| Wednesday, July 22, 2020 1. Stocks up some, but commodities up more as US dollar slides 2. Microsoft beat earnings estimates...that's bad? 3. Nasdaq index balanced by MSFT, TSLA Market Moves Stocks edged higher on stimulus hopes and optimism over earnings reports from Microsoft (MSFT) and Tesla (TSLA) directly after the bell. Commodity prices also rose as the U.S. Dollar index (DXY) and bond prices decreased slightly. These moves highlight the need for skilled portfolio managers to know how to properly hedge against price shocks of one kind or another. Perhaps that is why a growing number of them are beginning to consider Bitcoin (BTCUSD) as the next major alternative form of investment.
The chart below shows how the price of Bitcoin, though considerably more volatile than stocks or gold, is similar in character to the price movements of both the two assets. Notice the year-to-date comparison of both Bitcoin and the Grayscale Bitcoin Investment Trust (GBTC), an instrument that trades like a stock but tracks to 0.1 percent of Bitcoin's price. This comparison shows that these instruments are more similar to State Street's gold index ETF (GLD) than they are to that company's S&P 500 index ETF (SPY).
The good news for markets is that if self-directed investors are able to use Bitcoin as a liquid, alternative store of value, then it may also be true that those same investors would restart the buying when other investors lose confidence. The bad news for Bitcoin investors is that they still need to be very careful about allocating the right amount to this volatile asset class.  Microsoft Beat Earnings Estimates...That's Bad?
All year long MSFT shares have run ahead of the Nasdaq 100, with the gap widening significantly in a pandemic-driven economy. Microsoft is clearly benefiting from the work-from-home trend, enough for investors to send the price of the stock quite high. Notice that the P/E ratio went from a low of around 25 to a high of well over 36. That represents an increase of 30 percent in valuation, and yet the business metrics of revenue and profits show an increase to these items in the low teens.
As Investopedia contributor Alan Farley astutely wrote, Microsoft investors may have gotten ahead of themselves. So even though the report was good news, investors still sold shares after hours pushing the stock about three percent lower. 
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Nasdaq Index Balanced by MSFT, TSLA Though MSFT shares fell by nearly three percent after hours, Tesla investors added to their positions. The company reported its fourth consecutive quarterly profit and announced the opening of a factory in Austin, Texas. Though TSLA shares surged to new highs after hours, these gains merely offset the losses to MSFT shares. QQQ was essentially flat, down by a small fraction one-hour after the close.
Those facts lend credibility to the chart below as it shows investor demand for Nasdaq 100 stocks has held a steady upward trend since April. It is more likely to hit the next Fibonacci extension level instead of reversing trend and coming back to the previous breakout above resistance. 
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Wednesday, July 22, 2020
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