Alessio Rastani On The State Of U.S. Stocks And Bitcoin – Forbes

Peter Schiff and Alessio Rastani

When the stock markets crashed in March, Alessio Rastani was buying into the S&P 500 and the UK FTSE 100, averaging down by going long as the S&P 500 dropped from 2600 to 2191. Even though most investors were bearish and anticipating another stock market crash, Rastani was bullish and profited from bearish sentiment.

Now, Rastani is looking to pull out of stocks as he believes that the U.S. stock market is about to enter, a risky zone. In this exclusive interview, Rastani shares his thoughts on why stocks in the near future carry risk, how this risky zone could impact bitcoins price and why he is bullish on bitcoins long-term picture.

Bullish on U.S. stocks

According to Rastani, as long as the S&P can remain above 2550, he will maintain his long-term bullish perspective on the stock markets. Rastani thinks that most investors considered the recent stock rally to be nothing more than a bear market rally or correction. He disagrees with this perspective for 3 reasons:

Stocks could enter risky waters

The U.S. stock market is getting very close to a 100% full recovery from the black swan crash of March, and because of this, Rastani calls it a risky zone for stocks. Rastani says, This rally is going to get overbought and over-extended soonand the dumb money is likely to enter at the worst possible timevery likely when the S&P gets to the 3150-3200 zone.

Rastani says that: At the time of writing, the stock market has already reached my first targets at 3150 to 3200 (the levels I mentioned in my video 2 weeks ago on 22nd May). I think the markets will likely pause here near 3200 for a pullback, while the potential still exists for this rally to fill the gap at 3300 in the next few weeks or months. He thinks that between the 3200 to 3300 levels is where the most risk exists, as shown on the chart scenarios below:

S&P 500 Weekly Chart

Rastani sees 2 potential scenarios playing out for the chart above:

However, in both scenarios, Rastani is still bullish for the long term, as we will likely see a multi-month rally above the highs of this year.

Rastani is essentially eluding to the idea that once the stock markets return back to their former glories, then this could potentially lead to a massive sell-off of stocks as the majority of companies are in the black and reporting losses. This means that if such a massive sell-off were to take place, then retail investors that buy into this hype could suffer the brunt.

Unfortunately, most people have been on the wrong side of this market - they were bullish at the worst time (in January-February 2020), bearish at the worst time (from the end of March to May 2020), and now greedy at the worst time (June 2020), as this chart below shows.

Dumb Money Sentiment

If this scenario on the stock markets played, bitcoin could also take a temporary nosedive. Rastani says, If the positive correlation between bitcoin and the S&P 500 continues, which is likely, then bitcoin could also see a retracement or correction at the same time when the S&P starts its corrective drop.But this correlation remains to be confirmed by price action.

Long-term bullish on bitcoin

Rastani says, I have been bullish on bitcoin since late March and early April 2020especially when I saw bitcoin holding the weekly 200 moving average (200 WMA). This was an important bullish clue, and as long as bitcoin remains above 7000, I will continue to remain bullish for the long-term.

He further goes on to say, Once bitcoin escapes the 10K resistance potentially in the next few months, we are likely to see extreme bullish sentiment in the bitcoin community. This is especially the case as we likely approach the 11K to 12K levels. I would use that contrary signal as extreme optimisma likely indication that we are reaching the next turning point for bitcoin.

This would then likely be followed by a drop or correction (Wave 2) back down below the 10K level towards 9K by September or October of this year. However, this will likely be the last time bitcoin goes below 10K. This is because once the correction ends this year, I see a much bigger bullish multi-month rally (Wave 3) towards significantly higher levels in the near future I.e. towards 14K this year to 20K by next yearand then towards 30K to 50K in the next couple of years.

In the short-term

Due to the danger zone that stocks are currently about to enter right now, Rastani said in May that he is looking to exit stocks. I have been taking profits along the way in this rally, but I am not completely out yet. I am looking to exit the stock market and take the majority of my profits. Ill do this when the S&P 500 goes into the risky danger zone between 3150 to 3200, says Rastani (levels which have now been reached).

I am happy to remain in cash until a better opportunity develops to go long on the US stock markets again and potentially bitcoin. I will wait for a corrective drop back down to support before I buy again. Its of my opinion that sometimes the best position can be to do nothingI.e. stay in cash until a high probability chart setup appears.

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Alessio Rastani On The State Of U.S. Stocks And Bitcoin - Forbes