Gold and Bitcoin Threaten To Enter The Next Bull Market – FOMC – ZIRP Until 2022

Today equities closed lower even after Powell essentially pledged to keep interest rates low for the better part of the next 2 years. The SPY and DIA finished down .56% and 1.07% respectively while the QQQ managed to stay positive up 1.20% on the session.

Despite the interest rate suppression, as I predicted on Monday, Powell did not announce any new stimulus for the economy which I believe will trigger profit taking in the near term. Stocks behaved about as I expected after the announcement and ended the day fairly soft which should cause some headwinds as traders take profits and wait for new direction.

Notably financials and airliners have ran hard over the last 2 weeks and have been due for a correction. Today they led the market lower as the XLF finished down 3.74% with names like BA and AAL both down well over 6% each. During the session I used a common, but reliable chart pattern to buy put on BA and BAC which are both nicely in the money thus far.

I took advantage of the knee jerk reaction to the news and entered BA Jul $170 puts @ 7.65 during the 2:10 candle on the 10 min.

The classic inside bar on BA intraday sent bearish signals going into the FOMC announcement. This trade is ridiculously, and I mean… ridiculously crowded with retail. Once this thing catches downside momentum it will waterfall as newbie “investors” are forced into panic selling.

Price target for this trade is $190. We could easily get there tomorrow if the market gaps down in the morning.

Classic inside bar.

Another inside bar that caught my attention today was BAC. This is another stock that has had a crazy 2-3 week run but became very overbought in the short term and has been due for a pullback. Recognizing that the stock was underperforming and that the 10 min candles were showing a near perfect inside bar pattern, this was a trade I entered around 11:00 am in anticipation of more selling later in the day. The fact that it pushed lower and traded sideways while the rest of the market had since managed to stay off of the lows was a sign that the stock wanted to go lower. This coincided with my prediction that the market would sell the FOMC news as no new stimulus would be implemented in the near term.

Price targets for BAC are $26, $25.50, and $25. Again, a gap down tomorrow could easily get us to $26. I think this stock wants to retest $25 but the exact exit point will depend on the velocity of the move. I am comfortably up 20% on my position (Jul $25 P) so I won’t have any problem taking profits at $26 though if it looks like it wants to flush further, I may choose to just ride it. Another way to play it could be to sell at $26, then look for a potential reentry to the short side.

I am also still in the money on my SMH $150 puts. Semi’s were fairly strong today though as long as the topping tail stays intact in the daily this trade is still a hold.

GLD has regained the daily trendline that I have been intently watching. I believe it is a very strong buy and may be ready to make a run at $1800. With the Fed laying down the fundamentals by pledge low rates for the next 2 years as well as the overwhelmingly bullish technical position that gold is in, all of the stars may have finally aligned.

Also something noteworthy is that SLV seemed to decouple somewhat from the SPY today-

SLV has traded like an industrial metal and has mirrored the S&P for some time now. However today it got a huge bid off of the FOMC while the SPY struggled to stay above $320. It’s only one instance but it could mean that silver is ready to start trading like more of a monetary metal again as opposed to an industrial. The last time silver did this was during the bull market of 2009-2011 where it posted 6x gains in about 28 months from the 2008 low. Just something to keep an eye on.

Also trading higher off of the FOMC statement was bitcoin. Bitcoin bugs predict that this trendline that is now broken was the last area of resistance before the next bull market. The halfing just took place a few weeks ago and GBTC has a very strong cup and handle pattern on the daily chart which is a perfect setup for a confirmed break of that trendline.

If you are a novice to technical analysis – take notes because this pattern will make you money in the future. Notice how it has hammered on the red line 4 separate times in the last month or so. Each time it was rejected it made a higher low, then came back to attack it again. This is an extremely bullish signal that tells us that it is ready to violently thrust higher any day now.

In conclusion, I don’t want to sound like a pumper or anything but today may have been the last day we see sub $10,000 bitcoin. What confirms this even more-so is that the trade in gold also bears a striking resemblance to BTC both technically, and fundamentally. If gold and BTC both confirm above their respective daily trendlines , I am certain that we have seen the beginning of the next bull market for both assets.

About Aaron Basile
Day Trading and Swing Trading Ideas, Certified Personal Trainer, Power Bodybuilding, Avid Sports Fan (NBA, NFL)

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: