Weak Shorts Tested, Bitcoin Bounce and Bond Curves Steeper

Thanks everyone for joining us for this week’s Econemotion brought to you by Mike Agne of Magnelibra Capital Advisors. You can find our blog page at www.econemotions.com where we write our weekly thoughts in hopes that we can provide you with unique insights upon markets, trading and risk.

I am the manager of Magnelibra Capital Advisors which is an NFA registered CTA, that manages individual accounts and executes the Blue Dragon Discretionary Program, a long/short relative value futures and options trading program. Feel free to visit our website at www.magnelibra.com and follow me on Linkedin as well.

“Our mission is to be a significant portion of your portfolio’s alternative asset allocation”

In this edition we will touch upon the equity markets especially the FAANGs vs the SP500, we will also look at Europe in regards to the DAX and EURO. We will also go into the US bond markets and yield curves especially the 5s30 sector. We will touch upon the Bitcoin rebound, but before we dive into the markets, there are a few important societal items we would like to address. What does this have to do with trading and investing? Not much other than gaining better access to the insight of those around us, the mentalities that drive their thinking and perhaps a longer-term generational viewpoint, that may indeed shape our markets in the future.

Anyway, on our radar this week is the ongoing division between the red and blue states when it comes to life as well as the fact that the US has hit its lowest birth rate in over 3 decades. Finally, we will introduce you to some cool phenomenon sent to one of our favorite Youtubers MR. MBB333. We hope you get something out of this, we hope we inspire you to think outside the box and we hope that you look at the markets we cover as something that may pique your interest.

First up this just came out late today and the fact that conservative voices are being censored across the global social media platforms, the Trump white house has seemingly had enough and has now created a platform at the government level that people can use in order to report possible cases of censorship. Look this is America and it’s our first amendment right and the fact that these left leaning social media outlets continue to mute, demonetize and censor conservative voices is troubling. Look we don’t care about your political viewpoint, we welcome your liberal voices and we listen respectively, however this is not a conservative vs liberal fight, this is an amendment right and its not left or right, but rather an infringement upon everyone. This is a very big deal and we are glad the Trump administration is taking measures to combat this. For those that think this is trivial, well look no further than China and an authoritarian mindset, where you have no rights, yea this could lead to that and its why it is so important. So, remove your left or right thought process and realize the bigger issue is whether we will continue to have a voice or not, no matter our leaning preference.
We also saw this week USA Today reporting that the US birthrate hit a 3-

decade low of 1.72 births per woman. We can’t say this number surprised us. We know how hard it is, how expensive it is to raise a family. We also know that more women are foregoing a family to enter careers and perhaps start contemplating a family a little later on in life. We understand the societal changes; the economic changes and we can relate to all these reasons as to why this number is where it is. Some of the data to support this was the fact that the birth rate jumped 1 and 2% respectively for woman between 35-39 and 40-44. We would also like to note that child birth anomalies increase with age and although we don’t specifically point to any single numbers it is a well-known fact that the older a woman is, the more susceptible they are to having complications and potential babies with birth related defects and syndromes.
In what seems to be an ongoing battle of the definition of life, we see the red and blue states continue their polarization as Alabama just passed one of the strictest abortion laws in the country. This law which makes it illegal for someone to perform an abortion and is classified as a felony, is in stark contrast to the full-term abortion law set forth by NY state earlier this year where even after 24 weeks an abortion could occur under certain circumstances. Either way this is evidence of the new “uncivil war” which is what Magnelibra likes to refer to the ever-growing divide between red and blue states. What kind of societal effect will all this have, we feel that we will continue to see conservative people migrate out of the blue states and into red states that are more aligned to their viewpoints…not to mention most likely the better weather as well!

With all this life and family talk in mind, we had to bring you this excellent TEDx talk on life and happiness. Our goal here at Magnelibra is to give you a more holistic approach not only to trading but to life as well. We want you to succeed, we want you to be happy and this talk, which covers a life study that Harvard has conducted over the last 80 some years has some truly astounding observations. The link to the talk can be found here, TEDx Talk on Life and Happiness This was an excellent talk and we think you will truly find it insightful!
We have heard a lot of chatter about Bitcoin lately, well it was Consensus2019 week in NY so we are sure that generated some buzz, but we think the price action has a lot to do with it, as Bitcoin is up 121% thus far in the first 5 months of this year. The ecosystem and adoption of blockchain and decentralized alternative digital payment systems is ongoing and as we have spoken at length in the past, the future should continue to be bright for cryptocurrencies, especially Bitcoin. Here is the chart of Bitcoin:

We are longer term buy and hold fans of Bitcoin and we feel that the conversion price to US dollars should be the last thing on investors minds. This is a bet on the technology that it is built upon and the growth there like all growth will be dictated by Moores Law and why wouldn’t Bitcoin benefit in the long run if that is indeed truly the case? If computing capacity doubles than we think the technology based digital payments systems should grow with them. Digital is the future, fiat-based debt systems are the past and it’s no wonder the central banks around the globe continue to fool the masses with this debt laden system, i.e. they don’t know any better. However, the millennial generation is on board and the old guard, well your time is waning. The future is now and Bitcoin’s price is a testament to that, for its worth and you know we understand value, it’s worth or value is 8200x one single fiat dollar and its worth nearly 6.5x an oz. of gold. So yeah keep kidding yourself that Bitcoin is a “novelty” or listen to Magnelibra and realize the technology it is built on is the future and its worth putting some amount of risk capital towards it, hell remove a few lattes a week and put $20 toward it! Or look down the road twenty years from now and say woulda, shoulda, coulda…up to you.

Before we get to the technical charts, we wanted to update you on a chart of Beyond Meat, this company we spoke about in our last update and its one we feel you should keep on your radar as we understand the growing need and sentiment of the healthier lifestyle contingency. This seems like another Silicon Valley unicorn; however, we feel that given the consumer propensity to try alternatives and the growing health conscious consumer, this company may just be on to something. Just to measure the intensity of the investor-based IPO appetite, Beyond Meat was initially offered at $25 in the IPO. It opened at $46 and never looked back. Now this is not an endorsement of their product but rather pointing out that we sniffed this out as a great potential investment and a new company that should be on your radar Here is the chart:

Ok without further ado, let’s get into the markets that we trade and follow and see if we can explain a few patterns that have developed. Our program trades a long/short and thus we like looking at things in relationship to one another. This first chart is our proxy Nasdaq vs the SP500 where we show the actual FAANG stocks vs the SP500 future:

We can see the FAANGs have broken out of their 5-month up trend and have now been in a 2 week long down trend with the recent reversal off the lows bringing the spread back past the midline of the channel. We expect further short covering to be pressed as all the weak shorts duck and cover. However, nothing for us fundamentally has changed, but what we need to be cognizant of is the fact that the central bank money printers are hell bent on keeping asset prices inflated and will stop at nothing…so perma-bears, be careful here, this might just be a trap! Time will tell but unless this downtrend is broken, we aren’t convinced the selling is over.

As far as the Nasdaq future outright, you can see that a nice 7.66% drop from the highs has been met with some decent short covering. We aren’t sure why the 7200 level was held as nothing technically came in there, but perhaps as we will point out in a later chart of the DAX its 50pVwap came in and put a stop to the selling, but here is the Nasdaq June future chart:

As far as the SP500 it’s the 50pVwap that has put a stop to the rise today, but will see how this level goes, 2860 is sort of our advance decline line and will see how the week closes:

Moving over to Europe and as our readers know we often follow the DAX for overall global market sentiment and as we talked about earlier, the 50pVwap stopped the selling dead in its tracks and this is what we believed led to the overall global bounce:

Sticking in Europe we can see the clear downtrend the Euro Currency has been in. We can attribute this to both the ECB’s reluctance to limit peripheral Europe’s central banks’ ability to print, i.e. backstopping them which is apparent through their negative €250Bn TARGET2 imbalance as well as the ongoing Brexit talks. Anyway, the Euro continues to be plagued here and the 2.5x ECB balance sheet growth over the last few years will certainly continue Ad Infinium, here is the chart:

Moving over to US bond land where we can see the nice price jump in the 30-year treasury bond future as the FED has been put in its place by the larger bond market players, forcing them to contemplate cutting rates. The 150 area was rejected on the prior run up and our line in the sand here is 149-21 so a weekly close under there may open up some downside and testing of new weak longs:

When we refer to the bond market forcing the Feds hand, we can see evidence of this show up in the steeper 5s30 or FOB yield curve. The FOB dropped a bit off the employment number earlier in the month, but it since has resumed its steepening bias, if the uptrend isn’t obvious enough:

Ok guys and gals, that is it, sorry for the long rant, but before we go, we want to introduce you to a guy we follow on Youtube. As most of our readers know we are avid electric universe theory advocates and we love telling our readers about plasma physics, because we believe this area of study has been suppressed and we want our readers to dig and understand for themselves some grander questions about the world we live in.

Anyway, MrMBB333 does an excellent job of posting pictures and phenomenon that occur out in nature and in our skies and his latest video truly piqued our interest. We have never witnessed vertical light bars during a thunder storm, but a viewer happened to capture it so check it out and see what you think. Here is the link and the fun stuff begins at the 4:00 mark, MrMBB333

Ok sorry for the long rant, but there is more to life than trading and we hope this gives you a better view into the things we feel are important and that our letter intrigues you enough to learn more. You can view our video presentation of this blog post at our Econemotions YouTube channel, link is Econemotion Youtube Channel

DISCLAIMER: For Educational purposes only. This is not a solicitation to buy or sell commodity futures or options on neither commodity futures nor an endorsement for the purchase and sale of an ICO, Cryptocurrency or any digital asset and should not be construed as such. The risk of trading securities, futures and options can be substantial and is not for everyone. Such investments may not be appropriate for the recipient. The valuation of futures and options may fluctuate, and, as a result, clients may lose more than their original investment. Nothing contained in this message may be construed as an express or an implied promise, guarantee or implication by, of, or from the author Mike Agne owner of Magnelibra Capital Advisors LLC (MCA) and the website blog, which can be found at www.econemotions.com. All rights are reserved. We will never claim that you will profit or that losses can or will be limited in any manner whatsoever. Past performance is not necessarily indicative of future results. Although care has been taken to assure the accuracy, completeness and reliability of the information contained herein, (MCA) makes no warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, reliability or usefulness of any information, product, service or process disclosed.