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Market Outlook #52 (1st September 2019)
Hello, and welcome to the 52nd Market Outlook.
How on Earth has it been an entire year since I began publishing these each Sunday?
Given the somewhat special occasion (and because I feel it’s necessary, at present), I have opted for a different approach to this week’s post. Though I will be covering the past week’s price-action in Bitcoin and Ethereum, as usual, I have ignored Monero for the time being and instead thought to provide broader context on where we are in the market cycle, looking at Bitcoin Dominance, as well as EOS/ETH and its significance as a measure of health for altcoins.
There’s rather a lot to work through, so let’s crack on:
Market Cap: $172.206bn
Thoughts: As anticipated in last week’s Market Outlook, price broke down recently and began to clear out local support levels. Moreover, Bitcoin actually presented us with a short opportunity (which I took, as mentioned on Twitter) early in the week, as price rallied hard and rejected equally hard above $10,500.
Before we come to that, however, let’s take a look at the Weekly chart: here, I have kept the chart very clean, highlighting only the open price of the Weekly Bullish Orderblock at $8730 and the Weekly swing-low at $7430. These are the two most important levels for me for this coming month. Why? Because I expect our next Weekly swing-low to form within that range. Interestingly, the 20-week EMA, which has historically been respected (certainly so in the previous cycle, as can be observed) appears to be ready to be broken below. I did note that there were a number of instances in the previous cycle where price wicked below the 20-week EMA and closed back above it; perhaps we shall see something similar unfold here. Elsewhere, we can also see that volume continues to steadily decline; a good sign for bulls, as retracements in bull markets most commonly occur on declining volume. Going forward, I am expecting a flush of $9,000, followed by a swift capitulation wick and a heavy rejection, trapping breakout shorts and liquidating longs. Only after everyone gets shafted will we begin the next leg up.
Now, looking at the Daily chart, I have marked out the area of liquidity that I expect to be raided early in September; the prior resistance turned support (and double bottom) below $9,100. Further, we appear to be respecting the trendline resistance that has been in play since early August; as such, I would not be surprised to see a rally into next week that wicks above trendline resistance, liquidating any shorts trailing their stops, before we move down again. I have also depicted the 200-day moving average, as this is another possible magnet for price as it breaks down.
Finally, in the 4H chart, we can see where the short opportunity was presented this past week, with a rally above resistance at $10,475 that was rejected hard, with price printing a swing-failure. I entered my short as the 4H candle closed, riding price down for the majority of the week, until I closed in the $9400s. I am once again hoping for an opportunity to short next week, with two probable scenarios depicted; the first of which simply leaves me without a position, breaking down early and taking out the double bottoms; the second of which involves a move up above $9880, where I would be looking for reasons to short.
Now, having covered BTC/USD, let’s take a look at Bitcoin dominance: the dominance metric is key in determining where altcoins are in their market cycles, with dominance hitting 69.85% in November 2017, printing bearish divergence and proceeding to fall off a cliff, as altcoins bottomed and rallied through January 2018. It appears dominance is currently behaving similarly to that period, as BTC/USD has topped out short-term and is on the verge of a break below $9,000, akin to the breakdown from all-time highs in 2017; the only difference being that Bitcoin itself is in the earlier stages of its market cycle, rather than the latter. Nonetheless, the pattern of behaviour is consistent – when Bitcoin dominance reaches a peak at the same time as BTC/USD, it can be expected that we see a period of relief for ALT/BTC prices. Looking at Bitcoin dominance now, we can see that it hit a peak of 72.62% recently, but has printed three successive higher-highs with bearish divergences; clearly, the trend is weakening and dominance appears to me to be on the brink of a similar descent.
Price: $170.60 (0.01775 BTC)
Market Cap: $18.345bn (1,909,185 BTC)
Thoughts: Ethereum continues to give mixed signals, more so with the passing of this week, as ETH/USD broke down with BTC/USD but ETH/BTC printed a swing-failure below a major swing-low.
Looking at the Weekly chart, we can see that the yearly high was printed at $360, turning prior support into resistance. This was followed by a breakdown in market structure and a move below $227, with price falling to reclaimed support at $190. Price caught a bounce and retested $227 to no avail, with the following week bringing in new lows at $170. Following this, we had an inside week, with price consolidating, but this past week brought fresh lows, with the Weekly set to close below the prior low. Such a close would open up a move down to support at $146.
Looking at the Daily chart, we can see that the 200-day moving average was lost, with price retesting it as resistance. Further wee can see how cleanly the trendline resistance has been respected, which immediately makes me think that there will be a lot of liquidity resting above there for fresh shorts, as those currently positioned in shorts will be trailing their stops down. Interestingly, even ETH/USD printed a swing-failure on the Daily below $171, with price now consolidating at that level. Nonetheless, there is very little bullish about the chart at the moment, and I would not get bullish until price closes above $190 and he trendline resistance.
Now, we come to the mixed signals: looking at ETH/BTC, we can see that this entire downtrend since June has been a textbook series of breakdowns and retests leading to new lows. Now, however, price has printed a swing-failure at 0.0175 BTC, along with a strong bullish divergence. Moreover, yesterday’s Daily candle closed as a bullish engulfing. There is rather a lot here to get short-term bullish about, despite the looming trendline resistance. Perhaps we are going to see ETH/BTC move up as BTC/USD moves down, effectively negating ETH/USD’s movements and allowing it to consolidate roughly where it is… either way, the swing-failure beneath a major swing-low followed by a bullish engulfing makes me think we see 0.02 BTC retested sooner rather than later.
Finally, we come to EOS/ETH: now, why have I included EOS/ETH here? Well, because I use it as a sentiment indicator for the altcoin market. When EOS/ETH is rallying, it is often coupled with a healthy altcoin market and falling Bitcoin dominance. As such, it can provide us with a time-period during which we should be focusing on accumulating alts and can show us when we might consider selling (when EOS/ETH peaks). If we look at the Daily chart provided, I have marked out the peaks and troughs, and sure enough they correspond there or thereabouts with the periods of depression and euphoria experienced in the altcoin market. In particular, note how EOS/ETH peaked between April-June of this year; when many (myself included) were expecting the altcoin market to break out. Had I have paid attention to EOS/ETH, as soon as it began to break down and fail to make new highs, this would have been my indicator that ALT/BTC prices were due a fall. Now, it appears EOS/ETH has recently printed a swing failure and is consolidating at an area of support. I am expecting the pair to rally (meaning EOS will outperform ETH) and for this to coincide with Bitcoin dominance falling between now and year-end.
And that concludes this week’s Market Outlook on its 1-year birthday.
I hope you’ve found some value in the read. Feel free to leave any comments or questions below!
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This Post Has 2 Comments
Thanks for your hard work Nik! Incredible that it’s been a year- cheers!
No problem at all! Hope you’ve enjoyed reading the blog.