Market Outlook #65 (6th January 2020)
Hello, and welcome to the first Market Outlook of the New Year and the new decade.
Having been absent for the past three weeks, I feel as though I’ve missed out on about six months-worth of news and events, as is often the case when one takes even a short break from this space; the pace of movement and change is unrelenting.
As such, there is plenty for me to address and catch up on and I will begin by taking a look at the most prominent cryptocurrencies, as well as a couple of smaller ones to refresh my own memory and to determine where the current opportunities are present. In today’s post, I will cover Bitcoin, Ethereum and Monero, as usual, plus take a look at EOS, Cardano and Siacoin.
Let’s crack on:
Market Cap: $136.664bn
Thoughts: Well, it’s been almost a month since the last Market Outlook was published and, despite some degree of volatility during that time, price hasn’t moved much, on the whole. In fact, it is effectively exactly where we left it. That being said, one very important moment has occurred; as can be seen on both the Weekly and Daily charts, price printed a swing-failure beneath the previous swing-low from November at ~$6450.
Looking at the Weekly chart more closely, we can see that price has failed to close above trendline resistance from July, at least on this timeframe, and that a pattern of lower-highs and lower-lows had been occurring during that time. Moreover, weekly market structure was clearly bearish, not the least due to the large bearish close beneath $7400 in November. This market structure remains bearish, for the time being, and I have marked out the level that price would need to close above to reverse this: the swing-high at $10674. Until that point, I repeat, weekly market structure is bearish.
Now, things do appear to be shifting bullish when we look at the Daily chart, which depicts a clean swing-failure being printed beneath the low at $6492 in mid-December, which led to a large bullish engulfing candle being printed. I have also highlighted the previous occurrence of a swing-failure like this, which occurred in October beneath the $7413 double bottom; this, as you can see, was followed by swift bullishness that ultimately fizzled out and led to new lows. What is interesting about current price action is that Bitcoin is effectively range-bound between $6500 and $7700; when the high or low of a range has a swing-failure printed, it is likely that the other side of the range will be taken out also. As can be observed, price spent some few days in consolidation before rising up towards the top of this short-term range. Moreover, range resistance at $7700 is also the prior support area that gave way in November; if price is able to close the daily candle convincingly above this, daily market structure will revert to bullishness and I would expect continuation. However, if a swing failure is printed above $7700, it is likely this range will persist.
Price: $141.67 (0.0186 BTC)
Market Cap: $15.465bn (2,037,211 BTC)
Thoughts: Now, Ethereum’s troubles over the Christmas period were compounded by the fact that ETH/BTC fell in conjunction with BTC/USD dropping off, breaking through support that had held for months. As such, ETH/USD fell to new lows at $116, which formed the short-term bottom, as can be seen on the Weekly chart. Interestingly, you will also notice that the subsequent three weeks of price-action have remained inside the range of the prior candle. In all honesty, beyond the clear downtrend in the Weekly chart, there is very little clarity in structure.
Let us see if there is any greater clarity in the Daily chart: here, we do see a number of instance since June where support has become resistance as price has continued to move down. I have included trendline resistance, although given the lack of significant touches, I do not consider it to be very strong resistance at the moment; if price was to reject here (as it presses up against the trendline for the third time since June), I would start to take this resistance more seriously. More importantly, despite the gradual climb since bottoming at $116, price is yet to test the pivot area throughout 2019 between $150-160. That will be the real test and if ETH/USD can close above that zone, I expect we will see some continuation towards the 360-day moving average and the swing-highs above $180.
ETH/BTC, as can be seen from its Daily chart, broke below key support at 0.0187 in December, falling to a low of 0.017 before bottoming and climbing back up. It is currently printing a rounded retest of the 0.0187 support; a scenario I would usually short for an intra-week trade. I expect if price rejects here, as it likely will, we will see another test of the 0.017 area, followed by new lows below 0.0161 if this gives way. If price closes above 0.0187, however, the bearish scenario is invalid, as price will have reclaimed an important support.
Price: $55.65 (0.0073 BTC)
Market Cap: $967.642mn (127,465 BTC)
Thoughts: Monero hasn’t really done much over the past three weeks except bounce between its range, at least for the XMR/BTC pair. That said, let’s first take a look at XMR/USD on the Weekly timeframe to provide some context. In this chart, we can see that, much the same as Ethereum, price has been in a consistent downtrend for months, reversing almost all of the gains found since November 2018 when price originally bottomed at $37. The Christmas period wasn’t anywhere near as bloody for Monero as it was for Ethereum, however, with price largely remaining in consolidation between $43 and trendline resistance from June. I have highlighted $67 as the weekly level above which I would like to see Monero close before I consider its market structure bullish on this timeframe.
Now, looking at the Daily chart for XMR/USD, we can see more clearly the number of failures at trendline resistance and the consistency with which new lows were found throughout this period. In f act, the $43.70 low in mid-December was marginally lower than that of November, but price does appear to have found a lot of support, as the strong breakout above trendline resistance suggests. Over the past few days, XMR has climbed $12, closing above the trendline for the first time since it came into play. This occurred on relatively high volume, lending support to the move. However, support turned resistance at $58 will be the next test for price, above which is even stronger resistance at $66. If price gets above this level, I will start looking for long setups.
Finally, looking at XMR/BTC, it is the level that I have now been banging on about for months that remains the most important, and, in fact, where price currently sits: 0.0073. This level has acted as resistance since September, having originally acted as support. Price also remains under trendline resistance from March 2018. I expect a huge move is incoming for XMR/BTC, one that will either drive price to new lows beneath 0.006 or send it skyward above horizontal and trendline resistance. Until that move occurs, I remain disinterested.
Price: $2.79 (36,768 satoshis)
Market Cap: $2.644bn (348,560 BTC)
Thoughts: EOS looks a lot like Monero on the Weekly USD chart, having retraced most of its gains since the bottom was found in November 2018. Price does appear to have found support at an area of minor prior support from January 2019 around $2.10. I have marked out the level that price needs to close above for weekly market structure to become bullish: $3.80. This is the prior swing-high that led to new lows being made.
Now, looking at EOS/USD on the Daily chart, we can more clearly see the support found at $2.10 and the subsequent reaction, although price remains both below trendline resistance from July and the pivot at $2.97. I am looking for a move above this latter level to lead to bullish continuation and a breakout above trendline resistance, above which I will look to get long on a retest. If price rejects here, I’d expect another test of $2.10.
EOS/BTC, on the other hand, is in a relatively tight range of consolidation between 0.0003 and 0.00042, having spent 4 months bouncing around between those two levels. Again, I am waiting for a breakout above range resistance before I get leveraged long EOS/BTC as there is no real indication as to short-term direction at the moment.
Price: $0.036 (477 satoshis)
Market Cap: $938.295mn (123,652 BTC)
Thoughts: Cardano has had a similar few months to most large-caps, as can be seen on the Weekly chart for ADA/USD. Over the Christmas period, the pair fell to new lows at $0.0293, only marginally above the November lows of $0.0265. From this point, price has bounced a little although is well below the $0.049 level above which a close is needed to turn market structure bullish.
Looking at the Daily chart, we can see the most important area for ADA/USD, which is the pivot zone around $0.056, which also happens to be the 360-day moving average. Price remains capped by trendline resistance from September, despite recently breaking above support turned resistance at $0.034. I would like to get long on a break above this trendline with a view to hold for a retest of $0.056.
As for ADA/BTC, much like EOS/BTC, it has been range-bound between 396 satoshis and 540 satoshis for 5 months now and, as I have mentioned before, I am buying spot here for a cyclical position. More importantly, however, I am waiting for a breakout and retest of 540 satoshis, at which point I would like to get leveraged long and hold for 830 satoshis to be retested.
Price: $0.0013 (18 satoshis)
Market Cap: $57.892mn (7,626 BTC)
Thoughts: The first thing I’d like to draw your attention to is where SC/USD appears to have found support on the Weekly chart: the peak of the first cycle in its existence, from back in mid-2016, at $0.0012. This appears to me a logical place for price to have returned given that now everyone who bought when price broke above this first peak and has held throughout is now underwater again. Moreover, the next area of support below this is another 75% away, which, without BTC/USD effectively dying or SC/BTC trading below 5 satoshis, is impossible to reach (not that it would be obliged to reach this support even if price broke below current support). On the whole, this appears to be a very high reward-to-risk zone for new, long-term buyers.
Now, looking at the Daily chart for SC/USD, we can see a clear downtrend from July, much like with the USD pairs for most altcoins, as price broke below range support in August at 0.002, broke back above briefly, and finally fell to new lows, where it currently sits. Moreover, weak trendline resistance is now in play from July. That said, for mid-cap altcoins, the USD pair is less important.
Looking at SC/BTC, we can see that price has been within a large range below 30 satoshis for 193 days and a smaller range between 16 satoshis and 30 satoshis for 124 days. As the latter is more well-defined, I place more weight on it. Regardless, that is 4 months spent inside a range, with clear buying volume appearing on numerous days. Price has now returned towards the bottom of the range and I believe this is a great opportunity to invest cyclically in Siacoin.
And that concludes this first Market Outlook of the new decade.
I hope you’ve found some value in the read and apologies for the length, though it was necessary given the missed price-action from December.
As ever, feel free to leave any comments or questions below.