Cacophany
The reset is holding, Bitcoin may be bottoming, and why you've got to tune out the noise for the rest of the year.
Two weeks ago we had an incredible rugpull in the markets. Any attempts to “short the retrace” turned out to be a steamroller trade:
I’m sure you can blame holiday trading and low volumes for the walkup higher, yet that is (and continues to be) cope, because you can’t bet on trading volumes only price.
This is a trading range. We’ve been in a trading range. When you get near the lows of a range, it feels like the entire bid is going to be pulled, then all of a sudden buyers show up.
The VIX spiking above 25 helped. So did the GOOGL gap higher.
Now we’re at the upper end of the range, and now all the prairie dogs are peeking their heads up again to see if the coast is clear.
And it’s possible. I’ve got a scan that looks for stocks with a 10% weekly gain. It’s been listing about 50 stocks, and it’s currently sitting at 200 stocks.
The nature of the bounces aren’t all the same. Some are coming from soul-crushing lows, others are trend continuation patterns.
And the distribution has shifted. The best way to show this is to look at three indices and compare the recent pullback relative to recent structure:
When you look at the average stock, this was a much deeper correction, with clear extension lower from the October liquidation lows. It got ugly out there, magnified by hard resets in momentum darling spaces like nuke, quantum, and AI proxies.
And the price action in crypto has put a knife in risk appetite.
But if you’re just playing the Mag7, it’s been a hiccup:
Due to the relative outperformance of megacaps, this has kept “Johnny Passive” away from panicking and making stupid decisions. All of the churn and correction happened under the surface, attacking the higher risk spaces in the market.
Maybe that was the bear market. At the November lows, the average Nasdaq stock was flat for the past 4 months. A time based correction.
I’m not expecting “rip roaring” market action yet. If we make new highs without an exhale I’ll be looking to fade it.
For now, I’m expecting the range to keep going and emotionally exhaust market participants as everyone is trying to guess at what the next Narrative will be in the markets. And it’s incredibly noisy out there, with complicated market narratives about Japanese sovereign debt… not much with meat on the bone.
Give it another week or two, where everyone throws up their hands and say “we’ll wait until next year to play the breakouts” and that’s when things start to move.
Bitcoin Will Disappoint Everyone
In mid-November, I made the call to to start looking for a low in crypto. The bottom fell out of the market two days later.
Bitcoin managed to come down into the magic lines I found from the market structure of March - May trading range. Playing the bounce worked through Thanksgiving week, but as soon as Asian markets opened on Sunday, BTC got killed.
With the rugpull, expectations are now for a retest. There’s also rumblings of Strategy doing a forced BTC liquidation, which could hit around $75k.
If you’ve got too many traders positioned for the same levels into the same catalysts, what happens?
They’ve got to get runover. This afternoon, BTC should have been killed with liquidations and shorts pressing. This is the first evidence that a higher low could get carved out, which would disappoint so many traders and force liquidations.
Playing the Silver Blowout
We’ve got another gap and go in the silver markets. When price starts to act like this, it’s best to just ignore what the silver bulls are saying because they are the “tin foil hat creature from jekyll island fiat hayek” people.
Which is fine, but into extremes they turn into apes that put the Gamestop bagholders to shame.
Silver is stretched, but we aren’t in the “shit’s getting weird” territory yet. It’s currently having the same path as the gold parabolic from earlier this year. The market would walk up, start to accelerate, but the options market didn’t have a peak yet.
Here is VXSLV, which is the VIX for the SLV ETF:
If Silver wants have “the move,” then we should see silver options blow out to about 60%, probably higher on shorter dated options.
Once that happens, it’s time to start looking for a large fade. This is when you must ignore the silver bulls, because they will be SCREAMING about how central banks are panicking and hoarding silver, and the debt deficit spiral is finally hitting Japan and will bleed over into the US with higher rates… and the victory laps about finally nailing it after waiting 14 years for the next bull run are going to be incredible.
Because if we get a range expansion with a 60+ vol, the reversion will be incredible.
Do you know what narrative the silver bulls are going to run with? It just happened today.
More Water, Same Pipe
The Federal Reserve is ending its balance sheet runoff.
And you’re bearish stocks?
Chinese AI Info Ops
This year’s market history will revolve around the Tariff Tantrum, but the news that kicked off the Q1 pullback was when Deepseek dropped their model to the public. It wiped out half a trillion in NVDA in a single day:
Deepseek is back at it, announcing a new model on November 28th. On the Friday after Thanksgiving. When the market is only open a half day and there’s not much liquidity.
They wouldn’t conspire to try and cause a drop in the markets, right? They just picked a random Friday?
Sure. Let’s roll with it.
It wouldn’t work. Here’s a quote from their recent whitepaper, sourced from X:
“due to fewer total training FLOPs, the breadth of world knowledge in Deepseek-V3.2 still lags behind that of leading proprietary models.
That means even if Deepseek has caught up on the model side, the primary constraint still is how many GPUs can you stuff into a data center.
It’s still early.