U. K. REGULATOR WARNING — ‘LOSE ALL THEIR MONEY’ DAMPENS MOMO SENTIMENT

‘Lose All Their Money’

Please click here for a  chart of Bitcoin futures (BRR_F).

Note the following:

  • We were sharing with you late last week that sentiment had reached the beginning of the extreme zone.  Our long time subscribers already know that when sentiment reaches extreme positive it is a sell signal.  However, as a note of caution, the signal is not precise in its timing and sentiment can move farther into the extreme zone.
  • The other important point about sentiment is that it is a sell signal only if it stays in the extreme zone for a while.  Historically, often the sentiment moves back from extreme to very positive zone. Such a move gives a new life to the momo crowd.
  • A common reason for the sentiment to move back from the extreme zone is that a regulator expresses concern.
  • Bitcoin has been emblematic of the speculative fever that has gripped the momo crowd.
  • The U. K. Financial Conduct Authority has issued a warning regarding Bitcoin, “If consumers invest in these types of products, they should be prepared to lose all of their money.”
  • The chart shows the impact of the statement.
  • The chart shows that Bitcoin lost as much as 21% of its value in a very short time.
  • The chart shows that the VUD indicator has been mostly orange indicating net supply of Bitcoin. The VUD indicator is the most sensitive measure of net supply demand in real time. The orange represents net supply and the green represents net demand.
  • The negative sentiment from Bitcoin has crossed over to several momo stocks.  The reason is that a large number of investors who have lately been buying Bitcoin are the same ones who are buying frothy momo stocks.
  • The best way to understand the move in Bitcoin today is to think of a doctor giving Tylenol to reduce a fever.  A short time afterward, Tylenol wears off and the fever may spike back if there is no other treatment for fever.
  • Here we have the Congress, the President-Elect and the Fed doing everything they can to spike the fever.

Momo Crowd And Smart Money In Stocks

The momo crowd is 🔒 (To see the locked content, please take a 30 day free trial) stocks in the early trade. Smart money is 🔒.

Gold

The momo crowd is 🔒 gold in the early trade. Smart money is 🔒.

For longer-term, please see gold and silver ratings.

Oil

The momo crowd is 🔒 oil in the early trade. Smart money is 🔒.

For longer-term, please see oil ratings.

Markets

Our very, very short-term early stock market indicator is 🔒.  This indicator, with a great track record, is popular among long term investors to stay in tune with the market and among short term traders to independently undertake quick trades.

Interest rates are ticking up and bonds are ticking down.

The dollar is stronger.

Trading futures is not recommended for most investors. The purpose of providing this information is to give an indication of the premarket activity that usually guides the activity when the market opens.

Gold futures are at $1835, silver futures are at $24.87, and oil futures are $51.60.

S&P 500 futures resistance levels are 3800, 3860 and 4000: support levels are 3630, 3600 and 3520.

DJIA futures are down 310 points.

Protection Bands and What To Do Now?

It is important for investors to look ahead and not in the rearview mirror.

Consider continuing to hold existing positions. Based on individual risk preference, on dips, consider holding 🔒 in cash or treasury bills or short-term bond funds or allocated to short-term tactical trades and short to medium-term hedges of 🔒 and short term hedges of 🔒. This is a good way to protect yourself and participate in the upside at the same time.

You can determine your protection bands by adding cash to hedges.  The high band of the protection is appropriate for those who are older or conservative. The low band of the protection is appropriate for those who are younger or aggressive.  If you do not hedge, total cash level should be more than stated above but significantly less than cash plus hedges.

It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash.  When adjusting hedge levels, consider adjusting partial stop quantities for stock positions (non ETF); consider using wider stops on remaining quantities and also allowing more room for high beta stocks.  High beta stocks are the ones that move more than the market.

This post was just published on ZYX Buy Change Alert.

 

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