U.S. Stocks Snap Five-Day Winning Streak; Bitcoin Approaches “GTFO” Level
U.S. stocks drifted sideways on Friday, in what appears to be a soft landing for Wall Street following weeks of mostly solid gains. Cryptocurrencies stabilized following their most recent rout, though bitcoin continues to hover just above “dangerous” levels.
Winning Streak Snapped
After five consecutive gains and the strongest 11-day stretch since 2011, the S&P 500 Index finished flat Friday. The large-cap index pared losses in the final hour to finish at 2,596.26, where it was virtually flat. While most sectors finished lower, losses were mainly concentrated in energy, materials and utilities stocks.
Like the S&P 500, the Dow and Nasdaq also snapped five-day win streaks. Slumping technology shares dragged the Nasdaq lower by 0.2% to 6,971.48. The Dow Jones Industrial Average fell 5.97 points, or less than 0.1%, to 23,995.95.
Despite the declines, implied volatility in stocks fell to five-week lows. The CBOE Volatility Index, also known as the VIX, fell 6.8% to 18.18. That was its sixth consecutive session in the red.
Government Shutdown: No End in Sight
The partial government shutdown in Washington is entering its third week, marking the longest closure in U.S. history. Not only did 800,000 federal employees miss a full week’s paycheck on Friday, there’s no sign that the impasse will be resolved anytime soon.
According to The Wall Street Journal, the White House Office of Management and Budget is already preparing for the shutdown to continue until the end of February. The Trump administration is also preparing for this reality to be reflected in the Jan. 29 State of the Union address.
Political pressure to get a new budget in place has also been ameliorated thanks to temporary funding for Americans on food stamps. The IRS is also planning to pay out tax refunds as expected once filing begins later this month.
President Trump and Democrats last held face-to-face meetings on Wednesday, but talks broke down immediately after House Speaker Nancy Pelosi refused to budge on funding a proposed border wall with Mexico.
Bitcoin Stops Short of ‘Dangerous’ Level
Cryptocurrencies showed little recovery potential on Friday, though markets were able to stabilize slightly above their recent lows. For bitcoin, the bears stopped well short of $3,550 – a critical support line based on the long-term technical charts.
This week in the market: Crypto Winter Grows Colder; Trump Goes Prime-Time.
This level was brought to our attention by analysts at CCN as well as Mark Dow, a former IMF economist who shorted bitcoin near its peak. On Thursday, Dow said a dip below $3,550 would drag bitcoin into “GTFO” territory.
Dow is an astute technical trader but admits he knows very little about bitcoin or its future potential. Nevertheless, a look at the two-year timeframe paints a grim picture of bitcoin’s short-term outlook should prices fall below the ‘GTFO’ level.
According to CCN’s bitcoin tracker, the BTC price bottomed near $3,500 on Thursday in what appears to have been a flash crash. It has since recovered well north of $3,600.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
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