Welcome to The Cypher! 

We distill the market chaos and provide three ideas each week that you can tell your clients, friends and family were your own ;) 

Idea 1: A Good Month for US Equities

The curve for S&P futures is sequentially smooth over its curve, indicating strong market optimism.

Ideally, we want to see each blue dot going higher as we move further to the right. Declines indicate expected rough patches.

If we see a broader market rally, look for 493 (those stocks that are not part of the “magnificent 7”). The RSP might outperform the SPY in that scenario.

Takeaway: Short term market outlook is optimistic.

Positions to watch: SPY, RSP, QQQ

Idea 2: Is Bitcoin Overheated?

Having recently crossed $100,000, and rests near $95,000, it might appear that $BTC is over heated and due for a large pull-back as the rest of the alt-coin market has seen. Should we expect that?

Featured is the Market Value (MV) to Realized Value (RV) for Bitcoin. This is, roughly, the current price / average purchase price, and then standardized to find “too hot” (red) and “too cold” (green) zones.

Presently, the score is 3.12, which is not cheap but it is also a long way from the 6.8 from the last bull run.

Takeaway: You’re not early, but you’re not late either – at least according to this one metric.

Positions to watch: BTC, MSTR, MARA.

Idea 3: 2007-Era Corporate Bond Spreads

The Federal Reserve Bank of St. Louis collects data on the spread between the 10-year rate average and Moody’s Seasoned Baa corporate bonds.

If that spread increases, that means banks have less confidence in the ability of firms to pay back their loans. If it declines, banks have more confidence

We have witnessed several months of declining spreads–to a point well below the pre-COVID level. This is the first time the spread has been this small since 2007, a few quarters before before the crash.

Takeaway: While narrow credit spreads may seem like a sign of stability, they can also indicate complacency in risk assessment.

Positions to watch: LQD, VCIT, VCLT, MBBB

Final Remarks

We believe knowledge is power, so if you learned something, please share us and help others Think Beyond What’s Next. 

Happy Trading!

The Team:

Sebastian Purcell, PhD,

Julian von Loesch, PhD

Todd Mei, PhD,

Elyse Purcell, PhD

David LaRoca, PhD