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Market Outlook #33 (5th May 2019)
Hello, and welcome to the 33rd Market Outlook. It’s been a couple of weeks since my last post and it seems I have missed a great deal. As such, this week’s post will be longer than usual, and will be split into two parts; one of which will be published later this week and will exclusively cover smaller altcoins.
In this post, I’ll be covering everything I have yet to update for Bitcoin, Ethereum and Monero, plus I’ll take a look at Dash.
Before I begin, I’d also like to quickly mention that I will be transforming the current weekly email that goes out on Mondays in its entirety. It is, at present, just a RSS feed of recent blog posts, which is rather limited in its usefulness. Instead, I’ll be combining a round-up of the past week’s blog posts with brief thoughts, updates, short-term trade ideas and more. I’ve not really decided on the format of this yet, but just know that it’ll be changing moving forward.
Anyways, let’s crack on:
Market Cap: $102.245bn
Thoughts: So, as you may have already noticed, there is a lot to work through here, and I’ve provided 5 charts to supplement a top-down analysis of Bitcoin. In the previous Market Outlook, I mentioned that I thought price would make a move for $5750, coming into an area of significant resistance, prior to any rejection. This did indeed occur over the past couple of weeks, and now I am awaiting a breakdown, as I still expect a retest of the 200-day moving average before we start breaking up above $6500.
Looking at the first Weekly chart provided, we can see the full price-history of the previous two cycles, beginning in 2014. What is uncanny is the familiarity with which price is moving, relative to the previous bear market of 2015. Looking specifically at the summer of 2015, we can clearly see a breakout above the 20-week moving average when it and the 200-week moving average tightened, which led to a break above trendline resistance and a subsequent rally into historical support turned resistance. Sound familiar? Look now at the past few months of price-action and we see the same pattern emerging. In 2015, however, this breakout rally was followed by a rejection and retracement back below both moving averages briefly, before price bottomed out and begun the new bull market.
I have applied a projection of the same fractal to current price-action for some clarity. A similar (though likely not exact) rejection would send price back below $4000 to retest the 200MA, followed by a swift rejection and a strong move above $6000 in August/September of this year. This has been my expectation for a while now, as often outlined on Twitter; that Q3 will be the beginning of the new bull market for Bitcoin.
Now, looking at the Daily charts for Bitcoin, I have provided a line chart of the same period of price-history as the Weekly to point out another interesting pattern: the interaction of the 200-day and 360-day moving averages.
Back in early 2014, Bitcoin bounced off the 360MA before it gave way in July/August, leading to a crossing of the 360MA above the 200MA for the first time since the previous bull market began. What followed was months of blood, culminating in a bottom being found in 2015. Remember the breakout rally of 2015 I mentioned earlier? It was capped by the 360-day moving average, which led to the rejection and subsequent bottom forming. Now, in late 2015, Bitcoin rallied hard and began its new bull market, and shortly afterwards the 360MA crossed below the 200MA for the first time since the bear market began. Their paths did not converge again until the summer of 2018, and we all know what followed. And once again, the recent breakout rally has sent price up into the grasp of the 360MA, where it now sits, consolidating…
I expect we shall see another crossing of these two significant moving averages before the new bull market begins, and I expect it to occur in late Q3.
Now, looking at the second Daily chart printed above, we can see bearish divergence in the RSI as price comes into significant overhead resistance. The 4H chart depicts the path I expect price to take moving forward; one more leg up before a breakdown.
Further, it is clear to see that early shorts have been getting murdered during this recent rally whilst longs have been left untouched. Best believe there’s no free lunches in this game.
Price: $163.32 (0.02825 BTC)
Market Cap: $17.301bn (2,993,348 BTC)
Thoughts: Unlike my expectations for Bitcoin, my expectations for altcoins over the past couple of weeks were flat-out wrong, Ethereum included. My time away seemed to spark an abrupt sell-off in alts, with ETH/BTC leading the charge as it tanked below range support at 0.0315 BTC.
Let us first examine ETH/USD, however. Looking at the Weekly chart, one thing to note is that each successive higher-low over the past few months has occurred on declining volume; perhaps indicating an exhaustion of buyers as price lingers around overhead resistance – watch out below, trendline buyers.
The Daily chart depicts the 200MA supporting price, for now, but much of the bullish market structure that was working in Ethereum’s favour is now lost, as we see a series of lower-highs and lower-lows forming at present. Further, if Bitcoin retraces back towards its original breakout level at $4200, then Ethereum is going to be dragged down with it, perhaps even more aggressively if ETH/BTC takes a further tumble too.
There are two areas of interest in this scenario: the first is below $123, where there is an untouched level of support; the second is $100. I suspect we shall see both of these levels ran through before we find that cyclical double-bottom form. I doubt we will see $80 again, as there is very little significant support below it until around $50, but everything above it is likely fair game.
Now, looking at the Weekly chart for ETH/BTC, there is quite an interesting price-action fractal playing out, wherein a swing-high is followed by a lower-high, a subsequent bearish break of market structure and a move into a Weekly orderblock. If this pattern is anything to go by, we want to be buyers of the second wick into the orderblock, not the first, likely around 0.0265 BTC, as depicted in the Daily chart.
Price: $67.15 (0.01161 BTC)
Market Cap: $1.138bn (197,069 BTC)
Thoughts: Ah Monero; a range long held but now almost lost. There is a potential spring forming below range support, but I exited my trading position at 0.012 BTC and so am only currently holding cold-storage Monero. What I would like to see before re-entry is what I have depicted on the XMR/BTC chart, if this is to be the spring. I would rebuy on a reclamation of 0.0125 BTC. However, if Daily candles start to close below range support at 0.0116 BTC, we will likely see 0.011 BTC tested and a new range begin to form with 0.0116 becoming resistance.
Price: $119.23 (0.02064 BTC)
Market Cap: $1.048bn (181,410 BTC)
Thoughts: So, in the previous Market Outlook, I mentioned that Dash was in a low-risk, high-reward position; sadly, the 9R trade with a very tight stop at 0.022 BTC was crushed as the altcoin market fell apart whilst I was away.
Oddly, Dash is in a similar position now, sitting on strong support at 0.0205 BTC, and I initially took a similar trade but have exited based on recent analysis. Looking at DASH/USD, we can see similar untouched support levels to that of ETH/USD, and I have depicted the path I expect Dash to take moving forward. A sweep underneath trendline support would flush out buyers before a new bull market begins.
Looking now at the Weekly chart for DASH/BTC, it is hard not to be bearish, as price failed to regain the lost long-term trendline support-turned=resistance at 0.026 BTC. This coincided with a level of historical horizontal resistance. Looking at the Daily chart, it seems price will be making a trip towards 0.019 BTC soon. Again, I expect the December low 0f 0.0176 BTC to hold but there is likely 6-8% further downside to be expected of DASH/BTC.
Now, saying that, I point readers to a few charts I posted on Twitter recently, that lead me to believe Dash will outperform other largecaps when the bull market begins.
And that concludes this very long Market Outlook. I’ll see you tomorrow for some equally lengthy analysis of smaller altcoins.
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