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  • Doug Wakefield

Oversold, Next Rally is Critical

As we kick off May, we have seen sentiment readings hit lows not seen since last fall. As the Federal Reserve made their latest scheduled FOMC meeting last Wednesday, May 1, the equity markets were ready for a rally. This seemed to coincide with Bitcoin and the crypto markets as well.

Let's look at the data.

CNN's Fear and Greed Index hit a low of 34 on May 1st. This was slightly higher than a reading of 32 on April 19th. To reach these low sentiment readings, we needed to go all the way back to November 1st of last year.

If we compared equity sentiment numbers to those from Coin Market Cap's Fear and

Greed Index for cryptocurrencies, we find that both sectors moved off lows last week.

The Coin Market Cap index reached at low of 47.31 on May 1. To find this level we had to go all the way back to October 18th of 2023 (46.76).

Even though the Federal Reserve did NOT lower rates, they announced that they were reducing the amount of US Treasuries they were buying thru their Quantitative Tightening Program. This has been going on since June 2022. However, they DID announce they would reduce the AMOUNT of Treasury REDEMPTIONS from $60 billion to $25 billion, and leave mortgage backed securities at the same $35 billion.

"This means $105BN less gross issuance needed in Q3, with The Fed implicitly saying 'yields are too high'." - (Zero Hedge, FOMC Leaves Rates Unch, Says (Bigger Than Expected) QT Taper To Start In June, May 1, 2024)

The next step is to see if the Treasury markets BELIEVE that "yields are too high".

As for the short term view of markets, the low sentiment numbers shown above in equities and cryptocurrencies, the recent stock buyback blackout period ending, and the slowing of Treasury redemptions by the Fed's QT program supports the bulls. Once again, this is all seen inside the largest debt bubble in history.

The peak in CNN's Fear & Greed Index was March 4 at 78. The reading on May 1 was 34.

The peak on Coin Market Cap's Fear and Greed Index was 91 on March 31. Its reading on May 1 was 47. Both indices have risen since then. Notice how the Dow, the NASDAQ 100, and Bitcoin all rose off their 100 day MA.

These low sentiment numbers were seen last fall.

However, outside the broad US equity market indices, we continue to see commodity and metal indices supporting the long term bear market in Treasuries and inflation.

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. All of these are writings are free.

The picture of Schiff Gold is shown because of its daily live feed of metals. I am not connected to the company at all. The picture was taken today, May 6, 2024.

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