If you want to trade the equity markets you need a signal that leads the market moves.
It is a holy grail for trades
Right now its out there for all to see.
It is Bitcoin
US/China trade war is a perhaps the driver of the market now. It is in fact a little amazing that stocks aren’t in a smoking crater because of it. However lucky this escape is so far, no one would be shocked if this developing situation triggered a market rout.
But first let us look away.
What ever is going on behind closed doors is not something we are allowed to know but rest assured there are billions at stake and billions in Chinese Yuan. The deal is, Trade war worse, yuan down. Trade war progress, Yuan up.
This translates to increased trade war anxiety in China, Bitcoin up, less anxiety Bitcoin down.
Bitcoin is the ‘trade-war-ometer.’
Here is the proof:
Now the key thing to note is there is lead in this move. Lots of lead.
Not only is Bitcoin leading as a signal on the day, but it is also lead a day or two ahead.
This is a gift to traders.
For Bitcoin investors its little help because its feast if the Trade War going nasty and famine if it doesn’t and its anyone’s guess what the two mercurial sides will whip up. For equity traders it’s a gift because for now this signal is not being traded away.
Of course its only a high probability signal, not a message from the gods of Olympus, but a weak BTC versus a weak Dow on China trade fears, it a strong indication to buy the dip. BTC up, Dow down on trade fears…. You can fill in that blank yourself.
Remember this trade is driven by this cycle.
Get out of Yuan fast, buy BTC because you can get it out any other way. (Up goes BTC in a spike)
Sell BTC for Currency (Down goes BTC the next day in Europe/US in a spike)
Or
Hold BTC to reverse it back to Yuan when trouble passes (BTC doesn’t spike down)
While this is a pattern also coming out of Iran, China is the kingpin.
So what to do?
Set your levels to aquire, hold, sell and stick to your plan