Butterfly Strategy Pt. I: The Rebound
An important update for the cryptomarkets! I have been wrong on my previous analysis if the crypto markets were bearish or not. As you can read in that analysis; there was no news and no reason for bearish momentum. Unfortunately this has changed...
Evergrande & Fed tapering
With China Evergrande fiasco we now have another bearish trigger for the worldwide markets which is in confluence with my previous analyses of the S&P 500. I might have to remind you; but I did say; look out for the black swan! This swan might be arriving now and with the FED meeting this week and possible tapering of their bond program (they will stop buying bonds); it is likely to see interest hike up and consequently funds will react with a defensive position. What does that mean? It means big fund managers will take profits on risk assets (stocks and crypto) and roll them over into bonds, forex and potentially gold . If we get a default on Evergrande we have a problem where (simply said) there's a big debt gap that needs to be filled with funds (profits from the markets?) that creates a "gap, a whole or a dump" in the risk asset markets.
Butterfly Strategy
I call this the butterfly effect and subsequently I make this "my own" butterfly strategy. What it means is that I look for confluences in: fundamentals, news, technical analysis , market makers perspective, retail investor's behavior (market sentiment) and long term corporate strategies / investments and federal / central bank's policies. It's a whole lot and it's not easy to get the big picture or know everything there is to know. However; you can know a lot by researching what is going on and constantly re-evaluating what is going on and what is likely to happen. This means, that last week I can be bullish and this weak I can be bearish . Some might say that is nonsense and you should choose a direction and stick to it; yes that's fine for long term holders. But I am trading; mostly swing trades from a few weeks to several months in either direction and 98% without leverage. For me that works just fine, for others it doesn't. Just see what works best for you. For me it means one thing and one thing only: I cash out only in profit and when there's confluence of downside across the board (let's call it a butterfly lift off) and same for buying: bearish times that are flipping towards bullish times.
Technical analysis
Given we are trading below the 50 day EMA and dropped below the golden pocket (0.618) which both could be acting as resistance; we might have not seen the end of this dump. Historically; losing the 50 day EMA and/or the golden pocket in confluence with the bad news, bearish divergences, a "smaller" wyckoff distribution, possible fed tapering, interest rates, S&P 500 turning bearish , investor's sentiment crumbling towards fear, a lot of profit in the market and a market maker that profits from lower prices for the futures expiration this friday. That is a butterfly taking off. It is to be seen whether this bearish butterfly get squashed down by the bulls or it opens a can of bears and sell pressure. We don't know anything for sure but we can add up all possible confluences which make the Butterfly Strategy a powerful method to use.
S&P 500 topped out?
It looks like the S&P500 is topping out at the top of my box and at my estimate of 70%. Its an analysis from a long time ago and it are these moments that I can refer back on them and find the confluences I am looking for. As of now, faith seems to be lining up but nothing is for sure in the markets - we are always anticipating multiple scenarios.
IMPORTANT: this is not financial advice, trade or invest based on your own risk and research.
NOTE: you can read my analyses below and see where I am warning for news, a black swan event and the top of the S&P500.
Evergrande & Fed tapering
With China Evergrande fiasco we now have another bearish trigger for the worldwide markets which is in confluence with my previous analyses of the S&P 500. I might have to remind you; but I did say; look out for the black swan! This swan might be arriving now and with the FED meeting this week and possible tapering of their bond program (they will stop buying bonds); it is likely to see interest hike up and consequently funds will react with a defensive position. What does that mean? It means big fund managers will take profits on risk assets (stocks and crypto) and roll them over into bonds, forex and potentially gold . If we get a default on Evergrande we have a problem where (simply said) there's a big debt gap that needs to be filled with funds (profits from the markets?) that creates a "gap, a whole or a dump" in the risk asset markets.
Butterfly Strategy
I call this the butterfly effect and subsequently I make this "my own" butterfly strategy. What it means is that I look for confluences in: fundamentals, news, technical analysis , market makers perspective, retail investor's behavior (market sentiment) and long term corporate strategies / investments and federal / central bank's policies. It's a whole lot and it's not easy to get the big picture or know everything there is to know. However; you can know a lot by researching what is going on and constantly re-evaluating what is going on and what is likely to happen. This means, that last week I can be bullish and this weak I can be bearish . Some might say that is nonsense and you should choose a direction and stick to it; yes that's fine for long term holders. But I am trading; mostly swing trades from a few weeks to several months in either direction and 98% without leverage. For me that works just fine, for others it doesn't. Just see what works best for you. For me it means one thing and one thing only: I cash out only in profit and when there's confluence of downside across the board (let's call it a butterfly lift off) and same for buying: bearish times that are flipping towards bullish times.
Technical analysis
Given we are trading below the 50 day EMA and dropped below the golden pocket (0.618) which both could be acting as resistance; we might have not seen the end of this dump. Historically; losing the 50 day EMA and/or the golden pocket in confluence with the bad news, bearish divergences, a "smaller" wyckoff distribution, possible fed tapering, interest rates, S&P 500 turning bearish , investor's sentiment crumbling towards fear, a lot of profit in the market and a market maker that profits from lower prices for the futures expiration this friday. That is a butterfly taking off. It is to be seen whether this bearish butterfly get squashed down by the bulls or it opens a can of bears and sell pressure. We don't know anything for sure but we can add up all possible confluences which make the Butterfly Strategy a powerful method to use.
S&P 500 topped out?
It looks like the S&P500 is topping out at the top of my box and at my estimate of 70%. Its an analysis from a long time ago and it are these moments that I can refer back on them and find the confluences I am looking for. As of now, faith seems to be lining up but nothing is for sure in the markets - we are always anticipating multiple scenarios.
IMPORTANT: this is not financial advice, trade or invest based on your own risk and research.
NOTE: you can read my analyses below and see where I am warning for news, a black swan event and the top of the S&P500.
Kommentar:
Everyone has "bough the dip" and is turning bullish. Evergrande problems seem to have gotten a short term solution. OK. But everyone forgets we have a press conference of the federal reserve today that is much more important than Evergrande. Lets see how that goes first...
Kommentar:
The markets are very bearish. This week we could see a big move to the downside…
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