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The Market Breakdown - Issue #5

The Market Breakdown - Issue #5
By Christopher Inks • Issue #5 • View online
Your weekly macro look at the markets, news, and more

But I found that most of them wanted to lean ― not to learn. They just drifted along, guided by hope of profit and pursued by fear of loss.
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In This Issue...
  1. Macro Environment - Debt Ceiling, NFP miss, Energy Crisis
  2. Financial Term of the Week
  3. U.S. Dollar
  4. Crypto - Senator Lummis, NCET, Biden Tax Plan, Crypto-related ETF, Bitcoin, Bitcoin Dominance
  5. Stocks - S&P E-minis, QQQ
  6. Trade Ideas
  7. My Live Stream Schedule
  8. Recommended Resources
  9. Bio
  10. Disclaimer
Weak #NFP = December #taper? #Bitcoin rallying, #dollar recovering, and #stocks not looking too g…
Weak #NFP = December #taper? #Bitcoin rallying, #dollar recovering, and #stocks not looking too g…
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Macro Environment
The biggest news of the week was that the Senate passed a short-term extension of the debt ceiling. This extension amounts to a $480 billion raise of the debt limit into early December, keeping it in-line with the government spending stopgap bill that kicked that particular can down the road until December 3. So, while it hasn’t been solved, a default has been diverted until then.
If the biggest news of the week was the debt ceiling extension, the second biggest news must be the weak NFP numbers. The consensus was to see an addition of 500K jobs but, instead, we only saw 194K. However, unemployment dropped from 5.2% to a surprise of 4.8%. The consensus was for a drop to 5.1%. In addition, the August numbers were revised up from 235K to 364K. Overall, that gives us a worst-case scenario of a December taper. But I wouldn’t write off November just yet. Adding to that November taper possibility is inflation. If September inflation is seen as remaining elevated, it will put even more pressure on the Fed to being the taper in November. We will see what the September report says on Wednesday, October 13th. The inflation rate most recently pulled back, from 5.4% to 5.3%, in August. The consensus is for inflation to hold steady at 5.3%. The FOMC minutes will also be released on Wednesday. Traders would do well to watch how the markets trade into these Wednesday releases.
Finally, the energy crisis has also been at the forefront of the news as well. The continued climb of oil and natural gas prices have added to the inflation fears. Oil has been on a tear since the May 2020 bottom, rallying from -40.32 to 81.00 so far, and Natural Gas is up almost 350% since its bottom, just a month later, in June 2020. The rise in oil prices will continue to support the Loonie (Canadian Dollar). But a drop in oil, especially combined with a rise in the US Dollar, should provide a great long trade as it will send the USD/CAD pair rallying. For now, we can expect that energy prices will remain supported as China’s worse energy shortage in years forces Europe and India to compete for the limited supply. The US, for its part, is considering tapping its own reserves if needed. A well-written energy crisis explainer can be found here for those looking to get up-to-speed with what is going on.
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Financial Term of the Week
Non-Farm Payrolls - Non-farm payrolls are a monthly statistic representing how many people are employed in the US, in manufacturing, construction and goods companies. They can also be known as non-farms, or NFP.
Non-Farm Payrolls Definition | What Does Non-Farm Payrolls Mean | IG US
Nonfarm Payroll Definition
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U.S. Dollar
The index spent the past week pulling back and into the green zone as I mentioned I was looking for it to do. The consolidation should lead to a break out higher. Zooming out to the weekly chart, we can see the black box area denoting that the index is consolidating dating between the ascending channel resistance below it and the weekly pivot just above. I am expecting to see a strong rally through that pivot area. This could result from the Wednesday FOMC release and comments, along with the September inflation report release, both on Wednesday as mentioned earlier in the newsletter.
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Crypto
Senator Cynthia Lummis discloses a bitcoin purchase worth up to $100,000
The crypto market can always use more supporters, especially in high places. Enter Senator Cynthia Lummis, a long-time supporter of Bitcoin who made her first purchase in 2013. The Senator has stated in a recent filing that she purchased more Bitcoin, worth up to a possible $100,000, in August. Obviously this doesn’t mean that crypto necessarily gets a pass against government scrutiny, but it does help to have supporters where it matters.
Biden administration unveils ‘national cryptocurrency enforcement team’
With the unveiling of the Biden Administration’s “National Cryptocurrency Enforcement Team (NCET),” we can expect to see more-determined government oversight in the cryptocurrency area. Often, we hear people say that “if you’re not doing anything wrong then you don’t have anything to worry about.” If only that were true. Government has a history of always taking more; never giving back. Using mixing or tumbling services doesn’t necessarily mean that you have done anything wrong, but government appears to be taking the position that it does. And, in doing so, many users will likely find themselves fighting to prove their innocence where no crime was actually committed. Of course the government does this under the guise of national security. However, as any law student knows, plea bargains account for 90%-95% of all cases, as documented by the government’s own BJA. This has proven to put a significant number of innocent individuals behind bars. Why would they admit guilt if they are innocent? Because the prosecutor makes them fear the possibility that they will be found guilty which will leave them with an even harsher sentence. I am not a supporter of plea bargains as it undermines the judicial system and crypto traders are in the crosshairs of government.
For those who may not be aware, earlier this year it was made known that Biden’s tax plan wants to ensure that crypto transactions over $10K are reported to the IRS. Banks are already required to alert the government to any cash transactions in excess of $10K, but that’s cash. Congress, so-far, has refused to pass legislation stating that crypto is cash so the IRS treats it as property for tax purposes. But here we have the President’s administration exploiting this lack of legislation to exert more control over the populace.
SEC Approves Volt Equity’s Crypto Stock ETF — CoinDesk
Volt Equity’s Crypto Stock ETF was approved by the SEC and will trader under the ticker BTCR. The ETF will not hold cryptocurrencies, but it will allow investors to gain exposure to publicly traded companies who have exposure to Bitcoin. While it isn’t the ETF that crypto’s supporters have been looking for, it is a step in that direction. The fund will invest 80% of its net assets in crypto stocks, with the remaining 20% invested in more traditional stocks to “offset the risk of the fund’s focused portfolio.”
For those of you interested in this type of ETF, Bitwise launched its ETF earlier this year, under the ticker BITQ, and its goal is to track Bitwise’s Crypto Industry Innovators 30 Index which are “pure-play” crypto companies. That means 75% of their net assets must be in crypto or 75% of their income must be derived from cryptocurrency. It also includes firms with $100M or more in liquid crypto assets on their balance sheet.
Bitcoin
Earlier this week, Bitcoin broke out above $55K for the first time since May of this year. The weekly chart is clean with the last two weeks printing beautiful demand-spread candles coming off the retest of the previous support. The next leg up has a minimum expected target of $79400 and secondary target of $88525. Remember, these are just minimum targets. If we get the same general type of rally that we saw at the end of the previous bull cycles, then we could see this next leg rally even further. After this next leg we should have one more leg up. As such, even these targets are not expected to be the final highs for the pair.
The Bitcoin Dominance chart appears to be supporting the Bitcoin rally scenario mentioned above. We can see accumulation occurring over the past five months, denoted by the emergence of strong demand at the lows in May and September. This may have printed a double bottom pattern which will be confirmed on a break out above 49.16. That will give us a pattern target at the upper end of the red range (horizontal red dashed lines) surrounding the ascending channel’s EQ.
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Stocks
Monday, October 11, is Columbus Day (Indigenous Peoples’ Day) and that means that, while the NYSE and Nasdaq will be open, the bond markets will be closed. The holiday hours for the stock exchanges and bonds market for the rest of 2021 can be found here.
As mentioned above, energy prices have continued to rally. That means that, while they do, companies located in commodity-exporting nations will benefit (as will that country’s currency). To this end, Russia has become the favorite for investors. The Balance did a decent piece on how to invest in and analyze Russian stocks and an earlier piece on how to invest in Russia for those interested in doing so. Interactive Brokers allows users to trade on the Moscow Exchange (MOEX).
The cubes has rallied in three waves to the 50% retracement level at the daily pivot, where it was rejected. A break down below 353.15 will signal that the downtrend has been re-established. At that point we can expect wave iii to target a minimum of 314.00 at the high volume node.
The S&P E-Minis have rallied in three waves and found rejection around the daily pivot, similar to the QQQ above. A break down below 4267.50 will signal that the index has resumed its downtrend toward a minimum expected target of 3951.
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Trade Ideas
ReShape Lifesciences, Inc. just printed bullish divergence on the daily RSI and reversed off the daily S1 pivot to rally impulsively above the daily pivot on heavy volume. There is a minimum expected target of 59.33. Locally, a break out above the descending channel EQ gives traders a target of the channel’s resistance. An impulsive break out above that channel resistance will produce a pattern target of 18.73 above the point of break out. A break down below the swing low at the daily S1 pivot will invalidate this setup.
The IDEX/USDT pair should be prepping for a rally at this time. The descending channel pattern target is 0.57. An impulsive break out above the local descending red resistance will indicate that price has most likely resumed its rally toward that target.
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Live Stream Schedule
Free Public live streams //YouTube & Twitch//:
  • Tuesday 11 a.m. - 1 p.m.
  • Friday 11 a.m. - 1 p.m.
Make sure you subscribe to the channels and set your alerts so you don’t miss a show!
Tier 3 live streams //TWC Discord Tier 3 members area//:
  • Monday 4 p.m. - 5 p.m. (The Wyckoff Method)
  • Wednesday 3 p.m. - 4 p.m. (Trading Tips, Tricks, and Techniques)
  • Thursday 3 p.m. - 4 p.m. (Elliott Wave Theory)
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Recommended Resources
TexasWest Capital - When you’re finally tired of throwing away your money in the markets and are ready to learn how and why the markets really move like they do, as well as how to take advantage of that movement, then this is the place to be. We offer the most comprehensive market trading education found anywhere, as well as tons of trading opportunities every week for our Tier 3 members, and an incredible trading community.
Phemex - Take charge of your trading fees! Solid trading platform that allows you to trade contracts or spot.
Bittrex - U.S.-based Blockchain platform for U.S. customers.
MotiveWave - Are you ready to move into the big leagues as a trader? This is one of the most comprehensive charting platforms around, giving you much more flexibility and tools, but still without the steep learning curve that other advanced platforms require. Get a 14 day FREE trial. This is what I use on a daily basis for my personal trading.
TradingView - Need an extremely user-friendly charting platform? Then this is your go-to! Not as robust as MotiveWave, but combines the right amount of flexibility & tools with a very shallow learning curve so you can be up & charting in no time at all!
YouTube - The official TexasWest Capital YouTube channel. I simulcast live streams with our Twitch channel.
Twitch - The official TexasWest Capital Twitch channel. I simulcast live streams with our YouTube channel.
Twitter - The official @txwestcapital Twitter account.
Facebook - The official TexasWest Capital Facebook page. We have recently retrieved it from Facebook and will be posting regularly once again.
Instagram - The official TexasWest Capital Instagram page. We have recently retrieved it from Facebook (they own Instagram) and will be posting regularly once again.
TWC Book List - People are always asking me what books I would recommend. Here is a list of books that I have read and would encourage others to read in order to get a greater understanding of the markets.
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Bio
Christopher Inks is a macroeconomist, educator, and veteran trader of over 25 years. He holds multiple degrees including a BIS focused on economics, finance, and political philosophy, MS in Applied Psychology, MS in Homeland Security with a focus on governmental decision making, and a J.D. with concentrations in corporate, tax, and emerging technology law. He is a student of cycles and Socionomic Theory, especially as it relates to finance and the markets. Christopher currently holds a Level 1 CEWA certification and relies on Elliott Wave and The Wyckoff Method to understand and forecast market movements.
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Disclaimer
The views and opinions expressed in this newsletter are solely those of Christopher Inks and are not financial advice, nor do they constitute an offering of financial instruments or investment advice. Investments and trading are inherently risky. Always be sure to conduct your own research and analysis before making a decision, and never forget to practice proper risk management.
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