What is the current state of the markets, and what can we expect?
While the cryptocurrency market has been moving sideways for a long period with dwindling volume, other markets remain highly volatile. The S&P500 and NASDAQ are only about ~8% away from their all-time highs, despite the dollar's recent strength over the past month. It's noteworthy that the cryptocurrency market is currently not correlating with the stock market, whereas this has been the case in the past. Because the cryptocurrency market is currently so stagnant, it's also challenging to predict. In this edition of the Trade Letter, we will provide a general market update, analyzing the following assets: BTC, SPX, DXY, and GOLD.
BTC-USDT 2-hour timeframe
We have extensively discussed the higher timeframes of BTC in previous editions of the trade letter, so in this trade letter, we will primarily focus on the lower timeframes to see if there are opportunities in case volatility arises.
Given that we know BTC is on support in the higher timeframes, it makes more sense to consider long positions rather than shorts. BTC has been in the range shown in the chart below since August 18th. The price is respecting the range EQ (the middle of the range) very well, which is why I anticipate BTC will move towards the range low from here. If a deviation occurs below the range low, similar to what happened at the range high, I will anticipate with long positions if I get the right confirmations. The setup in the image is just an example and by no means a definitive one. I am patiently waiting to see how price action develops around the range low and will base my actions on that.
SPX (S&P500) 1-day chart
Since the breakout of the downtrend, SPX has been trending strongly upwards. Pullbacks have been consistently bought up quickly, keeping the trend intact. We can see that SPX is currently having some difficulty breaking the daily FVG, which could potentially signal a reversal in the trend. However, it is still too early to draw conclusions as no lower low has been made yet.
If SPX manages to break through the daily FVG, I believe the uptrend will continue, and new highs will be reached. Perhaps even an attempt to break the all-time high could be made later this year…
DXY 1-day chart
DXY has been very strong since early July, and we can see that the price briefly dipped below the range low before starting an uptrend. This uptrend may have contributed to BTC's recent struggles, given the inverse correlation between the two. Personally, I believe DXY can go higher, at least towards the range high, around 106. There may be a short retracement first, though, as the previous daily candle removed a significant amount of liquidity.
GOLD weekly chart
It is logical that GOLD is currently downtrending on the lower timeframes. This is due to the fact that a mega liquidity sweep occurred on the weekly timeframe, targeting the previous all-time highs. Since the liquidity sweep, GOLD has primarily been moving downward.
GOLD 2-hour chart
GOLD appears weak not only on the higher timeframes but also on the lower timeframes. Currently, it seems that a Market Maker Sell Model (MMSM) is forming. We can anticipate this model with short positions, as we can expect the price to move back in the direction of the original consolidation. This is our target for the shorts. Therefore, I recommend primarily focusing on GOLD shorts in the coming days/weeks until the target is reached or the MMSM model is invalidated.
Source: ICT and The MMXM Trader.
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