Two Days And 60% Early, Weekly Wrap 12/3-9/2017

It’s good to be back writing my weekly wrap again.

Macro and Markets

Bitcoin mania is in full swing: I could hardly turn to any financial publication without seeing a front-page article. Of course this is exactly what a blow-off top requires. The run-up to $19K and the subsequent pull-back is part of the script. I now anticipate some weakness which will embolden some shorts once the futures start trading — the very shorts whose carcasses will be the stepping stone to the top outlined here. Other prognosticators have given similar price targets as me, but no one to my knowledge the same timing — which is even more critical imo. TheMacroTurist hearkens back to the 1980 gold bubble:

One of my favourite trader war stories comes from Jim Rogers. In the late 1970’s, Jimmy was long gold (I know, shock!) In the early months of 1980, gold went parabolic. Traders were scrambling to buy their inflation hedge, and just-get-me-in orders were flooding the exchanges. Well, sensing the mania was getting out of hand, Rogers pulled out some pink tickets. He was within two days of the high. Problem was, he was 60% early in terms of price…

This week’s Bitcoin rally reminds me of that period.

The stock market is not exactly quiet either. After a classic “sell on the news” earlier in the week the indexes look to have put that episode behind them and are ready for new highs again. 2700 on the S&P, which I first fingered in March, is still in play. Even the biotech ETF $XBI, the bane of my existence for the past two months, is looking up after having made a double bottom. The long shadow on this week’s low is especially encouraging.

Precious Metals

Gold finally broke below its $1260 support this week. It took more time moving sideways than the simple sketch I drew almost two months ago. The low obviously is still to come. I’m still leaning towards the 63 week/13.5 month bottom coming in January, which may also corresponds to the peak in bitcoin.

Portfolio

There were no trades this week. Current portfolio composition is as follows: PMs 9.0%; equities 55.3%; FI, 22.5%; cash equivalent, 4.9%; and other, 8.2%. The “other” category is composed of crypto, 5.5%; 3X ETFs, 0.35%; and options, 2.35%. Effective exposure from options is 64.5% of total portfolio value for a leverage ratio of 27X. The total portfolio is 120% long equities (not beta-adjusted). Most of the percentages have fallen due to the rise of cryptos whose market value has increased to 10 times my initial deposit even after withdrawing 113% of the deposit amount.

Good Reads

None of the above is investment advice, the standard disclaimer applies.