Exhaustion or Pause? Bitcoin Collapses

Exhaustion: A state of extreme physical and or mental fatigue.
 
And that seems to be how we could describe yesterday’s action in the mkt…. I mean look we got good earnings pre-mkt from UNH, C & CSX…. Citibank beat the number and took a $22 BIL charge – which caused it to post a $18.3 BIL LOSS for the qtr…but remember – just ignore that $22 bill charge and the numbers are different…. No worries….
 
The mkt surged by 280 Dow pts or 15 S&P points  - taking both of those indexes thru 26k and 2800 respectively……in the mins after the bell rang – after a 3 day weekend when there was NO news…and while overseas mkts were also up – they were not raging higher at all….and so by 10 am……exhaustion set in…..the mkts appeared to stall a bit…began to roll over…..no one really thought much – just that maybe they need to take a breath…and but it was more than a breath that the mkts needed to take…It was a steady erosion, buyers EXHAUSTED – news that GE was considering breaking itself up at first was exciting but turned to caution – after they announced a $6.2 BIL charge in its 4th qtr insurance business while also setting aside $15 BIL over 7 yrs to bolster the required reserves at GE Capital.  CEO Flannery saying
 
“We need to continue to move with purpose to reshape GE” 
 
The stock spiked higher in the early mins of the day and then collapsed as the analysis was dissected across the airwaves…and by 10 am ( the same time the Dow and S&P turned south) GE was trading down 4% at $18 – (GE is a DOW and S&P stock)……when the chatter turned to figuring out what the parts were worth individually vs. where the stock was trading….numbers like  $11.50 were tossed around….which meant that if that was true….GE was trading at $7 more than the sum of its parts…..Capisce?  And so, it began…GE trading lower again this morning…currently down 20 cts from last nights close….
 
Then talk of a gov’t shutdown and the inability of the Democrats and the Republicans to work together to solve this issue hit the tape…and while DC BS does not ultimately determine stock prices – the fact that this conversation was happening just gave investors (buyers) an excuse to slow down…..And then Sammy Zell – the Billionaire investor comes out and says that the mkt is having an ‘irrational exuberant’ episode and that he was sitting on the sidelines with plenty of cash……and BOOM……the DOW had a 385 pt. swing from high (28,086) to low (25,702)  teasing just above Friday’s low of 25,653 – and this is KEY…..it did not break the prior days; low….The S&P on the other hand had a 40 pts swing from high (2807) to low (2768) –  breeching Friday’s low of 2769…..and this is where traders held their breath…..Since we breeched the prior days low – would that set us up for more downside or not?  It did not…at least not yet….and so by the end of the day – the mkts while they recovered a bit – ended the day lower……And so the bell rang and another day is behind us…
 
This morning US futures are now apparently recharged…. they are spiking higher once again in pre-mkt trading…. currently UP 10 pts – which would put us at about 2786 ish if it holds here…. well below yesterday’s surge up and thru 2800. 
 
It feels like we are toppy here at 2800 and could test yesterday’s lows if we stall at 2800.  The key will be if we hold the lows or not….so stay tuned….
 
This morning we heard from BAC and guess what?  YUP – they crushed it…. reporting 0.47 cts/sh vs. the exp 0.44 cts/sh…and they only took a $2.9 BIL tax reform related charge…. The stock is trading up 0.25 cts…at $31.45/sh. Other earnings include USB – beat.  We are waiting on GS, KMI, SCHW, and AA
 
ECO data includes Mortgage Apps +4%, Industrial Prod – exp of +0.5%, Capacity Util of 77.4% (still below what is considered FULL capacity), and the FED’s Beige Book – and you can expect that the Beige Book will support a stronger economy and better days ahead….
 
Look – I am not suggesting that the future isn’t bright at all….We have a high level of confidence in this qtrs numbers and the future guidance is very bullish due to the new corporate tax structure…we are hearing that from near everyone…and so it does make sense that investors are excited – but it does not make sense to just go out and haphazardly buy anything that isn’t’ tied down…..and that is exactly what the algo’s do…they have no sense of extremes, no gut feel, they operate on numbers and coding…..creating momentum that is unsustainable…..and so that is the word of caution…I mean – Look – if the tide should turn or buyers just exhaust themselves – the speed of a correction (sometimes unexplained – like yesterday for the most part) will be swift…..in line liquidity will dry up…..and then we will test tech supports to see how they hold up…..
 
Now the media is calling yesterday’s action just a pause in the rally vs. a reversal…. watch to see how the mkt tests both the upper and lower ranges…. keep your eyes on 2769 for the S&P and 25,702 on the DOW…. These are KEY levels – a breach below for both will cause the momentum to build…. traders will be screaming BTD (Buy the Dip) while others will be happy to sell them what they want……
 
The VIX spiked by 20% yesterday as the mkt came under pressure and is now settling in at 11.35…. if the mkt continues to trade in line to higher – look for the VIX to settle down…if the mkt turns again – then watch as the FEAR index (VIX) spikes yet again……
 
Oil is under pressure this morning as many analysts are now calling for a ‘correction’ in the price of oil after the 13% move higher in the past month….no matter that OPEC is cutting production – just because the emotions and expectations have reached excessive levels….and the move up in oil – while welcomed – may also be a bit ahead of itself. 
 
And while I am not a Bitcoin enthusiast – yesterday’s meltdown was also being credited to the nervousness in the mkts…. this I will say with CERTAINTY was not the case at all…. Bitcoin came under pressure because of all the chatter surrounding regulation of this ‘currency’ and what that may mean for its future……This morning it is down another $400 pts at $10,407…. Bitcoin is now down 48% from the crazy December highs of $19,000.  Ethereum – another cryptocurrency closed at $890 and is off 37% from its January highs of $1,420.  While I am not making an investment statement on either of these – the millennial types should understand RISK  (think about the poor bastard that paid $19,000 because he didn’t want to miss out) – and these ‘assets’ are full of RISK now – so tread carefully (us dinosaurs do have perspective  and experience that you do not – one day you will too.)   Intermediate support for Bitcoin is $8,803 or another 14% lower from here…. just sayin…. 
 

Take Good Care

KP

Champagne Pork

For this you need:  Pork Chops (on the bone is always better), s&p, olive oil, shallots, fresh sliced mushrooms, thyme, tarragon, Champagne, flour and whole milk.
 
In a large sauté pan heat up the olive oil over med-hi heat. Season pork with s&p.  Add to the hot oil and let cook for about 2 - 3 mins per side (depending on thickness)- you want them nice and golden brown. Remove pork from pan and set aside.
 
In the same pan add diced shallots and sauté.... until soft. Now add mushrooms and sauté for another 5 mins.... Add about 2 tsp of thyme and 1 tsp of tarragon. Stir. Next - here comes the Champagne - add and deglaze the pan for about 1 mins....
 
In a sep bowl - whisk together 1 tblsp of flour to 1 cup of milk - add to pan. Put the pork back in the pan, cover and simmer for 3 - 5 minutes, until pork is fully cooked and the sauce thickens.
 
Present this dish on a bed of mashed potatoes topping the chop with the champagne, mushroom cream sauce. A large mixed salad is always welcome
 

  
Buon Appetito.