The S&P Dropped Another 2%
One of the most important factors affecting Crypto right now is the macro environment. When you see bullish expectations in an environment that is extremely bearish it becomes obvious that there is a lack of knowledge. Many choose to ignore TA, thinking they can do just fine without it. How can you be a mechanic without an understanding of how an engine works? It’s a simple and logical question. One that everyone should consider if indeed you have chosen to partake in any financial market. It’s imperative that our community grow in knowledge and understanding because without it there is not much growth. Today, as expected we saw the S&P retrace by another 2%! In Sunday’s article, we addressed further downside, as well as pointing out that the rejection of the 4300 level was now confirmed. For those wondering why we are talking about the S&P and not Bitcoin, it’s because BTC is under the influence of “higher level” indicators. This was addressed in another recent article, “Do You Understand The Hierarchy Of The Market?” The macro landscape is dominating everything right now.
Bear Market Pumps
This has been addressed a few times in the past. The fact that the recent pump to $25K was nothing more than a typical “bear market pump”. Apart from TA and other metrics, there is a very important perspective that helps traders and investors remain sure-footed in a bear market. In a bull market, a retracement is simply seen as an opportunity to buy, correct? Why are market participants not applying the same logic in a bear market? Now the reverse is applicable. A pump is merely an opportunity to sell. Until the trend has reversed, the bearish bias remains. I saw many people saying that the trend was clearly up and that BTC was edging higher. Incorrect, the trend was still the same. There had been no fundamental adjustment to the trend. This is a prime example of how being “technically impoverished” can rob traders and investors. It’s like finding a location without a map.
We need to see the stock market find a local bottom because it has now been rejected at a key level and is basically prone to the force of gravity. Looking at the chart below, it is likely that the S&P will travel lower to the first point of support.
There might be a bit of a bounce here and there but I would think that by the end of the week. or even next week, we are likely to hit the 3900 level. This will be a very important level. Not only because it is the first major support but also due to another technical reason. If the S&P can find a bounce at this level then the bulls will be looking at an inverse head and shoulders pattern. If that support is lost then it can get pretty nasty.
The Crypto Market
Without some sort of stability from the traditional markets, it becomes very difficult for BTC to move higher. Unfortunately, we are at the mercy of what is happening outside of the Crypto market and not only our in-house challenges. In my most recent article, I addressed what I believe could help Crypto eventually decouple from traditional markets. However, I think that it is still a way away. Essentially, we are watching the 3900 level for the S&P at this stage. It’s not logical to expect a pump while the stock market is in free fall. High-level indicators could initiate a pump but I don’t see any significant strength on the horizon. Look at how the “Merge” has surrendered. ETH is down 25% in a matter of days. If you went short with me on that trade, good for you! Thanks for stopping by! See you in the next one!