. (SPX/M2)

The most obvious comparison here is that we are still a long ways away from the bubble of the Dot Com late 1990/2000. Though there are many comparisons to the tech bubble, quantitatively we are still a long ways away from that extreme. 

The next thing I notice is that we are currently higher than any other time in this recorded history, minus the tech bubble, higher than the housing bubble at the 2007 peak and the only other instance was the post WWII peak before the Kennedy Slide of 1962.

Things become a bit more interesting when we look at the NDX/M2. First of all, the Nasdaq 100 only goes back to 1985, so we can only compare one bubble era. 

Again the Dot Com bubble stands out, and while we are much closer to those levels, we are miles away from the 1987 crash and the Housing Bubble in 2007. 

Of course it wasn't until the late 1990's that technology started to impact the consumer and the economy, with cell phones, personal computers and the internet. The Nasdaq being mostly tech. 

A major difference of the 1990's and now, is that all of these technology companies are insanely profitable with little if any cost of producing goods, compared to older economy companies. 

If nothing else this analysis of the two most important indices for the US Economy compared to the M2 Money Supply shows that it is historically possible to go higher, it wouldn't be unchartered territory!

Until (if) we take out the Dot Com era levels, this is nothing historical. 

Next we can look at the different major market indices and assets, and identify how much time they are spent in a bullish or bearish regime.

The most significant of all of these assets, by total number of days recorded is the $SPX S&P 500 index with 12,802 trading days recorded. 

86% of the time, the S&P 500 trades in a bullish regime. 

The point of all of this is to demonstrate the that there is still an upside opportunistic environment to the Nasdaq and S&P 500.

NQ/NDX/QQQ 

The Nasdaq ($NQ) spend the last 2 1/2 weeks rallying off the lows, with barely a stall. Last week we were in buy mode waiting for our opportunity, which did not come, we remain sidelined. 

We continue to wait for the "best looking sell setups in the world" to get us in to some low risk positions and will anticipate building on them over the coming months if a campaign long reveals itself. 

AAPL

Though we haven't been able to get long $NQ yet, On October 18, we did get long $AAPL calls. 

NFLX

We also got long $NFLX on October 4th, for about $50 in profit so far.

Platinum 

$PL (platinum futures) has a short (FBOR) setup with a target price of 965.3 for front month. 

BTCUSD

Bitcoin continues to drive higher, putting in new all time highs this week, and taking a bit of a breather. The next longer term level I'm tracking is 101,000 per Bitcoin. 

That level might prove to be the top, and I'll make adjustments to my model along the way, but there is real potential to see prices between 200k and 400k. 

In the Trading Lab we have been covering this extensively the past few weeks, and will remain a large portion of our focus as we progress through this next leg in the crypto bull market. 

Crypto is the most important markets we trade currently, and there is a lot more room to go. If you aren't in yet but want to get involved safely, join us in the Trading Lab and we'll get you sorted!

ETHUSD

Ethereum has a lay up target at 7,000, and that isn't even close to where it's headed!

DOTUSD

Polkadot (DOTUSD) is another smart contract platform and along with SOL, ADA and the other's in the same sector are where a pile of capital has been flowing. We got in last week in the 30's and expect to see $88 as our next level from here. 

The amount of opportunity that still remains in crypto is truly incredible, and things move lightning fast in the space. 

Being successful in crypto isn't as easy as Twitter frog's might make it seem like. There are really easy ways to make money in crypto, and really hard ways!

For example here is a sector chart, of the top 5 assets in the 7 different sectors in crypto. 

• Centralized Exchanges
• Decentralized Exchanges
• Smart Contracts
• Privacy Coins
• De-Fi
• Currencies
• Web 3.0 Platforms

Year to date (2021) Centralized exchanges have returned 864% while the top 5 DeFi products have lost 20%. 

The DeFi money is fickle, always searching for yield it seems. 

But if all you knew was to get into De-Fi and you missed the latest and greatest, you might be sitting on losses. 

Again, this stuff moves VERY FAST, and the opportunities are huge if you can get an edge. 

We will continue to keep our Lab Members in the lowest risk/reward projects, with a smattering of major alpha generating trades, but mostly it's my job to know when to be in the massive moves higher and when to get out. 

Join us in the Trading Lab if you want access to all of this!

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