Analyst Nicholas Merten issues warning, says stocks and crypto set to trap traders ahead of new lows – Reuters
A popular analyst warns that recent strength in risk assets is likely setting the stage for a sharp bullish trap.
In a new YouTube strategy session, crypto analyst Nicholas Merten recount its 511,000 followers than the stock and crypto markets likely have a bit more leeway before attracting unsuspecting bulls.
Merten says many anticipate two main outcomes from the Federal Reserve’s first meeting of the year on Wednesday. He says investors expect either an immediate decline or an immediate rally based on Fed Chairman Jerome Powell’s interest rate decision.
However, the popular analyst predicts a different scenario.
“I think it’s going to be something that’s going to continue to feel like it’s a bull market, the start of the next upswing, and we’re just going to continue to see stocks and crypto going up probably in those ranges that are going to convince everyone that this is the next bull market.
AAll the traditional ways that would excite us, that would induce retail traders to buy into the market in order to absorb a lot of that buy-side pressure and liquidity and trap those traders in order to drive prices down and absorb much of the excess liquidity that causes inflation in the economy.
Merten says such a scenario would be straight out of the playbook of the biggest players influencing the financial markets, where prices move just enough to convince the crowds before a reversal knocks them out of the game.
“I’m going to tell you about a really cold spot here that we need to keep in mind, and believe me, that’s why Jerome Powell follows the stock markets. This is why the Fed monitors what is happening in financial assets. We have to understand a very important dichotomy here…
We’ve talked about traps for traders where, in general, asset prices will go up to the point where everyone is convinced… it’s the start of the next bull market.
And it just so happens that right then, that’s when the institutions start shorting out. They begin to build downward positions and due to their weight and mass on the size of their command they are able to lead to dramatic downward movements. And vice versa, if they want the market to go up to a large extent, they will start making those bets that have that kind of upward pressure.
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