Stocks have been experiencing a pretty terrible week and more widely have been in a downwards trajectory now for two months.
The Dow Jones has fallen from 26,000 at the highest point in January, to around 23,000 yesterday, with the price going back to November levels and in the process wiping out some billions.
While the daily candles chart looks somewhat interesting and might perhaps be making that classic shape.
The given rational for this movement is trade war, or perhaps Facebook’s difficulties, or tech stocks, but opening China’s market, or otherwise responding in kind, should arguably benefit the economy.
It may therefore be more the case that sentiment has changed. Stocks were growing way too fast in a booming optimism following better than expected after better than expected economic data.
At some point something had to give, with more sellers overtaking buyers. After the first sell-off of course there was disbelief, back to normal, and then more sell-off.
We’ll see how that goes now because there wouldn’t be any real reason for panic, but stocks, like most investing, are a game of chairs.
More importantly, for the first time, they have a real competitor. Everyone is talking about bitcoin because when the best have gone, the rest come.
And what currently has the best most excited is ethereum because its platform can potentially replace the stock market or at least complement it.
Look at that capitulation. That’s the biggest one week candle ever. Then more down in despair, but the candles are getting smaller and smaller.
That’s probably because the music is now no longer too loud, the fear has sort of gone. People are back to “don’t care about the price,” with the atmosphere generally calm as the excesses have arguably cleared.
Of course no one can predict the price, but cryptos might be moving ahead of the stock market, which might now be going through its own phase with cryptos potentially coming out of it.
The lesson here for stock investors, in our view, is diversification. While the lesson for regulators and the mainstream media is that when you diss cryptos you diss the stock market.