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September 3, 2020

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Hi Everyone,

"The markets take the stairs on the way up and the elevator on the way down, sometimes the window."

-old trader proverb.

We can definitely see that happening today as we witness a broad multi-asset pullback. We're not out the window just yet, but definitely feeling that gut-wrenching elevator ride down.

The funny thing about momentum trading is that at some point, the momentum reverses directions. Let's take a look at some of the main market movements today. ...

Stonks

Wall Street's darling stocks are all way down, with the NASDAQ gaping down about 2% at the open and continuing south from there.

We can probably gain a bit of insight into today's action from the fact that Tesla is down the most of the pop-stocks. This will be the third consecutive daily loss for the overvalued green automaker.

The funny thing is that everyone knows these stocks are overvalued, but everybody seems happy buying them as long as prices continue to rise.

This is basically the global macro version of the "Greater Fool Theory" that was so popular among no-coiners as an argument against owning bitcoin in 2017.

The question is .... has the momentum reversed? Is the party officially over or are we about to see a massive effort to buy the dip? And if we do see that effort, who will lead the charge?

Either way, we'll find out soon enough. Weekly U.S. unemployment figures released today came out much better than expected, as only 881,000 new Americans filed last week.

Tomorrow, we get the monthly nonfarm payroll report before a long weekend. With Labor Day on Monday, no doubt many traders will be looking to cut their exposure.

Why now?

There's no doubt that a lot of today's and yesterday's moves are due to a U.S. dollar comeback. We can see the commodities all falling against the dollar.

However, it's not necessarily gaining against its fiat peers, which is why the Dollar Index isn't showing any huge surge. So rather than dollar strength, we can probably say that this is a fiat rebound play.

The crypto market has broken a few psychological levels. Bitcoin is below $11,000 as I write this, and ether broke $420. Of course, the big level that everyone is watching is $10,000.

When we broke above that level in late July, it was with such force that we never really got to test it as support. Well, this may just be our chance.

Hey, if things get really bad we may just get another chance to buy bitcoin below $10,000. ; - )

Hope you're enjoying the volatility as much as I am. Have a great day!

Mati Greenspan

Analysis, Advisory, Money Management