With markets closed over the long holiday weekend and Donald Trump’s inauguration and related politics taking center stage, no one thought the financial markets would make the headlines. They did. On Friday night, Donald Trump launched the largest meme coin in history. A meme coin is a cryptocurrency based on a meme. Like a baseball card, meme coins have no real value except for that which buyers and sellers ascribe to it. The failed Hawk Tuah and, thus far, the successful Fart Coin are recent examples.
The price of Donald Trump’s meme coin, $TRUMP, surged upon its issuance and was quickly followed by $MELANIA, which also jumped. Trump, his family, and colleagues own 80% of the meme coin while the other 20% trades on the open market. They will not realize profits until they can sell the coins, which is expected to occur on a schedule over time. That said, the unrealized profits are well into the tens of billions!
We believe these coins are bearish for Bitcoin because they help reveal the truth about cryptocurrency. Anyone can “invent” a coin for almost zero cost and sell it for real money. The upside is tremendous, and the downside is zero. The coins expose a fatal flaw of cryptocurrency: the supply is limitless. Furthermore, with zero real value, the prices can go to zero solely on the whims of traders. Lastly, the circus around the $TRUMP coin will probably make pro-crypto legislation or a strategic crypto reserve harder to pass through Congress.
What To Watch Today
Earnings
Economy
- No economic reports today
Market Trading Update
The market was closed yesterday for the Martin Luther King holiday. It was also the Presidential Inauguration. However, as discussed, the market broke out on Friday above the downtrend line from the December highs. To wit:
“The market broke above several resistance levels, including the 20 and 50-DMA and the downtrend resistance from the December highs. That technical bounce and break of the downtrend clears the way for a potential retest of those market highs. Furthermore, on the bullish side of the ledger, that technical bounce has reversed the MACD “sell signal” and improved overall relative strength, which should support a rally into next week.”
With the markets closed yesterday, nothing has changed heading into this morning, but with the MACD “buy” signal triggered and markets not overbought, there is room for the current advance to continue. The seasonality also supports that potential rally, as the last half of January and the first part of February tend to be bullishly biased before getting into seasonal weakness in March (distributions heading into tax season).
Lastly, the selloff that began in December has washed out much of the more bullish exposure to equities and is at levels more normally associated with short-term reflexive rallies. While the setup for a rally is favorable, things can always happen that can reverse the bullish setup. Therefore, continue to monitor and manage risk, but the setup currently suggests “leaning” toward equity risk for now.
Cass Freight Index Points To Weakening Economy
The Cass Freight Index has been down about 6% over the last 12 months, as shown below. It is now near its lowest since the 2020 pandemic. The index measures North American intra-continental freight volumes and is an important indicator of US shipping activity and the economy. Per the Bureau of Transportation Statistics:
The index covers all domestic freight modes, and expenditures are the amount paid to ship the goods. The Cass Freight Index is widely used as a measure of freight activity. Cass Information Systems releases the Cass Freight Index monthly.
While the service sector accounts for two-thirds of economic activity, the Cass Freight Index points to weak goods consumption and likely slumping consumer expenditures. Bear in mind that the consumer accounts for about two-thirds of economic activity. That said, the index has been declining for two years, yet the economy has remained robust. Can the divergence continue?
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