I have never looked at Bitcoin. I have never traded it, or even considered doing so. Even when Bitcoin was so hot a few years back, I found it fascinating, but that was it. In the last week or so I have seen several people talking about it, though, folks who are not exactly crypto-centric.
So, when a reader, Jerry, told me he was taking a hard look at Bitcoin this week, I felt it was time to at least take a gander at the chart. Being a stock person, I opted to look at the equity version of it, Grayscale Bitcoin Trust (GBTC) . Much to my surprise, one of my favorite patterns was right there on the chart: A head-and-shoulders bottom. Well, a potential head-and-shoulders bottom. A breakout over $14 would be needed to complete the pattern. And while there is still resistance all the way up to $17, getting through that resistance is a step in the right direction.
I want to stress that I know next to nothing about Bitcoin or cryptocurrencies, but I thought the chart was interesting and decided to share it with you.
Now back to the stock market. The day started out exactly as I prefer, where the breadth is good and the indexes sag or lag. It stayed that way most of the day, but that last few minutes of trading saw the S&P play catch up and breadth did not improve much more. But the breadth was the exact same as it was on Monday, yet the S&P 500 was up half of what it was, so Tuesday was a better day in terms of breadth.
It wasn't good enough to move the needle on any of the indicators. That means we need to see another day of good breadth to nudge the McClellan Summation Index up. It means the number of stocks making new highs has still not expanded. It means the number of stocks making new lows is not expanding, but rather holding steady. You can see that on the 10-day moving average of stocks making new lows. If you think the market should go up, then you want new highs expanding and new lows contracting. That's not where we are now.
What surprises me is that the Volatility Index, while down, hasn't been down much this week. The Daily Sentiment Index (DSI) for the VIX has now slipped to 12. Remember that single digit readings tend to lead to rallies in the underlying instrument. Last week's single-digit reading in the dollar led to a snap back rally in the buck. So a single-digit reading in the VIX should lead to a move up in the VIX and presumably down in the indexes.
Finally on gold and silver. Gold has clearly moved higher than my target in the mid-$170s, but silver is finally into my target zone of $23-$25. Both have DSI readings at 93 now, so once again, it's necessary to let it rest or correct.