Bitcoin: Relative Weakness.

28K resistance still in play in the face of a dramatic stock market rally over the previous week. This is a sign of relative weakness and speaks volumes about the balance of order flow. The 25K support AREA (see blue square) is the price location that I am WAITING for in order to put on a new SWING trade long.

As a market technician focused on short term movement, I am not concerned with why a market is acting the way it is, I am only concerned with price structure, levels and confirmations. My only purpose is to manage risk and evaluate probabilities, it does NOT get any more complex than that.

With that being said, what is relative strength and why is it so important to be aware of? First, it has NOTHING to do with the RSI. Relative strength is the comparison of one market against a parent market or index. In the case of stocks for example, you would compare the price behavior of your stock to the S&P or Nasdaq. If the S&P rallies, and the stock in question hardly moves, that is a sign that selling activity or at least an absence of buying. Once the S&P becomes weak, the stock in question is likely to outperform on the bear side. This means it would be a good idea to consider short possibilities and avoid any longs.

Bitcoin is an index that I use in comparison to alt coins, but when it comes to comparing Bitcoin, the parent would be the S&P. The correlation fluctuates over time, BUT there has been plenty of instances where these markets generally move together over the short term (this is all relative to the Dollar). So if S&P rallies hard like we have seen over the previous week, Bitcoin should have also. Instead, Bitcoin can't get out of its own way. This implies NO ONE is buying, or if they are, they are being absorbed by greater selling activity.

For this reason, I anticipate once the weakness reasserts itself in the stock market, Bitcoin will correct into the 25K support area. This can take a week or two. In my previous article I described a price scenario of retracing to 25K and the market briefly agreed before it presented another scenario. Perhaps this was the stock market effect. As you should know by now, I don't pretend to know the future, I consider potential scenarios. I adjust with the market because markets are HIGHLY random.

Based on the current position of the bond market (10 Yr Note), the S&P while interesting, has still not proven any sustainability in terms of "bull market". The next retrace will be very telling. No major resistance levels have been taken out yet. This translates into: very high risk for long term stock and Bitcoin/alt positions.

The game plan is still the same: wait for retrace to relevant support, measure risk and WAIT for confirmation before taking a position. This does NOT apply to smaller time frame strategies.

Thank you for considering my analysis and perspective.