Could the Delta Variant be the Push to Capitulation?

Delta Variant

If we want to understand what is happening in the market during a brash selloff, we’re at the point where I look at two things. First, the U.S. dollar seems to climb every time the S&P 500 falls and vice versa. That odd relationship that has evolved since the beginning of COVID is quite a sight. The Delta Variant will no doubt have a further effect on our markets. Despite the recent inflation that we’ve experienced, at least we aren’t experiencing anything close to what’s happened to the so-called “Future of Money.”

Bitcoin (CCC:BTC-USD) is back down another 6% today. Ethereum (CCC:ETH-USD) is off 9.2%. There isn’t a currency in the world that can fall like this and not spur a crisis daily. Bitcoin is now off more than 50% in the last few months. If this were the official currency of a nation, the revolution would have started weeks ago. The bread lines would be epic. Perhaps that’s why the narrative has changed so much around Bitcoin. I haven’t heard “The Future of Money” in a while. And “Storage of Value” is proving to be quite a laugh.

So, what now? “Alternative asset?” “Collectible?” “Speculative Time Bomb?”

The liquidation from this recent bubble has not started. We’re not even close to deflating the bubble. The Federal Reserve remains committed to keeping the cheap money flowing. The only problem is that the markets have largely forgotten one thing over the last 12 months.

Geopolitical tensions can mount and fester and maximize quickly. We are witnessing a string of geopolitical problems in the markets all at once. The Delta Variant is now creating nationwide emergencies. The Tokyo Olympics have threatened again.

China is severely cracking down on its technology sector – whose shares were overvalued in the first place. OPEC+ is on the verge of imploding, which would unleash massive amounts of oil onto the markets and potentially move crude down in the $50s once again.

Do you remember how fun it was to navigate headlines like North Korea’s nuclear weapons launches or Iran’s decision to down a jetliner? How about trade wars over soybeans? The world is back but as uncooperative as ever. Now we have to navigate it.

A Word on Market Momentum

The broader markets are extremely harmful again today. We have seen an incredible move out of small-cap stocks at the moment, combined with large withdraws of funds out of the energy space. Most funds this morning are shorting oil and natural gas.

Money through last week continued to pour into the SPDR S&P 500 ETF (NYSE:SPY) and the Invesco QQQ Trust (NASDAQ:QQQ) through July 2. But now, that appears to be threatened by overextended movement in the Mega Cap stocks like Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN), and Microsoft (NASDAQ:MSFT).

I showed you a picture last week that predicted the selloff we’re witnessing in the SPXL (NYSE:SPXL, Direxion Daily S&P500 Bull 3X Shares). Meanwhile, the Hang Seng Index in China is getting hammered this morning. This is typically an indicator of future pressure for U.S. markets. This appears to be a bearish day for markets. Prepare accordingly.

Garrett Baldwin
Garrett Baldwin
Garrett Baldwin joined Godesburg Financial Publishing as Chief U.S. Markets Analyst in early 2021. A Johns Hopkins-trained Economist, he’s worked with hedge funds, venture capital firms, angel investors, and economic advisors to the U.S. government. Baldwin specializes in market anomalies and alternative investments. He’s written extensively on momentum, value, insider buying, and other unique strategies that provide investors that elusive edge.
Garrett Baldwin
Garrett Baldwin
Garrett Baldwin joined Godesburg Financial Publishing as Chief U.S. Markets Analyst in early 2021. A Johns Hopkins-trained Economist, he’s worked with hedge funds, venture capital firms, angel investors, and economic advisors to the U.S. government. Baldwin specializes in market anomalies and alternative investments. He’s written extensively on momentum, value, insider buying, and other unique strategies that provide investors that elusive edge.

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