Bitcoin is fighting its trendline resistance while Ethereum struggles at 1,736$. SPX bumps into the 0.702 fibs as the daily RSI enters overextended territory. Get the popcorn ready!
Macro Monday: Adrenaline Increase
Liquidity to the upside on BTC was indeed targeted like expected in last week’s update. However the push higher was much more aggressive than anticipated. While regulatory pressure on crypto companies in the U.S. has been increasing, Wall Street giants do show some interest in the industry. This raises questions about whether the challenges are mere political theater.
Operation Liquidity Grab: Success
Late last week all long position stops placed anywhere below the swing lows created in the last few weeks got taken out. But not before BTC pushed above 31k (running short stops) giving some hope of a breakout. Timed news? Coordinated liquidity grab? Maybe. Especially looking at the bounces across the market afterwards. Meanwhile, a decision on the spot BTC ETFs could potentially be made as early as August.
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The Week of Truth
Bitcoin remains in its consolidation range for over a month now, trying to bore everyone out of the market. FOMC this week could be the catalyst for a break in either direction. Beware of pre-FOMC volatility. Once price starts moving, it will likely be swift, like we have seen several times since the beginning of this year.
Strong Economy + Strong Stock Market = Weak Bitcoin?
Market sentiment seemed to receive a positive boost from a series of mostly favorable economic indicators, particularly related to inflation. On Friday, stocks opened with significant gains after news broke that the core (excluding food and energy) personal consumption expenditures (PCE) price index, which is the Fed's preferred inflation gauge, had risen (only) 0.2% in June, down from 0.3% in May. This resulted in a year-over-year increase of 4.1%, slightly lower than expected, and the slowest growth since September 2021. Additionally, the employment cost index, closely monitored due to concerns about wage inflation among policymakers, rose 1.0% in the second quarter, also falling below consensus and marking the smallest increase in two years. But unlike the strength in the stock market, Bitcoin remained weak.
The Wait Could Soon be Over
Since the beginning of this year, BTC had impulsive moves to the upside, leaving people not already in longs far behind, then pullbacks from the highs to just under the 50% mark, scaring late longers out of their positions, and giving bears / people who missed out on the move up hope for even lower prices, just to start the next impulsive way from right under the 50% threshold. In March it was a fair value gap in the discount zone that marked the end of the pullback, after that in June it was a bullish order block in the discount zone. This time around we see a fairly large fair value gap higher up in the discount zone (just like in March). Based on this, if the strong / impulsive uptrend in BTC is to continue, I would not be surprised to get an accelerated move down towards 27.7 - 28.2k, then the next leg up towards 34k within the next couple of weeks.
The Market Pushes Snooze Again
Bitcoin has mainly remained flat since last week with only little ups and downs. With the push up on last week Tuesday hopes for an AMD pattern playing out were kindled briefly, but price has since dropped back under 29.5k$. For now the consolidation continues and a dip under the 50% fib retracement level (28 - 28.3k$) mentioned last week is as likely as a sudden start of an expansion to the upside (towards and beyond 31.8k$). On the daily timeframe there currently is not much we can do but wait for the market to pick a direction.
Trade Letter #179 : Everyone’s Awake Now
BTC price plummeted about 12% on Thursday. While we had mentioned a good possibility that price could dip towards 27.5k, the correction was faster and deeper than anticipated, causing more crypto positions to get liquidated than during the FTX collapse in November 2022. The positive view is that the price is holding the daily bullish order block between 24,824 - 26,087$. As long as we do not see daily candle closes below 24,824$ (may vary between trading pair and exchanges) there is still technical hope over the short to medium term. The RSI is currently around 21, far into the overextended negative territory. I will be watching this week whether a positive divergence will start forming here while price still holds the order block level.
Trade Letter #182 : Living on the Edge
Bitcoin has been consolidating at around 26,000$ since its corrective drop on August 17, keeping the market on edge. The RSI has slowly been creeping back up towards the 30 mark, but still has some ground to cover. As long as the bullish order block holds and RSI keeps grinding to the upside, there isn’t much to update on the technical side. Further weakness would be signaled through daily candle closes under the bullish order block (<24,824$) while the first level to break for some upside optimism is the 0.5 fib level of our current range (28,307,46$).