Will Bitcoin Go the Way of the NASDAQ?
Correlations between financial markets are never permanent, but the current one...
by Bob Stokes
Updated: September 21, 2022
In our more than 4 decades of observations, Elliott Wave International has concluded that the use of the Elliott wave model is the single best way to analyze financial markets.
That said, technical and sentiment indicators are also useful. Elliott Wave International's analysts review literally dozens of these regularly.
It's also a good idea to pay attention to correlations in financial markets.
Our Sept. 16 U.S. Short Term Update focused on one of those correlations with this chart and commentary:
Risk assets are currently showing a high level of positive correlation. This chart shows the 120-day correlation between bitcoin and the NASDAQ 100 index, which is near its highest level in 12 years. Correlations, both positive and negative, are never permanent but the current one between these two assets has been positive since early 2020. Many investors assumed, incorrectly, that bitcoin was store of value, a hedge against inflation and falling stocks. But stocks and bitcoin have been trending together for years.
With the above analysis in mind, Bitcoin investors may want to pay attention to the trend of the tech-heavy NASDAQ 100.
Note that on August 4, Barron's said:
Mom and pop investors are pouring money into cryptocurrencies.
The same thing was going on with technology stocks around the same time, as our August Elliott Wave Financial Forecast spelled out with this chart and commentary:
The depth of the dip-buying zeal is evident by a late-July retail surge into technology stocks. According to Vanda Research, investors pushed about $580 million into a basket of tech stocks, the highest total since at least 2014, and probably ever. "I'm extremely bullish tech stocks," one 27-year-old investor told The Wall Street Journal.
You'll find analysis of the NASDAQ 100's Elliott wave pattern, including near-, intermediate- and long-term, in our popular Financial Forecast Service.
Considering the correlation thus far, ascertaining the price trend of the NASDAQ 100 may help you to get a handle on Bitcoin (in addition to the NASDAQ 100).
I say "may" because there are no guarantees with any analytical method, including the Elliott wave method. Also, as mentioned above, the correlation between Bitcoin and the NASDAQ 100 may or may not persist.
That said, the correlation has been in place for some two-and-a-half years.
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That is from Robert Prechter's landmark book, The Socionomic Theory of Finance.
Imagine knowing the market's "likely future direction" -- regardless of the news!
In our almost 40 years in the business, we have yet to see a forecasting method that surpasses the usefulness of the Elliott wave model.
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