There is no mail today. Banks are closed. The U.S. markets are closed…and what the hell am I doing up?
Well, this is another one of those half holidays we talk about. Fine time to introduce non-subscribers (to our Peoplenomics newsletter) to some sharper thinking than appears in the mainstream.
Were it not for the pending winter storm (tonight in Texas) and a few headlines, you’d have been spared this morning’s report. But, such is not the case. You need to be lectured, again.
Let’s start with macro-econ: there are two interesting things we’re watching.
One is the price of Gold which has quietly moved up into the $1,340 range, and silver has firmed nicely over $17-bucks, too. So that’s one. (Toss in oil prices firming, too…)
The second is the Bitcoin – which is always a source of amusement.
Since people come here mainly for our unorthodox views of the world, let’s not disappoint them. Here’s what we think of Bitcoin right now:
This looks hopelessly confusing to people who don’t bother to try understanding charts – and are then shocked when events come along “out of the blue.”
So a “teaching moment” while we run through the chart lines:
You will see there is a level line off to the right from the tippy-top of the Bitcoin run-up. The reason we extend this line is it becomes (in the world of technical analysis) “overhead resistance.”
One strategy for making money holds that when something breaks above overhead resistance, a good bullish move is unfolding. Often so.
There is a small asterisk to this: That is, if the move above resistance is more than momentary.
Depending on who you talk to, “momentary” can be a few minutes. Others will wait for a daily close over resistance. More will demand a weekly close above. There are even old-timers who (not running on internet time) will hold out for a monthly breakout above resistance. Quarterly? Just how slow do you want to play?
The horizontal line is also copied to the lowest point since the present decline began and is called “support.”
If this line is broken to the downside, and the break is more than momentary (*see previous discussion), then it’s time to unload and either go short or flipped into cash.
Trend Channel Lines
The two downward blue lines represents “trend channel” in technical analysis. Two ways to construct them.
Method One (used by grown-up mathophiles) involves data downloads and calculation of a 2-standard deviation trend channel. This verges on work…which we can’t stand.
The preferred Method Two (because it’s simple, graphical, and fast) is to draw lines with whatever’s handy, eyeballing it. Choice? A ruler, graphics tool (we use CorelDraw), or even putting PostIts on the screen. (I still do this now and then…talk about lazy… )
Here’s the process to draw the lines:
Draw your first line from the tippy-top all-time high to the top of the first significant bounce. Extend this line a good bit to the right. That’s the top of the trend channel if things are going down.
Copy it and paste it. This ensures that the line will have the same angle as the source.
Move it with the object tool to the lowest point between the tippy-top high and the Big Bounce high. Again, it extends down to the right.
As long as Bitcoin is trading in this range, we are in the “academic learning mode.” Since we have no money on the table (in this fool’s techno-folly) we are ONLY interested in seeing how the breakout happens.
This brings us to the two dashed lines. The black one tells us the general direction things could be heading if we get an upside breakout.
SOME traders will buy when the upper trend line is crossed. Even if overhead resistance isn’t eventually crossed, you can still make lunch money, on quick trades. Black dashed line is the bullish dream.
The red dashed line is the bearish case.
This visually looks like the most likely outcome at the moment. The going short or into cash to avoid carnage happens when Bitcoins – while staying in or below the trend channel – bust through the support line.
That’s when our Elliott Wave estimator tool which we have on the Master Index page of Peoplenomics.com gets fired up.
You put in an approximation of the all-time high, and then you put in the bottom of that first significant low.
From there, this lazy person’s thinking tool spits out how bad things could ultimately get. With the Wave 1 down “in the bag” and with our Wave 2 expectations set by the brainamp.xls spreadsheet in the $16,279 range, we would not be surprised to see the Bitcoin breakdown to new lows in short order.
Still, hype springs Eternal in the hearts of men…so no telling what will really happen.
One can go back to the study of Tulip Mania and note that the first real price runs of that Fad Attack were tulips of a particular kind. Just as the only true first crypto was Bitcoin. Lead tulip.
Then, miraculously, just as the ancient Wave 1 down was put in, along came the clones. Whether it was the red & white tulips, or yellow, (fill in any crypto name but not Bitcoin) and you’ll see how these manias work.
Now that you understand how the chart works, consider how Darwin’s Origins of Species is a “template” that explains technological species replacement as new cryptos come out of the woodwork, w
We’ve be content to stand aside and keep a sharp eye out for potential Darwinian predators, not the least of which is governments. These, as an article of faith, won’t give up their lock on “what is money” without a fight – nor without legislation.
We are not alone in our skepticism toward Bitcoin. Forbes seems to have the same technical view we hold as evidenced in Bitcoin Is Headed Lower – For Now.
If this technology is going to take over the world, it will need government behind it.
But wouldn’t it be a great world IF the illegal surveillance of Americans stopped and that big Secret Agencies spy center (the castle and moat) up in Provo, Utah could be repurposed to create crypto transaction?
That’s the level of infrastructure we see as necessary and for now, the trend channel says that a long-shot bet.
We hold that if scaling doesn’t kill it, regulators will as Bitcoin Halts Week-Long Slide But Battles With Regulatory Pressure.
Shills are everywhere – and what they have going for them is a virtual country full of politically-correct gullible idiots – so we will continue to hide-out in the Outback of East Texas waiting for an outbreak of reason and common sense.
Could be a long wait, but these sideshows are priceless.
Social Media Ruination
Dreams of Wind Ranchers
We’re finally beginning to wrap our arms (belatedly) around grunge and such.
The epiphany came on reading Inside the new ‘anti-gorgeous’ hotel.
Here’s how the young are rolling: They ALL want more money, but they don’t want as many upscale ways to spend it.
Thus, with money piling up, they believe this to be responsible capitalism and a new miracle form mof capitalism.
I’m going to take some pills now and go back to pillow-testing.
Let me know if the planet formerly known as Earth reappears.