Please be Kind… seems like an oxymoron given the information that our highest court in the land delivered to us last week. Putting that aside, a key building block of success is the idea that kind interactions significantly increase productivity. When people feel significant and respected, they’re more likely to focus on what needs to be done – instead of hiding or constantly playing defense. Allowing others, the same level of opportunity as yourself – is a choice to move forward with less friction. Enjoying your day is not a bad thing, and it instantly creates a posture that is infectious. I realize that most competitions (and certainly sporting events) are not designed to be kind, but just about everything else seems to work better when you’re NOT throwing elbows at the people around you.
Can I get an Amen? I personally believe that the current crypto environment presents an awesome opportunity. I believed digital asset prices were too high, and needed to go sharply lower in order to be attractive investments. I’m a huge believer in the future of decentralized finance. I believe that DeFi, alternative asset classes, and Web3 are here to stay. It was only 20’ish years ago that there were doubters about Web1’s staying power. Now, there is virtually no one who hasn’t experienced Web2 = the social web. Web3 pushes Web2 even further and naturally includes DeFi and blockchain integration. Crypto provides the token-nomics and financial incentives that will keep the Web3 game going. It’s the purest form of checks and balances. Web3 is trustless, verifiable, permission-less, self-governing, stateful, distributed, and robust. To quote the Monkeys: “I’m a Believer.”
It could be better… is a reaction to a presentation that encourages both understanding and improvement. Per SG, it’s not a slap-in-the-face to talk about how something could be improved upon. In fact, when you care enough to say, “It could be better” – it puts you on the hook to create and describe an improvement. Once you announce that something can be better – you get to become part of the solution that gets it there.
The Market:
Business is moving back to C2C… from D2C (direct to consumer). C2C (consumer to consumer) works because of the level of trust we have in one-another versus adding any corporation to the mix. The level of distrust in our government and in our corporations is at an all-time-high right now. To really connect, brands need to be where consumers are with proper consumer-based representation. Due to the increased levels of trust that we’re seeing in ‘each other’: C2C sales could hit $168B by 2027. That’s a 500% increase over last year’s social sales.
FED Chair Powell told Congress… that they will continue raising rates in order to lower inflation – even if that means that the economy faces higher unemployment and a recession. He also stated that a soft landing “is going to be very challenging,” and that a recession is “certainly a possibility.”
Was last week’s market a bounce or a move higher… Last week, markets came in and took us higher - ending the week with a massive rally. But, it did include a large amount of month-end / quarter-end rebalancing. Maybe there was a catalyst for a rally hidden inside last week’s move. We will learn this week when we get the GDP data. It will be BIG in either direction; therefore, stay aware.
When Russia’s foreign exchange reserves were seized… it marked a turning point in geopolitics. It tried to tell the world that anyone’s currency is only worth what the U.S. says that it’s worth. Believe me, China, India and the Middle East took notice. After the war ends, ‘money’ will never be the same – and Bitcoin and the Russian Rubel (assuming they exist) will benefit the most from all of our sanctions. I also believe that our FED (a year from now) will be back doing QE – they just can’t help themselves.
InfoBits:
- The Michigan Consumer Sentiment reading… hit a fresh record low while inflation expectations remain high.
- Cathie Wood is talking her own book… warning that our FED is ignoring signals that their rate hikes will plunge us (and her fund) into a recession.
- Kelloggs plans to split into 3 companies… with hopes to boost cereal margins (by fixing supply issues), expand plant-based market share (by attracting pure-play investors), and boost snack profits (by investing in new varieties).
- GM’s electric-van unit BrightDrop… delivered 150 of its EV vans to FedEx, and is preparing to deliver more to Walmart.
- eBay continued its push into digital collectibles… by acquiring U.K. based NFT marketplace KnownOrigin.
- FED Chair Powell after saying: “the U.S. economy is in good shape”… received pushback from Congress who thought our FED was behind the curve.
- NBCUnivesal and Google are leading the race… to crown which ad giant will service Netflix’s new ad-supported plan.
- Bullish indications are showing that… investors continue pouring over $24B into Series B investment rounds. That’s higher than the full-year total for 3 of the past 5 years, and shows confidence across the startup ecosystem.
- Maersk, the #1 container-shipping company… says shipping costs are up 30% since COVID, and pricey supply struggles could be with us for a while.
- The Global Manufacturing PMI dropped to 52.4… missing expectations of 56 by a wide margin.
- Polestar, the EV side of Volvo… has received shareholder approval to go public via SPAC.
- Netflix has laid off another 300 employees… as they try to bring costs under control amid uneven subscriber growth.
- Tesla has partnered with PG&E… to launch a new virtual power plant in California that will pay Powerwall owners to help stabilize the electric grid and end brownouts.
- Intel has told lawmakers that it is delaying the building… of its multibillion-dollar chip-manufacturing facility in Ohio – due to our government’s non-confirmation of their financial support.
- Kraft changed the official name of… Kraft’s Macaroni and Cheese to: “Mac & Cheese.” Like we ever said the ’roni’.
- Gunmaker shares rose 14.48%... following last week’s Supreme Court ruling.
- Gallup reports that trust in the Supreme Court has never been lower… as only 25% of all Americans have any confidence in the institution.
Crypto-Bytes:
- FTX founder Sam Bankman-Fried… has become the lender of last resort to crypto companies, and may end up owning large chunks of many of them.
- There’s an ETF for that: A new inverse ETF by ProShares (BITI) gives traders a vehicle to bet against the price of Bitcoin.
- Uniswap Labs said it has acquired… NFT marketplace aggregator Genie.
- CoinShares estimates that… crypto firms’ total assets under management has reached its lowest level since February 2021.
- The Canadian Purpose Bitcoin ETF lost half of its assets… in one day – due to a margin call. This was the most severe, one-day redemption since the fund made its debut on April 2021.
- Binance.US will offer zero-fee bitcoin (BTC) trading… as it seeks to attract more users.
- A Bank of America survey indicates that… 91% of respondents plan to buy crypto in the next six months, despite the downturn.
- According to Deloitte… 85% of U.S. retail execs think digital currency payments will become ‘ubiquitous’ in the next five years.
- Nexo hires Citigroup to advise on acquisitions… as it pursues a consolidation of other crypto lenders hit by the recent market downturn.
- Bad Sign … Crypto broker Voyager Digital reduced its daily withdrawal limit to $10,000 from $25,000 after detailing its exposure to struggling hedge fund Three Arrows Capital earlier this week.
- Aspen Creek Digital, a new bitcoin miner… has started mining at a 6-megawatts solar-powered facility in the western part of Colorado.
- Can’t funge this…. E-comm behemoth Shopify announced "token gating" as a way for merchants to give NFT holders access to exclusive IRL shopping events.
- Solana unveiled Saga, an Android web3 smartphone… with the goal of creating a seamless mobile crypto user experience without having to be tethered to a desktop.
TW3 (That Was - The Week - That Was):
Monday: On Friday I suggested nibbling on some DIA, SPY or QQQ’s just in case we gapped-up on Tuesday. So, at the close on Friday, I bought the DIAs @ $399.01, and the Q’s @ $175.10. This morning we are getting that gap-up open. If this has holding power, we could see an oversold, bear bounce that will squeeze some shorts and add fuel. If this doesn’t hold, the next stop is S&P 3500.
Tuesday: U.S. stock futures are sharply lower, failing to hold yesterday’s strong gain as recession and stagflation concerns resurface ahead of FED Chair Powell’s semi-annual testimony to Congress on monetary policy and fears of a hard-economic landing. Citigroup economists see the chance of global recession nearing 50% as monetary policy tightens and the demand for goods weakens. This morning markets are a roller-coaster ride. We ended the day relieved and down. If we can’t get a rally out of this mess soon, I think 3500 is within our grasp. So, it’s still short-term trades on much less size for me. Hang in there, something will break one way or the other.
Thursday: It's been a lumpy affair, but they've managed to keep us green. I won't say it's "safe" but it still does feel like they want to try and get us into a soft rally. I'm looking at AAPL. There's some big resistance in the 137 level, but if that fails – AAPL should pop. Yes, it’s frustrating seeing so many fits and starts, but no follow up. Bear markets grind you like this, but generally toss-up a bounce so amazing that you forget about the bear – for a week or so.
Friday: Both the Nasdaq and S&P have fallen 10 of the last 11 weeks coming into this week. Volumes could be higher than normal today as the Russell completes its annual index rebalancing. Oil prices are higher, but on track for weekly losses after hitting 6-week lows on Thursday.
AMA (Ask Me Anything…)
It finally happened. For 10 years, Bitcoin’s drops have never broken below the previous cycle’s highs. Last week BTC shattered that record by hitting a low of $17,760 – before rebounding. Crypto has never had to perform during a recession, and the word on the street is – there is a recession coming. Cheap money is getting a lot more expensive. What happens when things go south and consumer spending dries up? The good news is our FED only knows how to print and give out money – so I give ‘em a year until they’re back at it again.
Crypto-bearish factors include:
- FED Chair Jerome Powell remains hawkish on inflation.
- Mid-tier whales have reduced their BTC holdings to the lowest level since 2020.
- Equity market options expiration events are causing crypto volatility.
- Crypto sentiment is improving among retail traders == bearish sign.
- There is a new EU Crypto Law coming.
- Saturday’s close of BTC under its 200-week moving average of $22,400 … is a bearish sign.
Trade slowly and with small size.
Next Week: Is the BIG MOVE coming?
- The SPX drives order-flow to the entire marketplace. Therefore, at this point, is everything an Out-Sized move? In the last 5 weeks, the behavior of the markets has not only been bizarre – it’s been virtually, mathematically impossible. Over 80% of the time, markets moved over 200% higher or lower than expected. A good point is that markets are back to trading around the 3931 (SPX) gravity point – where they have previously been content.
- 4 out of the past 5 weeks = we’ve seen 2-Sigma moves: Mathematically speaking, 68% of the time we should be trading within a 1-Sigma (standard deviation) range. For the past 5 weeks we’ve spent 80% of our time – trading 2-Sigma moves. Every mathematician on the planet would have predicted that behavior to be impossible, but we did it. IF this is the shape of things to come, then we truly are in un-charted waters. How can billions (almost trillions of dollars) screw-this-up this badly. Markets are built-on and expect efficiency, and for 80% of the last 5 weeks have been completely inefficient. The reason for my worry is that traders are trained and required to create efficiency out of inefficient movements in the market. And they couldn’t do it.
- Have we ever seen this behavior before? NO. Looking back even when we entered COVID, we did NOT produce this type of irrational trading behavior. And that was during the onset of a global pandemic.
- The SKEW, VIX and VVIX are compounding my worry… because all are inherently low – signaling complacency. Traders are NOT hedging and certainly not hedging heavily. If our markets turn lower, professionals will need to Buy Puts and market makers will need to Sell them Puts. To balance out, the Market Makers will need to Sell S&P Futures contracts. Therefore – due to our market inefficiency, if we have a downturn this coming week – we could see a Run on Puts which will produce (yet another) 2-Sigma move to the downside.
- I’m monitoring the bond markets and the dollar closely. This week the market could definitely rally higher, but if/when we turn lower – the structural part of our markets will come apart at the seams. Sure, there’s always an upside reward to being long, but currently there is huge downside risk. The SPX is telling us that traders are getting it wrong. If bonds (/ZB) rally – that means stocks are being sold and investors are seeking immediate safe haven (because they have no Puts). If bonds (/ZB) fade – then interest rates will be moving higher and mega-cap tech will be getting crushed.
SPX Expected Move (EM):
- Last Week = $121… and we closed up $235. Even after all of these huge moves one way or the other – next week’s move is a contraction. This just doesn’t make sense to me.
- Next Week’s EM= $113. In high volatility periods, it’s all about risk vs reward. ONLY TIP: if you do NOT have any PUTS on – buy some to protect yourself!
Tips:
HODL’s: (Hold On for Dear Life)
- CASH == Nexo == @ 8% yield on USDC
- PHYSICAL COMMODITIES == Gold @ $1,828 / oz. & Silver @ $21.13 / oz.
- **BitFarm (BITF = $1.49 / in at $4.12)
o Ready to sell more CCs for income,
- **Bitcoin (BTC = $21,400 / in at $4,310)
- CDEV (CDEV = $6.30 / in at $7.83)
- CostCo (COST = $447)
o Bot July, +$465 / -$460 PUT Spread
- CPG (CPG = $7.02 / in at $6.44)
o Sold Jul $7.50 CCs for income,
- Emerging Markets (EEM = $40.65 / in at $39.71)
o Bot Jul +$40 / -$42 Back Ratio CALL Spread
- Energy Fuels (UUUU = $5.71 / in at $11.29),
o Sold Jul $8 CCs for income
- **Ethereum (ETH = $1,225 / in at $310)
- GME – Holding
- **Grayscale Ethereum (ETHE = $8.50 / in @ $13.44)
- **Grayscale Bitcoin Trust (GBTC = $13.85 / in @ $9.41)
- Hudbay Minerals (HBM = $4.27 / in @ $5.04)
o Bot October 22, $7.50 CALLs,
- Silver (SLV = $19.51)
o Bot Jul +$19.50 / -$21.50 CALL Spread
- Uranium Royalty (UROY = $2.60 / in at $4.41)
o Ready to sell more CCs for income,
** Denotes a crypto-relationship
Trade of the Week:
Follow me on StockTwits.com to get my daily thoughts and trades – my handle is: taylorpamm.
Please be safe out there!
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