Market Outlook #93 (21st September 2020)
Hello, and welcome to the free edition of the 93rd Market Outlook.
In these free versions of the Outlook, I provide my analysis on Bitcoin and Ethereum.
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Market Cap: $196.366bn
Thoughts: Bitcoin is looking shaky as we move towards Q4, despite reclaiming an important level last week.
If we begin with the weekly chart, notice firstly that price actually closed back above $10,600 last week; I had mentioned in the previous outlook that I wanted to see this occur in order to maintain short-term bullishness, but what we didn’t see in conjunction with the level reclaim is an accompanying breakout in volume – weekly volume actually decreased on the previous week. As such, I am not considering this a valid reclamation of the all-important level, and in fact it appears that we are putting in a lower-high on the lower time-frames before the next leg down. Sticking with the weekly, the key levels here are obviously the monthly low at $9,790, a break below which would open up a move down below that consolidation of clean lows around $8,825. Below this, the next area of support for me is $8,000, which is the capitulation candle high. What I am looking for over the next few weeks is for price to form a swing-low above the 200-week moving average, consolidate for a while and begin moving higher. Looking at this, I would expect October to be when we find the next mid-term bottom, and if we start to see signs in the $8k-$8.8k area of a bottom, I’d be looking to open up new longs there for the next leg of the rally into $14,000, which I still think we hit by January 2021.
Turning to the daily, here I have provided a more granular breakdown of the current bearish structures; we are seeing highs form, get swept then retested as resistance and a dump follows. Last week, we rallied back above $10,600 and touched the $11,100 area that I mentioned as a potential turning point. This all occurred on declining volume, and following the first push into $11,100 we got a sweep of the high and have since begun to fall off. Now, if price does manage to hold above $10,600 despite the bearish volume profile, I would be looking for a higher-high above $11,100 and a breakout above trendline resistance to revert my short-term outlook to one of bullishness. However, I don’t think that’s what we’re going to see occur. If we look to legacy markets, which are so highly correlated with crypto, there are signs of reversals across the board, all being driven by the rebound in the Dollar and the increasing VIX prints. Whilst legacy looks to be entering a period of higher volatility, I am loathe to be bullish crypto. As such, I would expect that $9,790 level to get flushed, followed by the $8,820 area. I do think we’ll find some support at this point, as there is a confluence of important levels and moving averages here. Once we get down into that area and I see the reaction, I’ll have a clearer idea on what to expect for the subsequent weeks. I want to see this confluence of levels swept, perhaps with a deep wick on the weekly timeframe, and ultimately I want to see buyers step in and push price back above the 200dMA. We’re in for a wild few weeks, I’m sure…
Price: $349.59 (0.03281 BTC)
Market Cap: $38.894bn (3,659,125 BTC)
Thoughts: Ethereum continues to look weaker than Bitcoin, having stalled at significant resistance on both pairs.
If we begin with ETH/USD, from the weekly we can see that the bearish engulfing candle remains the range within which price is currently trading, although the prior support turned resistance at $365 is once again acting as resistance and looks ready to send ETH lower. Looking at the levels below, my first area of interest assuming Ethereum moves lower from here is that $308 low from the bearish engulfing, below which we have the Q1 high and 200-week moving average converging at $290. That’s a 20% drop from current prices and would be my first area of interest for a bounce; an area I will be focusing on intra-week if we do come down towards it. If we fail to hold that area as support, the next support is at $255, followed by minor support at $213. If we turn to the daily, here we can see that price is breaking down below trendline support from the March capitulation low. Moreover, the 50% retracement of the entire swing from $89 to $491 is at $290; more confluence for a potential bounce as price comes into that level.
Turning to ETH/BTC, the parabolic curve is certainly coming to its conclusion for the current swing, as price looks ready to move back into the prior highs at 0.0286 to find support. If we look at the weekly, the trend is still clearly bullish on the higher timeframes, with higher-lows and higher-highs having been put in since September 2019, and I think we’ll see another higher-low form in that 0.026-0.0286 area. Looking at the daily, the most important level at the moment is 0.0327, which is coming under fire at the moment, as it looks to hold for its 5th test. I doubt sincerely that this level holds, so I am looking for price to move down into that confluence of support around the 200wMA, 360wMA and prior resistance. This does mean that we should expect further bloodshed in alts against BTC over the coming weeks as ETH/BTC finds its next low, but we’ll discuss that at length later in this post. For now, it is quite clear that Ethereum looks topped out.
And that concludes this week’s free Market Outlook.
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