Market Morning: Bitcoin Bubble Bursts, Market Mayhem, Housing Hurts, Recession Murmurs

Market Morning

Has The Bitcoin Bubble Popped With the Stock Market Bubble?

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Bitcoin (BTC-USD) and other cryptocurrencies are in freefall, with the price of Bitcoin Cash (BCH-USD) getting especially clobbered the last few days due to the ongoing hash war between Bitcoin ABC and Bitcoin SV. Bitcoin prices have crashed below $4,500 a coin, now down over 75% since peaking in December 2017. The total market cap of all cryptocurrencies including stable coins backed by fiat currency is now down over 82% from highs. Gold, (NYSEARCA:GLD) meanwhile, the other anti-central-bank currency, has been relatively stable, now trading at around $1,230 an ounce. What could be causing the crypto collapse is speculative money flying out of the sector in response to the continuing downtrend in momentum stocks. Perhaps margin calls are propelling money out of cryptocurrencies to replenish forced sales.

SEE: Venezuelan Department Store Retailer Now Accepts Payments in Cryptos

Uh Oh…Housing Starts Heavily Disappoint

The housing market is in trouble. Housing starts came in at 1.228 million in October, versus 1.267 million expected. That’s a miss of 3.1%, pretty sizeable by Wall Street standards. Watch homebuilder stocks D.R. Horton (NYSE:DHI) and Lennar (NYSE:LEN) for how the reaction unfolds. Despite the discouraging numbers for October, the annual rate of construction is still up 1.5% year over year, so we have not yet reached a full scale downturn. We may be headed there in the months ahead however. One of the main reasons for the slowdown in the housing market has been the rise in 30Y mortgage rates, the average of which is now pushing 5%.

Yield Curve Narrows to 25 Basis Points, Short Term Rates Up

Treasury yields on the short end of the yield curve have inched up about a basis point this morning, while yields on the long end have fallen as equities continue to slide. The spread between 10Y and 2Y rates has narrowed to about 25 basis points, the low being 18 hit back on August 27. Every recession since 2000 has been preceded by a negative yield spread, which we have not hit yet, but we’re getting closer.  Treasuries are still being used as something of a safe haven from volatility in stocks as the iShares 20+ Year Treasury Fund (NYSEARCA:TLT) is up marginally this morning. The question is how much longer investors will view the bond market as a safe haven, given skyrocketing debt and the probability of recession increasing. Speaking of that…

Recession Chances Now Higher According to Reuters Poll

People are starting to notice a change of flavor in the US economy. Reuters reports that the probability of a U.S. recession in the next two years has nudged up to a median “35%” from “30%” in the latest monthly Reuters survey of economists taken Nov 13-19. What these numbers actually mean exactly is anyone’s guess, since economists usually are herd-minded and it’s hard to tell if they’re doing anything other than copying the guesses of one another or if they actually have a systematic theory behind their predictions. It shouldn’t matter though, because the Federal Reserve has given investors no cause to worry as they don’t expect any major recession ahead, which they never do anyway.

Netflix Third FANG Stock to Experience the Cross of Death

Mourn for Netflix (NASDAQ:NFLX), for its 50 day moving average has fallen below its 200 day moving average. This means death according to Wall Street jargon. Amazon (NASDAQ:AMZN) and Apple (NASDAQ:AAPL), not quite a FANG stock but an honorary FAANG stock, are the only two left that haven’t been to death cross row yet. Both, however, are in an official bear market, Apple down just over 20% from highs, and Amazon down over 26%. Google parent Alphabet (NASDAQ:GOOGL), which most traders are uncomfortable even calling Alphabet, is the last of these momentum darlings to resist a bear market, but that looks all sealed and done today as Alphabet shares are down  about 2.5% in premarket trading, about to cross below the $1,000 a share mark.


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