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Thursday, November 30, 2017

Daily update 11/30 Bitcoin

Today we had a buying panic followed by some profit taking.

Look at that volume.  Plenty of participation.  This looks a lot like a possible buying climax like we had back on March first.  That one led to a pullback that lasted a few weeks.  Breadth was only +54% after being +65% at the high.  There was considerable profit taking in the afternoon.  New highs were strong again at 285.  New lows dropped considerably to 31, but that is still elevated.  Asia was mixed overnight while Europe was up.  That had buyers already pushing the futures to a new high going into the open.  The bulls really came out when news hit that McCain would vote for the tax bill.  The market peaked shortly before 1 PM and the sellers took over the rest of the day.

We have not seen a long upper tail like that on the futures since the early Aug. pullback.  The futures are still outside the channel in accelerated up move mode.  I don't know if there is more up right away or not.

The green count picked up a bit and is getting pretty close to overbought. 

HYG rebounded from the spike down low, but is still below its 200 SMA.  I am not sure if this is out of the woods or not. 

Investors seemed focused only on tax cuts at the moment.  I still have no idea whether there is enough support to pass the bill in the senate.  I also have no idea what schedule it is on. 

European indexes ended up closing mostly in the red.  Most Asian indexes were red except Japan.  It is certainly not clear the global de-risking is over.  Seeing some comments coming out of China there may be really good reasons for it.  This morning looked a lot like euphoria to me.  They interviewed Icahn by phone about some stock he bought to become an activist investor in and he mentioned the market looked euphoric to him as well.  Unfortunately there is no way to measure euphoria.  It is simply an opinion.  In my opinion we have a sentiment condition consistent with a bull market top.  Of course that can last for months before the final price high.  I expect the trouble that takes the market down to come from offshore most likely originating in China.  I think we need to keep a close eye on Asian markets.  The horrific hurricane season will likely keep the U.S. economic data looking good for a while yet.  I can't be sure that will insulate us from the global economy should China stumble badly though.  China slowing down seems highly likely to me.  It is just a question of how much. 

A close below today's low (2633) most likely signals this was a buying climax and could usher in some corrective activity.

It is interesting listening to people talk about bitcoin.  I have heard people call it a commodity.  Since a bitcoin does not actually physically exist it is not a commodity.  I have heard people call it a store of value.  Really.  Something that goes up and down in price 10-20% in a day is not a store of value.  Some call it a currency that will be the future.  Calling it a currency has the same problem as calling it a store of value.  Nobody is going to accept payment in something that varies in value the way bitcoin does.  There is also something else.  Blockchain technology is supposed to be this great new invention.  I don't really get the excitement.  Blockchain is nothing more then what I studied in college back in the 80s as a distributed database.  People get excited about the fact this makes it decentralized and under no single entity's control.  The problem with it is this is an extremely inefficient architecture.  I will predict right now that nothing could ever be used as a real currency based on this technology as any serious amount of transactions would bog the system down to be unusable.  Bitcoin already experiences issues in that regard and people are only trading it.  They are not actually buying lots of stuff with it.  A single database in a client server architecture was invented for a very good reason.  It is extremely efficient and can easily handle many transactions.  That is something blockchain can never do until we all have supercomputers in our homes and offices connected by fiber optic cables.  Even that might not be enough to make it a usable currency.  I think bitcoin has a better chance of being outlawed (after people lose tons of money on it) then it has of becoming a real useful currency.


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