Trading With Larry Benedict
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Bitcoin Is Not Keeping Up

By Larry Benedict, editor, Trading With Larry Benedict

Traders need to leverage any edge they can get.

I know because my 40-year trading career spans some of the biggest booms and busts ever seen. I witnessed the 1987 Black Monday crash, the 2000 dot-com bust, 2008’s financial meltdown – and everything in between.

I’ve made my share of mistakes along the way. But I also learned what it takes to become a successful trader.

I ran a hedge fund and made money for my clients for 20 years in a row. During that time, I honed an edge that’s served me extremely well.

It includes something many traders don’t use to their advantage.

So today, I want to pull back the curtain on “intermarket” analysis and share what it says about the stock market’s next move…

Searching for Clues

Intermarket analysis is built on a simple premise: All financial markets are linked in some way.

Searching for clues in one market segment can help you figure out what could happen next elsewhere… like watching a row of dominoes topple each other.

For example, interest rates can impact how the U.S. dollar moves relative to other currencies. The dollar’s movements impact commodity prices because commodities are priced and traded in dollars.

That’s just one example of how one thing (interest rates) can ultimately impact another (commodities).

And one important intermarket relationship has emerged in recent years.

That’s between Bitcoin and the stock market.

Trading in Bitcoin (and other cryptocurrencies) can reveal the mood of investors and their appetite for taking risks.

Fear and greed often show up in Bitcoin before other markets. So Bitcoin can change direction before stocks follow.

Let me give you an example in the chart below:

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The price of Bitcoin topped out just under $107,000 on January 21 (arrow). That was a full month before the S&P 500 peaked on February 19.

And Bitcoin’s failure to confirm the S&P’s high was a warning that a sell-off was in store.

Since then, Bitcoin has flagged other major reversals in the stock market… and now it could be delivering a warning.

Tune in to Trading With Larry Live

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Each week, Market Wizard Larry Benedict goes live to share his thoughts on what’s impacting the markets. Whether you’re a novice or expert trader, you won’t want to miss Larry’s insights and analysis. Even better, it’s free to watch.

Simply visit tradingwithlarry.com at 8:30 a.m. ET, Monday through Thursday, to catch the latest.

Follow us on YouTube to catch any episodes you missed.

Bitcoin’s Warning

Bitcoin called the top in the stock market earlier this year. It also pointed to the rally off the April lows.

Take another look at the chart:

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As the S&P 500 plunged to fresh lows in early April, Bitcoin was holding up near the March low (see “1” compared to “2”).

At the same time, the Relative Strength Index (RSI) made a higher low (dashed line). The RSI showed that underlying price momentum was improving.

Bitcoin’s price action pointed to a short-term bottom in the stock market.

Following those developments, the S&P has been rallying back toward the prior record highs. The Nasdaq-100 made a record high this week.

But Bitcoin is now suggesting that a move in the other direction may be near. Take another look at the chart:

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(Click here to expand image)

The S&P 500 and Nasdaq are jumping to their highest levels following April’s lows. But Bitcoin is currently trading below the highs at the end of May (arrow).

On a recent test of the $110,000 level earlier this month (“1”), the RSI made a lower high (dashed line). That points to worsening price momentum.

So Bitcoin is not confirming the most recent advance in the stock indexes.

If Bitcoin can’t move above the $110,000 area soon, then the stock market’s recent gains could reverse.

It might not be immediate. (Remember, the stock market lags Bitcoin’s moves.) But this is an intermarket relationship that’s definitely worth watching…

Happy Trading,

Larry Benedict
Editor, Trading With Larry Benedict

Free Trading Resources

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