For weeks and weeks US stock indices have been totally oblivious to warnings of risk. Based on price movements, everything was a big yawn...until last Friday. Tensions between Israel and Iran have not only increased, but Iran's attack on Israel was the 1st since the Ayatollah Khomeini, came to power in 1979. While Iran has worked through proxies and small groups to attack Israel, a full on assault of missiles and drones from Iran as seen this weekend had never taken place.
What happened in various financial markets today presented us with material we have not seen in months. Let's start with reviewing sentiment through the lens the 2 fear and greed indices we have discussed this year. For stocks, we will continue to use CNN's Fear and Greed Index (based on the S&P 500), and for cryptos we will use the one at coinmarketcap.com.
Since last October, the highest reading we have seen in the CNN Fear and Greed Index was 80, reached in February. The highest reading we have seen in the coinmarketcap.com fear and greed index was 92, reached in March.
Considering the fact that the last 2 days prices have come down very fast, a reversal could happen anytime. However, today we saw a pattern across major US stock indices we have not seen since this rally started up last October.
I have also been watching the Japanese Nikkei, which recently has broken a very old pattern that goes back to 1990!
Will the Dow failing to break 40,000 and the Nikkei failing to hold 40,000 be a sign of a major turn in financial markets such as 2000 and 2007? We continue to watch.
We know that Bitcoin broke its 2021 high in March, topping 73,000 on March 13th. Then it broke 71,000 on March 31 and April 8. Currently, the 70,000 barrier is the one to break...and continue to climb...in order to return to its bull trend.
On the downside now is the 60,000 level. On March 20th Bitcoin stopped right below 61,000 and on Saturday when Iran began firing on Israel Bitcoin dropped hard, but stopped right above 61,000.
Is this the level it will stop at before returning to its climb? We must wait and see. With the next Bitcoin halving (the speed at which Bitcoin can be mined/generated) taken place in a few days and only every 4 years, it will be interesting to see how Bitcoin and the cryptocurrency markets react to this rare event.
In closing, while the religion of the Fed has lead many to believe that big daddy money bags can always spew forth unlimited trillions of fiat currency, the 3 month Treasury bills and the long term Treasury notes continue to force their magic to only come in words, not actions. They can not cut rates to provide the cheap money unless the bond markets allow them.
I will write another post before the end of the month. In the meantime, keep watching gold and the metals. When you can not created something out of thin air, its value comes even more valuable when the thin air technique have problems.
More soon. Please share with others if you found this of value. Thanks.
Disclaimer: Best Minds Inc was closed in 2018. I am retired. Nothing I am writing should be taken as advice to buy or sell any form of security or asset. Everyone must study and consider their own situation before placing money anywhere, as well as understand they are living in a time where major changes at the highest levels of money are taking place.