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 bitcoin’s price and why he is bullish on bitcoin’s 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:
- The speed and intensity of the crash in March and the subsequent quick recovery (we went from bear to bull market in 5 weeks). We are still in a long term uptrend.
- The up-volume thrust behind this rally has pushed the S&P above resistance.
- The fact that the majority of people have not believed in this rally (and were bearish) until just recently when the S&P entered the 3100-3200 zone. The economy and stock markets are not correlated either.
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 soon–and the ‘dumb money’ is likely to enter at the worst possible time—very 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:
Rastani sees 2 potential scenarios playing out for the chart above:
- Either the market could start the corrective rally from near current levels at 3200 for a corrective drop down to the 2800 to 2700 levels in the next few months—shown in white, or;
- A pause near 3200 to 3150 for a while before pushing higher to 3300 in the next few weeks to “fill the gap” on the chart—shown in yellow—and once the gap is filled, the S&P will likely drop in a correction back down to 2900 to 2800.
However, in both…