3 min read

Stockmoney Lizards Newsletter - Issue #10

Stockmoney Lizards Newsletter - Issue #10
Photo by 愚木混株 cdd20 / Unsplash

Dear Stockmoney Hunters, Crypto and Biotech lovers,

the past 2 weeks at the markets have been stormy.

The prevailing sentiment on the markets continues to be fear. Fear of further rising inflation, of lockdowns such as the recent one in China, of military uncertainty and of further interest rate hikes.

FOMC Meeting and Interest rate hikes

The latter are on the agenda today when the FED announces the results of the Federal Open Market Committee (FOMC) meeting. The markets are expecting an increase of 50 basis points (bp). This is already considered to be certain; what is of interest now is the wording and the outlook for further increases in the course of the year.

The so-called CME FedWatch tool has made the following predictions for further interest rate hikes in 2022.

May: 50 bp increase to a new target range of 75-100 bp.
June: 75 bp increase to a new target range of 150-175 bp
July: 50 bp increase to a new target range of 200-225 bp
September: ~ new target range of 225-250 bp or 250-275 bp
November: ~ new target range of 250-275 bp or 275-300 bp
December: ~ new target range of 275-300 bp or 300-325 bp

But what does all this mean for the equity markets and cryptocurrencies? In our view, high inflation in particular and also interest rate hikes are already largely priced in. Here, the probability of positive surprises is far greater than negative surprises.

The big stock market indices are showing signs of insecurity

The major stock indices such as the S&P 500, the NASDAQ 100 (tech), the NBI / XBI (biotech) are going through a correction at this stage, as are Bitcoin and Altcoins. Especially the latter are very strongly linked to the stock market in the short to medium term.

Figure 1: Stock markets and Crypto are correcting at the moment.

However, we expect Bitcoin to decouple in the medium term. Inflation figures are higher than they have been for a long time, and Bitcoin is one of the few inflation-proof assets alongside gold and real estate. Furthermore, some indicators are forming, which now point to an imminent bullish reversal. How long this phase will last is currently not foreseeable, but we expect the next bull run in the course of the next weeks and months. Also we're seeing a lot of similarities to other pre-bull run fractals:

Figure 2: Bitcoin - Double falling wedges with a flip - Bullish pattern
Figure 3: Bitcoin - different fractals - Accumulation phases have always shown the following pattern: 1. first failed breakout test 2. bottom / rebound at support 3. final failed breakout test before bull run. Current fractal is showing the same behaviour

Meanwhile, the biotech sector (SPDR S&P Biotech ETF, $XBI) has continued its low and is still hard hit by the correction. In the current downtrend, however, the first breakthrough signs are now showing in the daily. With currently > 50% loss in value compared to the post-Corona peak, we currently see this segment as strongly overbought. What is currently still missing are the major M&A breakthroughs. In our view, the next buyouts will also bring about a turnaround.

Finally, we would like to say one more thing: It is not easy for us either to look at red numbers on a daily basis, but the past teaches us that these phases in particular should be used to expand long positions in promising assets. We have used the time to increase most positions in our sample portfolio. Reversal is near.

Stay tuned, your Stockmoney Lizards