Overview:
The NFP numbers threw a wrench in the market and the debate will be until the July meeting will be "Does the Fed Lower Rates"? With cryptos consolidating and the market adjusting to the news, we can use the time to look for future positions.
Bitcoin
Bitcoin is holding up but there are some mixed signals that we are watching. The potential for another leg lower is starting to evolve and this may unfold as a bullish flag.
Sentiment still leans to the Bullish side. This rally exceeded our initial target level and when we are seeing bullish calls near a tops, even interim tops, we have to be cautious.
Not that we are bearish and expect a large pullback, but we could see a flushing out of longs and pushing us into the low to mid 9k area. This may take a few days or a week or so to unfold IF it does.
Though there is no reason to panic, and we are going to let the day play out, the risk is to the downside. Failing to take out the 12k may be a sign buy action is stalling.
Remember markets stall because they run out of buyers. Most traders lose money in markets and buy or sell at the worst possible time and generally near reversal areas. If we see weakness we will not hesitate to cut for a smaller profit or small loss. We can always get back in.
For our new members we are not focused on being right, or issuing the most trades, we focus on capital preservation. I think many have a false sense we will see 2017 all over again.
This market is evolving with larger institutions and operators participating now. As markets mature they are less prone to "bubbles" and tend to stabilize being less volatile. The dotcom is the perfect example.
Few companies emerged from the dotcom bubble and this is likely what we will see this market cycle. Hearing "Alt-coins" are next is probably a strategy of hope and hype not conservative.
Wabi
With Wabi being traded mainly on Binance and Binance closing access to US markets, it went from a bullish continuation pattern to likely lower levels. We are simply going to take our loss and close the position.
I still like the platform, but common sense tells me that this technology will likely be picked up by public companies.
To be clear we are closing out our position, if you like the coin, this is up to you whether you close it out or not.
NEO
Neo had a nice rally since May but this may be indicative of the type of correction we see with Bitcoin. Again with everyone looking to buy here, and price action showing a series of lower highs and lows, I pause.
I would rather wait for better prices here and since we just sold half our position, I am not interested in adding until we see either a structure conducive of a continuation or a deeper pullback to around 14.00.
Of course this will depend a lot of Bitcoin. If Bitcoin can rally from here, we may see a retest of the high or a lower high. Either way as I pointed out with Ethereum earlier if Bitcoin consolidates for a few weeks or so, the alt market will likely push lower.
Alt Coins Pullback during Consolidations
During the crypto winter while Bitcoin ranged holding the 6k level, alt coins continued to move lower. Since we are seeing sentiment across social media starting to rotate into alt coins and the market not moving higher, we pause.
The sentiment around the market may be bullish, but order flow is not confirming this. IF we see late buyers head to the exit, we can pullback quickly. I do not want to be caught in that.
In my opinion the alt market has peaked and unless Bitcoin resumes a bullish swing we are not adding any alt coins and are looking to trim out.
S&P
Good news is bad for the markets this morning as NFP came in stronger than anticipating implying the Fed is less likely to be overly dovish here. We need more structure before looking to short outright, but this is an initial bearish signal.
Looking for a pullback into the 2890 area where we can start to look for longs, but we are focused on quality dividend paying stocks. Currently we are in MPC and Qualcomm buy are looking to add a couple more, one in the retail sector.
Kohls
Yielding a 5.35% dividend with a 10% plus annual growth rate over the past five years I like Kohls here. They also have partnered with Amazon and has plenty of free cash to cover their dividend and have been trimming down the balance sheet.
We will use our options strategy to position into this trade. Kohls has been a turn around story and has bucked the retail trend. As the sector consolidates Kohls has been rising to the top.
This has been in a broader range between 45.0 and 55.0 and we are looking to add at these levels.
Cisco
Cisco only yields a 2.5% dividend but has a five year 15% dividend growth rate, and is a play on IoT and 5G. This is going to require mass infrastructure and Cisco is still the 600lb gorilla in networking.
We are going to be patient and see if the market pulls back here providing a better area to enter. The 52.0 level would be the first area we will look at. Ideally the 42.50 to 47.50 area is the area to be aggressive.
Summary
If Bitcoin starts losing momentum here, the entire sector is going to pullback hard. I think many are over estimating the alt-coin market and though there are a few we are interested in, we are looking to tighten up our portfolio.
Will update later in the day closer to the close of the market.