Market Outlook #95 (5th October 2020)
Hello, and welcome to the free edition of the 95th Market Outlook.
In these free versions of the Outlook, I provide my analysis on Bitcoin and Ethereum.
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Market Cap: $197.912bn
Thoughts: It has been another week of tight consolidation for Bitcoin, the likes of which we last saw around the end of June.
If we begin by looking at the weekly chart, you can see here that price, for the third straight week, has closed above the prior triple-top at $10,570, which is a good sign for bulls, particularly with volume continuing to decline as weekly ranges contract. In fact, this past week has closed as an inside week; given that, short-term traders might want to look at buying a break below last week’s low if it occurs, in anticipation of inside week failure and thus a push higher into the prior weekly high at $11,000. However, I am primarily concerned with where we can expect price to move over the coming weeks, and with the ever-tightening ranges and declining volumes, I am now looking back at the multi-week contraction of volume that occurred in June. This period saw price spend several weeks declining in both volume and price range week-on-week, with BTC then pushing up and out of the range and ultimately breaking higher. Now, whether we see similar movements is yet to be determined and I definitely don’t want to jump the gun, particularly given the macroeconomic and political climate, which is undoubtedly going to get more volatile over the coming weeks. That said, if we see price continue to range here as opposed to begin to break lower, as I was initially expecting, then I believe we are more likely to see a similar base-and-bounce period to June, as opposed to flushing the lows at $8,800. This is all dependent upon whether we hold that $9,790 low, as a move below that level would invalidate the range.
Turning to the daily, there is actually not a lot to add here, given that we have seen price print an inside week and thus a lower-high and higher-low over recent days. What I am looking at here is how tightly we seem to be hugging that $10,570 level, which was such an important resistance level to overcome. It now appears that, short-term, bulls and bears are fighting for control of this level, hence the tightening range. One possibility I am considering from here is whether we simply see $10,570 act as a magnet for the next few weeks heading into the US election, and following that we see a breakout one way or another. For now, I am simply watching that $9,790 low as my line in the sand for any further downside; remain above it and I think the above scenario is quite likely.
Price: $352.11 (0.0329 BTC)
Market Cap: $39.743bn (3,715,944 BTC)
Thoughts: Much like Bitcoin, Ethereum is currently hugging an important level, but I do think the possibility of short-term downside is stronger here given how ETH/BTC looks at present.
If we begin with ETH/USD, as we can see from the weekly, price is wrestling with $365, which was an equally important level to break out above as $10,600 was for Bitcoin. We have since come back under that level, but the important thing to note here is that all of the past few weeks-worth of price-action has occurred within the range of that bearish engulfing that set the 2020 high at $491. Price has failed to move below the low of that week at $309 and is now contracting its weekly ranges around $365. If we drop into the daily, we can see that there is somewhat of a double-bottom at $309, which should concern anyone long here (as noted last week). That said, given that price printed an inside week (just like BTC/USD), it would actually be a beautiful textbook setup for longs if we see price flush $309 into that demand area around $290 and then close the week back above $309; I would be very keen to get long if we saw such movements, looking for $365 to be retested or even swept as the inside week high. However, if we start to close below $309 – particularly if we close the weekly below that level – I would be looking for continued downside, given bearish market structure and the pull of the 200dMA below.
Turning to ETH/BTC, a similar story can be seen to the Dollar pair on the weekly, with price having printed an inside week on declining volume. Unlike for the Dollar pair, however, the week before last saw its low sweep that of the bearish engulfing at 0.0312. This level held firm as support as price closed well above it after the sweep, but, if we turn to the daily, we can see that despite the swing-failure price has failed to give any sign of a sustained reversal. If anything, it has simply led to another lower-high at present, with price struggling to stay above 0.0328. If you look at the lower-high that preceded the swing-failure ~0.036, that is the level I am most interested in for a reversion to bullishness. Until that level gets broken above, I am expecting further downside for ETH/BTC, with the next area of interest a retest of 0.0286.
And that concludes this week’s free Market Outlook.
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