Market Outlook #219 (7th May 2023)
Hello, and welcome to the 219th instalment of my Market Outlook.
In this week’s post, I will be covering Bitcoin, Ethereum, Cardano, Fantom, Immutable, dYdX and UFO Gaming. I will also be looking at Altcoin Market Cap in BTC and USD.
As ever, if you have any requests for next week’s Outlook, do let me know.
Market Cap: $560.819bn
Thoughts: If we take a look firstly at the monthly chart for BTC/USD, we can see that last month closed marginally green, just above prior range support around $28.7k into $29.2k. Volume was lower than the previous month and it was largely a period of consolidation, where we saw price wick both above and below that pivot level but ultimately close right around it. If we look at February, we had a similar scenario in which we rallied hard the previous month on good volume but then consolidated below resistance. This led to a bullish engulfing in March after the trendline breakout and retest, and we now have that April candle looking contextually similar to February in my view. That being said, it is important to note that we are at a pivot here around $28.7k and if we begin to accept back below that level this month as reclaimed resistance, it is likely we have formed a local top. If instead we start to break above $30k, I think we get a third drive higher from here towards the 38.2% retracement of the entire bear market right around $36k.
Turning to the weekly, we can see that price continues to chop around this pivot, with consecutive closes above and below the level for three weeks, with price closing at $29,240 last week. This week has been a period of consolidation, evidenced by the inside week formation we have got here, with the entire weekly range inside the previous weekly range. Given this formation, we may well see inside week failure form next week, where if we take out the lows at $27.6k and then close next week above that level, it is likely we reverse and trade higher through $30k from there; and vice-versa if we take out the $29.8k weekly high and close back below it next week. As such, if we do start to wick lower early next week, that could be nice dip to look for longs in anticipation of a move back inside the range, assuming a setup forms on the lower timeframes; alternatively, we can await the weekly close next week for confirmation. Now, if we don’t get inside week failure, I am watching for a clean break and close below $27k to confirm a local top, where I would then expect a retest of the $25.4k breakout level at the very least. Similarly, a weekly close above $30k looks like a clear continuation signal to me.
Dropping into the daily, as mentioned in last week’s post we did have that bearish div but I believe that has played out. We have since rallied back above prior range support at $28.7k and are now sat around resistance from the March highs at $29k, with that level currently holding as support. I have marked out two trajectories from here assuming no inside week failure formation, with the more bullish of these being acceptance here above $29k as resistance turned support leading to a push back above $30k next week as a legitimate breakout this time, from which point we can look to play longs into $36k. The less bullish scenario is rejection at $30k next week leading to a breakdown and close below $27k and a flush of the $26.6k lows into $25.4k; for now, I am still assuming that would mark out a bottom as higher timeframe structure and momentum are still pointing higher. In spite of what appears to be a huge amount of doom-posting on Twitter, the actual price-action on BTC looks fine, in my opinion.
Price: $1907 (0.06597 BTC)
Market Cap: $229.503bn
Thoughts: Beginning with ETH/USD, we can see from the weekly that price wicked higher this past week back into reclaimed resistance at $2037 and rejected, now set to close just above the weekly open but still firmly above resistance turned support at $1847. There is no indication of momentum shift on this timeframe, in my view. Looking at the daily for greater clarity, what we can see here is that the rally of this past week took price right back into that trendline resistance that has capped price for all of 2023 except for the fake out in mid-April. We are now largely just chopping around with $1847 as range support and $1945 as range resistance. If we see daily closes below $1847, I would expect to see a deeper retracement as market structure turns bearish and I am looking at that range between $1660-$1720 as a target for shorts. However, until we see that structural shift, again there is no indication here of momentum exhaustion or a trend shift – we are just consolidating above resistance. Bulls now want to see that $1847 area hold as support next week (and a sweep wouldn’t go amiss) and then break and hold above $1945 – accept above that level and I think we rally through $2037 and fill the gap into $2425.
Turning to ETH/BTC, we can see that this week saw the pair bounce and rally back into prior support turned resistance at 0.0679 but reject, with the pair set to close back below 0.0664. If we drop into the daily, we can see how a higher-low appears to have formed at 0.064, with daily structure currently bullish with the series of higher-lows and higher-highs since March. Nonetheless, we remain capped by a confluence of resistance levels below 0.07 and until we see a clean break through that area and acceptance above it, I will continue to assume the long-term downtrend is still intact. If we break lower from here, any close through 0.064 invalidates the higher low and likely brings with it that leg down towards 0.0594. Continue the rally next week and close back above the 200dMA and then we’re looking at a significant trend shift, in my view.
Price: $0.38 (1319 satoshis)
Market Cap: $13.283bn
Thoughts: Looking at ADA/USD, we can see from the weekly that weekly structure is actually bullish here, with a recent higher-high above $0.42 into $0.47. That being said the pair immediately rejected that breakout and closed back below $0.42, which is not promising for the validity of the breakout beyond a critical level. Since, we have returned to consolidation between reclaimed resistance at $0.42 and support at $0.37. Whilst the structure is indeed bullish, I don’t like how $0.42 has been reclaimed as resistance here. If we crack that level again, however, I’m looking for reasons to jump in, as I would expect the second breakout to be valid and there is a huge gap to fill back into $0.60 as the next resistance level. Dropping into the daily, we can also see how the pair rejected at the 360dMA and is now consolidating between the 200dMA as support and the 360dMA as resistance, with price having spent almost 18 months below that latter MA. If we see demand step in here and price close above $0.42, I am buying that breakout with invalidation below $0.37 and looking for $0.60.
Turning to ADA/BTC, this looks less promising for a period of ADA outperformance, with rejection at support turned resistance around 1500 satoshis and trendline resistance putting in a local top. The pair is still trending down with bearish weekly structure and there is no support here back into the prior swing-low at 1176. What would be really nice to see develop here over the coming weeks is a lower-low below 1176 with bullish divergence, indicating momentum exhaustion – if we start to see that, I will be looking for long exposure.
Price: $0.41 (1414 satoshis)
Market Cap: $1.139bn
Thoughts: Beginning with FTM/USD, we can see that the pair continues to consolidate between resistance at $0.53 and support at $0.42, but with price struggling to hold onto that support here. If we begin to accept below $0.42, I think we move lower to fill in that weekly wick into $0.29, where I would expect demand to step in. Looking at the daily, we have a lot of chop around here since putting in that low above the 200dMA in March, but we did break back above the 360dMA and have since been range-bound between $0.40 and $0.53. If we do break and close below support here, there is a possibility we just dump into the 200dMA again and put in another higher-low, which is the more bullish scenario, but if that 200dMA fails to hold I think we’re going to sweep the March low into $0.29, which would be an amazing buying opportunity, in my opinion. Now, in the event that this feeble support holds here despite looking ready to give way, I would be looking for a return to the top of the range at $0.53, with a daily close above that level signalling trend continuation towards $0.90.
Turning to FTM/BTC, I have recently entered a spot position with a stop on a close below 1190 and a target of the 38.2% retracement around 3500 satoshis, which I am looking to hold for several months, assuming I don’t get taken out. We have been in a long-term uptrend since May 2022 lows and rice has found support above the 3200wMA since, so I am not expecting the trend to end but rather for price to form another higher-low between 1240 and 1460 satoshis from which to take that next leg higher. Obviously, if we do close he weekly below 1190 then this trend is invalidated and we’ve likely got a lot more chop to come before another trend begins…
Price: $0.866 (2997 satoshis)
Market Cap: $791.869mn
Thoughts: As IMX has only been trading for a little over a year, I will focus here on the Dollar pair.
Looking at IMX/USD, we can see that price rejected at resistance around $1.32 in February, deviated above that level in March and immediately rejected, putting in a top at $1.62. Since, the pair turned market structure bearish and has been trending lower, capped by trendline resistance, with this past week seeing another break below support at $0.90, which should now act as resistance. We are coming into both the 360dMA and the 200dMA, as well as the March lows and historical support all around $0.72-0.76, so I am definitely interested in rebuying my spot IMX in this region over the next week or two if we get that dump lower, with invalidation on a close below $0.70 (tight, I know) and an opportunity to add on a clean break back above $0.91 and above trendline resistance. Not much else to add here. Very clean structure.
Price: $2.39 (8264 satoshis)
Market Cap: $373.622mn
Thoughts: Similarly to IMX, dYdX has only been trading for around 18 months and so both pairs are looking very similar, so I will focus here on the Dollar pair.
Looking at DYDX/USD, we can see that price recently broke above trendline resistance but rejected just above support turned resistance at $2.97, which has been a key level through the pair’s history. Price has since dumped back into the trendline, now acting as support, put in a lower-high off the bounce and is now testing support again at prior resistance ~$2.38. If this level gives way here, we do have the 200dMA just below but much like IMX and Fantom I would then expect the March lows to be tested around $1.77, where any sweep of that low and subsequent reclaim as support begins to look like a bottom. If instead the bulls are alive here, a wick below $2.38 into the 200dMA at $2.11 followed by an immediate reclaim of the support level would be very promising, and we could then expect another test of that all-important $3 level from there. Looking ahead, when we clear $3, I think I’ll be doing everything I can to have leveraged long exposure as I think dYdX’s first bull cycle will be starting…
Market Cap: $31.524mn
Thoughts: As UFO has such a ridiculously large supply, its satoshi value does not even appear correctly on a chart and it is far more legible (though still somewhat difficult) to just look at the Dollar pair.
So, looking at the weekly chart for UFO/USD, we can see that price has very much played out its first full market cycle and the pair appears to be in the depression phase of a traditional altcoin bear cycle, having now returned to the accumulation range that preceded its first bull cycle and finding support around that area. We have been inside this range since June last year, except for the bull trap in August, and support turned resistance at $0.00000230 is the most key level here for me to the upside; break and close above that on the weekly and I think we emerge from depression into disbelief and retest that reclaimed resistance above the August high at $0.00000720. If we quickly glance at the daily, we can see that the 200dMA and 360dMA have now completely flattened out as price has chopped around inside this range for almost a year and there is next to no volatility now, which is the dead zone in which I like to accumulate alts that have promise for the next cycle. I have already bought spot UFO in a moon-or-die scenario – either my 1% allocation goes to 0 or I hold it for a cycle back towards all-time highs.
Altcoin Market Cap (TOTAL3):
Thoughts: Right, so for this look at Altcoin Market Cap, I have opted for Total3 on TradingView, which also excludes ETH.
If we look at the weekly chart for ALT/USD, we can see that price has been consolidating above the 200wMA for most of 2023 after deviating below it late last year to form what I believe was the cyclical bottom. We broke out above trendline resistance from the all-time highs but immediately retraced that breakout, but altcoins are still sat above a confluence of support here – prior cycle highs at $355bn + the 200wMA. If we lose this area, it is likely we dump another 10-15% back into $322bn, which is likely a 20-25% retracement for most ALT/USD values except the larger caps. Looking at this purely as structure, we have the May 2022 capitulation low into $322bn. We then have a deviation below that level with bullish divergence into $285bn. We then reclaim $355bn and retest it as reclaimed support, and are now consolidating above the 200wMA and below summer 2021 support turned resistance at $412bn. If we now look at the daily, we can see that we have even more confluence for support here with the 200dMA and the 360dMA that we are sandwiched in between. If we hold here and start to push higher again over the next week or two, I think alts rally through that $412bn area and start a much broader rally back towards the 38.2% retracement and fill the gap into $600bn (a 40-50% rally and likely much more for smaller alts). This would likely mark out a top pre-halving and we would have the classic mini-bear cycle from there followed by trend continuation in 2024. Now, if the market is not yet ready for that and we lose the confluence of support here at $355bn, I would expect $320bn to be retested as support, with any close below that looking very weak indeed and definitely opening up the likelihood of a sweep of December lows, which would spell obliteration for many alts that are already retesting those lows at present. So that’s my view on ALT/USD values…
Looking now at ALT/BTC, we can see that alts have more broadly just been in a range for two years against BTC, with mini periods of outperformance and underperformance during that time. Since November, they have been underperforming, recently retesting range support at 13.4mn and then breaking below it last week with a weekly close at 12.6mn. That said, we are still right on prior resistance turned support and right above the 200wMA. However, what is potentially bleak for alt performance is if we start to close below 12mn, as there is no ‘support’ for ALT/BTC valuations back towards 9.5mn, which is another 30% drop across the board. However, if support holds here and we then see alts outperform for a week or two and reclaim that 13.4mn valuation, I think this is a deviation into the 200wMA, from which I do think we begin another period of outperformance, at least towards the 15mn area. Let’s see how this next fortnight goes…
And that concludes this week’s Market Outlook.
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