First off, why they matter: Every long position has someone who has already bought and is now an obligated seller. Every short position has someone attached to it that has already sold and is now an obligated buyer. So when longs are at or near an all time high it roughly means you have everyone that was going to buy, has already bought, and now they are obligated to sell. Likewise with shorts, when shorts are at an all time high that means roughly everyone that was going to sell has sold and now you have an excess of obligated buyers.
My understanding is the longs and shorts reported by bitfinex are the number of coins in a margined position. In order to get an idea of total dollars equivalent margined I have multiplied the margin position by the price. The longs or shorts are in candles and the dollar amounts of the longs and shorts are in High Low Bars. Shorts are in blue/red or blue/white.
First of is ETHUSD, because it is in the most bearish condition. The price action is in a bearish rising wedge and the number of coins margined long are just shy of the all time high. The price action has held 160 as resistance and we have formed a double top. The shorts are high relative to their historical high but are low compared to their relative peak. Both longs and shorts are trending up so there is a lot of interest in playing ETHUSD no matter which way it breaks. The high level of longs is bearish, the structure is bearish, and the divergence is bearish (See the linked post for the write up on that). Second is BTCUSD, which has a moderately high level of longs which are still rising but no where near all time highs like ETHUSD, but we also see the number of shorts is dropping rather quickly. As longs go up we have more obligated sellers, as shorts go down we have less obligated buyers. More sellers and less buyers suggest the price will break down. The last time that happened the bottom fell out of BTCUSD. The current pattern is a continuation pattern and the overall trend is bearish. Some people have been charting an Inverted Head and Shoulders on BTCUSD and while you can see that in the chart there is also the possibility we are just about to set a new low (three drives down, ABC correction, etc) and we just haven’t set our second low yet. The chart below shows a lot of bearish divergence on the daily chart and I don’t think that tiny dip down was enough for the divergence to do its work. We formed a top and I am fairly certain we are going to be setting a new low shortly. XRPUSD has their longs and shorts in a middling range. Historically it looks like long squeezes and short squeezes are very effective/predictive for XRPUSD but we don’t have anything near as distinct for XRP as we do BTCUSD or ETHUSD. Shorts stand at 15,800,000 coins and longs at 37,00,000, so we have (roughly) twice as many sellers as buyers. Additionally, both BTCUSD and XRPUSD are hugging the 20 MA as support, and it is doing so with bearish divergences (particularly Bitcoin). ETHUSD has a bit of space between the price action and the 20 MA and at this point I think that is just giving the price more momentum to smash through. Usual disclaimers, I am not a financial advisor, I could still be wrong, so forth and so on. But this looks pretty damn bearish to me.
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I was tinkering with the charts and just a little to late for the orignal post I mocked up the current chart. The 20 MA on the 3d is providing a lot of resistance and the longs and shorts are clearly moving in opposite directions where in the single day chart the shorts look like they are just chopping sideways after the dip.
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BTCUSD just slipped 1.5% on this 6h candle after a nice doji right at support. By itself and elsewhere that many not mean a lot, but the longs chart will hopefully show why I think that is going to be painful.
Indicators that track momentum and strength can judiciously be used for anything that has momentum and strength reversals. On the below chart we see a very tight gravestone doji. We see that the strength of this move up has been faintly divergent, the MACD is about to have a bearish cross and the Average True Range has been plummeting as the number of net new long positions declines.
All of this points to the longs coming down which means obligated sellers will be selling to settle their leveraged positions. Which points to a long squeeze. No telling how quickly the juice will come out, or if it will come out in stages. But the chance of the price going up is really low if we start putting up red candles on the longs chart.
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First things first: the longs and the shorts: This squirt up resulted in a net decline of longs positions, which is curious. Often these consolidation patterns have people looking to buy-stop their way in on a break out and get the momentum to the top of the movement (which would add to the number of longs) but we clearly see a red candle on the longs chart during this up on this move which means more people were looking to get out that get in during this movement. People getting out of their positions suggest to me that this is somewhat of an exhaustion move on the behalf of the bulls.
The shorts also has a red candle as peoples short stop losses triggered. But as the consolidation pattern showed shorts coming down isn't really driving the price action, there is no juice in the shorts to fuel any kinds of pump.
Post surge we see the longs picking up again and the shorts continuing to decline. I think we are seeing people trying to follow the trend and they may be a bit late. One thing that is bullish is this price pump has hit the neckline of an inverted head and shoulders on the right shoulder just prior to break out. The fact we stopped right at the neckline shows there are a lot of people looking to take profit right there, which is pretty normal as is normally some resistance at the neckline before break out. Bellow is the Inverse Head and Shoulder that formed and executed rather well between June and July.
Finally, the longs chart has as red hammer which continues to look like topping behavior, with a potential handing dead man candle pattern forming. The blue line marks the all time highs for longs so we do have some way to go to hit that psychological resistance.
This pump has made me less bearish than I was before but the topping behavior of the longs and the fact the pump did not lead to a net increase in longs keeps me biased bear.
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I am really liking what I am seeing for my shorts. The Ethereum chart below shows we had a nice hanging dead man on the 3D chart and the longs continue to go down and the shorts continue to go up. Longs coming down means people are selling to close their longs, and shorts going up means people are selling to open their shorts. This should start to accelerate. ETHUSD might be in a symetrical triangle so I drew that as a possible bullish scenario to this pull-balck The hanging man candle on the longs chart developed nicely on the 12h chart for BTCUSD and was followed up by a red candle. So far the relative size of the red candle of the longs is larger than the red candle on the shorts. I hope to see shorts rising in the next couple of period to really increase the selling pressure. The margin chart for XRPUSd continues to be less conclusive than ETH or BTC, but long still massively outnumber shorts and for the last three candles the longs have a gravestone followed by two red candles, which may be the start of the longs coming down more assertively. The shorts have a morning star forming on the daily and that might be the relative low for shorts as they climb again. A lot can still happen.
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ETHUSD shorts continue to fall and the longs have been roughly flat over the last couple of days. Almost no fuel for a short squeeze and still a lot of juice for a long squeeze. If we were going up ETHUSD wouldn't have that head and shoulders and plenty of longs to get squeezed out. XRPUSD looks like I would want a crypto to look before a breakout. Longs spiked showed and increase in buying power and shorts are not dropping like a rock. The resistance might still hold and we may test support again before the triangle resolves itself but that action shows the bullish interest I am talking about. BTCUSD longs seem to be converging in a symmetrical triangle and I think it will break downward. Shorts seem to have found a relative bottom and I think the bears will start to assert themselves and the price will start to decline as the short selling increases and the price moves down and longs get squeezed out.
I know that I remain on of the few people right now thinking the price will go down. Most are calling for a inverted head and shoulders and I don't think that it will perform. I am not so foolish that I don't have shorts backing up my shorts but the juice for a big move up isn't there.
Trade closed: target reached
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I amjust looking at ETHUSD due to time constraints but we see a lot of hidden bullish divergence after this retracement and an approximate acceding triangle forming (I have been looking at that for days) I see a potential adam and ever fractal within the accending triange, which we don't typically see, ususally they are made out of rising and falling wedges and other triangles. We also appear to be finding support just above the 50MA and we are doing it with the aforementioned hidden bullish divergence. The longs and the shorts for ETHUSD don't seem to complell any further hope for a long squeeze. I think the shorts are waithing on the other side of the 50MA and I don't see us being able to get that selling pressure with so much hidden bullish divergence. Longs also look like they are on the verge of recovering. Bitcoin also has hidden bullish divergence and seems to be following the falling wedge structure I did an earlier post on. I see BTCUSD rallying to resistance of the wedge at $5,000 with a somewhat complex inverted head and shoulders before hitting new lows defined by the wedge.
Keep in mind, there is a 7 hr maintenance downtime scheduled on bitfinex 10 am UTC.
Having bitmex in the drivers seat while finex is down could be a wild ride, let's see.
This_Guhy
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@codex42, There is more juice and pain to the downside with the longs high and the shorts low on BTCUSD. If I was evil I would be market selling a fat stack of BTC and I'd be short in XRP, ETH, etc. What is your take on things?
codex42
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@This_Guhy, I'm sitting on my hands for now. Trying to think through what an evil composite man would be thinking. The margin ratio is definitely bearish for longs to get squeezed. Shorting heavily on bitmex swap just before finex re-opens to a cascade of long liquidations is one possibility. Interesting how this move up happened while longs dropped though. Could the price be moving up through actual buying of BTC on the spot markets? Nah, I'll sleep on it.
This_Guhy
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@codex42, I am already short in an ETHUS position at 150 and 148 so this pump put me into the red so sitting on my hands isn't an option, but deciding where my stops should be is really important right now, I don't want to get stopped out and miss the big move down because an exhaustion candle wickes me out. We failed at ETHUSD at 160 several times over the last couple of days already so hopefully I am safe on the other side.
What does an evil composite man do? He spikes the price about 24 hours before the outage to see what happens to longs and shorts. Longs are still sitting on a reversal doji over the last 12 hours with only 1h to go before the close. Shorts, which were already low, didn't really dump any further. The BTCUSD consolidation triangle didn't fully perform on the pump and didn't trigger the inverted head and shoulders.
Another way of thinking about it is spiking the price lets them short from higher up when they finally do dump the price. All this is speculation though.
codex42
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@This_Guhy, looks like the downtime was a non event. Good job on hitting your target!
Having bitmex in the drivers seat while finex is down could be a wild ride, let's see.