Remains a risk-on environment

This has been quite a week already. The leading sectors/assets over the past year got hit especially hard. Early in today’s session, TAN, ARKK and BTC were all down over 15% on the week.

Meanwhile, precious metals and miners had a nice bounce yesterday.

All this has many jumping the gun to declare the end of the ‘bubble’ in risk-on assets (growth stocks, crypto) and a rotation into risk-off (gold). For an explanation/refresher of why I categorized these assets like this, see this previous post: link.

Based on the weight of the evidence, I disagree. I believe we're in that part of the bull market where you can either:

  1. Make amazing profits by sitting tight and not being distracted; or

  2. Be confused and chopped up by the volatility

Remember the first trading day of the year when gold soared while tech & crypto fell hard? That was a giant head fake.

Let me show some charts for why I continue to remain very bullish stocks & crypto.

Financials (XLF) have just come out of a 14-year base.

Lumber recently made a 6-month breakout. This is great for stocks.

ARKW had a peak-trough drop of 19% in the past couple trading days. It hit the first fib retracement level and rallied over 8%. This is a strong and beautiful uptrend, which has consistently rewarded dip buyers.

Ethereum retested a 3-year breakout.

Swiss Franc is a very good proxy for gold, just like real bonds. CHF/USD broke down earlier this month and got rejected as it tried to recover the neckline level. This suggests more weakness for gold in the short-term.

I will add one sign of caution for risk-on assets. Commercial hedgers (“Smart money”) have begun building a large long position in VIX futures. However, as the chart history shows, this indicator has been early by several weeks and months.

In summary: the weight of the evidence still favors risk-on assets (stocks, crypto) and not risk-off assets (gold, bonds). If the support levels on the risk-on charts fail to hold, then I will gladly change my view.


Important DisclaimerThis blog is for educational purposes only. I am not a financial advisor and nothing I post is investment advice. The securities I discuss are considered highly risky so do your own due diligence.