Suddenly the Equity Markets See a Return to Normalcy

Monday was one of the most noteworthy trading sessions since the coronavirus pandemic began in March.

Before considering what it could mean for cryptocurrencies, here’ are some key things that happened:

  1. The Transportation Security Administration reported that almost 832,000 people entered checkpoints at U.S. airports on Sunday. It was the highest total since March 17.
  2. Bloomberg reported that a Chinese quarantine on visitors to Macau would be lifted this week. That essentially reopens the world’s biggest gambling hub.
  3. Royal Caribbean CEO Richard Fain said bookings for cruises have more than doubled in the last quarter – despite almost no marketing. Wall Street viewed that as a sign that one of the industries hit hardest by the outbreak is returning to normal.

The market’s response? Airlines spiked 5-8 percent. Cruise ships jumped 7-10 percent. Casinos rallied 8-13 percent. Transports had their best day in almost four weeks and closed at their highest level since the pandemic began.

Meanwhile, money streamed out of Netflix, Amazon.com and Zoom Video Communications – the same companies that soared as social distancing became the norm.

But there was more.

Last week also saw a rebound in several key economic indicators, like manufacturing orders, service activity and employment. (Chinese exports also crushed estimates, a sign of health for global business.)

That helped draw money back to economically sensitive sectors like industrials, energy, financials and small caps.

It’s also threatening one of the strongest trends in the market lately: downside in the U.S. dollar.

The greenback fell for seven straight weeks through last Friday – its longest slide in a decade. That launched precious metals like gold and silver. Gold flew past $2,100 for the first time ever and silver had its biggest monthly gain in at least 19 years.

That’s where cryptocurrencies come in. There are plenty of reasons to follow blockchain assets like Bitcoin and Ethereum, especially after the halving event and as Ethereum upgrades its network.

But another catalyst has been the coronavirus-induced slide in the greenback. While more dollar weakness could help BTC and ETH break out, dollar strength could have the opposite effect.

Cryptos are also more mainstream than ever now. Investors view them as just one more option within an entire universe of assets including stocks, precious metals and commodities. As a result, sentiment in the equity markets could have a big impact on tokens like BTC and ETH. Traders may not want to miss the cautionary signals they could send.

 

 

About The Author

David Russell is VP of Market Intelligence for TradeStation Group. He leans heavily on intermarket analysis to identify actionable trends across equities, commodities and cryptocurrencies. Readers can find updated content daily on his blog, Market Insights