BTC Buy Zone

BTC has now declined into the buy zone. The market (BTCUSD) has retraced 50% of the recovery from the 340 low up to 550 which is midway through the usual retracement level. BTInvest believe that this provides a good first entry level, mre conservative traders (or short term traders) may want to wait for a further sell off to the bottom of the buy range (400/410).

Long term investors should look to place their initial position (approx 1/3 of the full intended position) with a stop at 320. The position should then be added to on a break above 550 (another 1/3). This is based on our belief that a major pivot low was reached at 340 and a major swing upward is now underway.

Mt.Gox Rant

Periodically we see articles or, as in this case, listen to commentary which just needs to be shot down in flames.

Again and again we see comments along the lines of “The Mt.Gox failure sounds the death knell for Bitcoin” or, more recently, “Mt.Gox must be saved to preserve the future of Bitcoin”.

Absolute rubbish.

We don’t recall anyone saying that the Madoff Ponzi scheme marked the end of the road for the US Dollar, or even that it marked the end of the hedge fund community; on the contrary hedge funds have gone from strength to strength.

These comments are made by self serving individuals and, if anything, show the concern that banks have for the disruptive impact of Bitcoins on international transactions and Banking.

Mt.Gox should be allowed to die in peace. It wasn’t a problem with Bitcoins or the Bitcoin marketplace, it was a problem with the management (or lack thereof) of Mt.Gox. We don’t know if it was theft or incompetence, in many ways it doesn’t matter for Bitcoin as a currency, but the sooner that Mt.Gox is liquidated and put to rest the better.

Thank you – rant over.

US Interest Rates and Global Implications

Part of analysing any market is the cross influence of other global markets and what they might be telling us. At BtInvest we are becoming increasingly concerned with the behaviour of US Interest Rates.

We are, according to all reports, in the middle of a growing economy in the US. The FED are tapering their Bond purchases; OK, not reversing these purchases but reducing the rate at which they purchase them – Its a start.

Given this scenario the 10yr Bond Yield should be showing an impact, we would expect the rate to be rising. This was true up until Q4 2013; rates had been steadily rising from a low of 1.4% until in September we hit 3%. Since then we have been in a broad range between 2.5% and 3%, last retesting the 3% level in December 2013 before declining to the current tighter range of 2.6%-2.8%.

While it is never good practice to pre-empt a breakout from a range, we are increasingly concerned that the yield will break out of the tighter range to the downside and test the 2.5% level. If we then complete the breakout from the 2.5%-3% pivot range to the downside this will have serious implications for the Global Marketplace.

The major risk is that this move is foreshadowing a dramatic slowdown in the global economy; we don’t see how a sub 2.5% 10 year yield can be justified in a growing economic environment. If this slowdown takes place we are likely to see a dramatic shift out of risk assets such as equities and a flow into what are perceived as safe havens (US Treasuries, Gold, Swiss Franc, the usual suspects).

At the moment Global stock markets are clearly not anticipating any slowdown of this kind. This could either mean that we are being overly cautious, as I said it is always dangerous to pre-empt a breakout in any particular direction.

Alternatively it is a well known maxim that where the bond market leads the stock market follows (eventually) so at the moment we at BtInvest are keeping a watching brief on both interest and credit rates for any sign that trouble may be brewing.

 

 

FTSE-100 in the doldrums

Starting commentary on a market that has been range bound for the past 12 months is never easy. It is stubbornly fixed at a central level of about 6600 with no impetus to move either way significantly; this is even more surprising considering the improving economic statistics we’ve seen over this period.

Contrary to first impressions, however, this is not the type of market to ignore. Behaviour of this type shows significant churning of stock between different classes of holders. Participants will be lulled into a  false sense of security and  become very used to buying dips and selling rallies. When a true move does happen it will catch a lot of people the wrong way and will move rapidly and further than anyone expects as participants caught the wrong way scramble to close out their positions.

The key watchword with this type of market behaviour is patience. There’s no easy way to determine which way the market will eventually break so hold and watch for the breakout when it happens.

On the upside the level is clearly defined, a break of 6880 on the upside indicating a continuation of the bull swing. The downside is a little trickier; I would treat each of the downside levels (6420, 6315, 6025) as a signal to liquidate in stages (or establish shorts in stages for short term traders). On either side of the market be wary of assuming the market will give you ample time to get in or out of positions, this formation rarely unfolds slowly.

We recommend a wait and see approach on this market, entering longs on any break above 6880, stops on these new longs should be placed below the old central value area of 6600. If you are holding longs already look to scale out of these positions if the market starts breaking down through the support levels.

Have we seen the high in US Markets?

US Market Commentary at the start of this year was very focussed on the overdue correction for the markets, and a general consensus that this would be a healthy development – this could be a case of be careful what you wish for. Since the start of 2014 the US markets have gone nowhere; they’ve been higher, they’ve been lower but are broadly unchanged from where they started. Analysts are now speaking hopefully of a “Creeping Correction” where we have a period of consolidation without any real setback.

Our view is that this is wishful thinking. We believe the high has been seen for the year and  we will see lower lows in due course. While the NASDAQ market best illustrates the breakdown in sentiment that has occurred in the last quarter other major indices are showing a similar lack of progress and consolidation.

We believe that there needs to be another down leg across all the major US indices before we able to see a base forming and a further leg higher. A key indicator that this move is under way would be a break of the trend-line formed across the two recent lows in the NASDAQ. When this next intermediate leg takes place we expect this to impact all the major indices, not just the NASDAQ.

Our current estimate of targets is 3000-3050 in the NASDAQ-100, 1625-1650 in the S&P 500, and 14500-14750 in the DJ-30. These targets would be invalidated if we see a break to new highs in 2 of the three indices.

On a longer term perspective we are still anticipating a continuation of this 5 year up-move. While the bull market is historically long in the tooth, we are not yet seeing the destructive structure that would be expected ahead of a bear trend developing. A key indicator will be how the markets responds after this intermediate term correction that we are expecting is complete. Any failure to make new intermediate highs after this correction would be the signal we will be looking for to confirm that this bull move is over. This isn’t something we’ve seen to date.

 

 

BTC hits a significant low.

This appears to be an opportune moment to start our coverage of the BTC market.

The USD/BTC price reached a low point of $340 on 11th April 2014, triggered by further announcements from China about that country clamping down on the ability of the BTC exchanges to transact business with banks in the country. This move was immediately reversed to close the day at $420. This was followed in subsequent days with a swing up to $550.

While we may see short term weakness to retest toward the lows, we see this as a buying opportunity. $340 has all the hallmarks of a panic low and should see good support from that level.

On a longer term basis we expect the market to form a base before pushing ahead to retest the first significant resistance at the $700 level. We expect this to form a medium term limit to any further up move until a more constructive base has formed.