The Ole Death Cross once again lures in those following Captain Obvious patterns and once again those that were calling for capitulation after the market has already pulled back significantly. Remember when at 4500 they were locking in profits, shorting at 7k and even recently?
These are the same Furu's who were posting parabolic moves to 60k when Bitcoin hit 13 a few months ago. The same Furu's trying to time their long term investments with every move in the market. The same Furu's that will be calling this a bull trap!
First most of these guys have less than 5 years of experience and the bull market made them to appear as chart masters. Do not confuse a bull market with genius, they profited from the latter.
Enough of that, there really has not been much to write about over the past few months, because as we mentioned in July, this was likely going to be a multi week / month consolidation. Nothing changed in our opinion until now!
Sentiment:
What causes markets to top or bottom is simple, they run out of buyers or sellers and nothing else. Fundamentals may be what guides what we position in, but sentiment is what drives markets. Never think an equity is ever over priced, or under priced for that matter. It is all about sentiment.
Back in July Sentiment was high with Furu after Furu fighting to have the highest target on their chart. Then those same Furu's were selling their longer term inventory, shorting this market and calling for capitulation into the 5k area. Sure it was possible we pushed lower, but based on what? A 2 or 4 hour chart pattern at 7300?
What we were actually seeing was sentiment getting overly pessimistic. Not everyone, but the majority of the herd was pessimistic. But Why?
Technicals
Patterns repeat because the herd continues to do the same thing over and over. Patterns are formed due to order flow and nothing else. They are not magical indicators so it is important to not only identify the pattern, but understand the position and sentiment of the market when they form.
Before that lets go over some technical levels which provide a perspective of the strength of this move.
Many are too focused on a 2 hour and shorter term time frames and "attempt" to make sense of the broader market from this information. Completely pointless. The weekly carries so much more weight. Let's break it down.
It took nearly 12 weeks for the market to take out the 38.2% retrace and then the 50% retrace. However this was right into the previous wave 4 fractal leg which is a traditional area of support. Forget the EW count, this was an area of historical consolidation before the final swing higher and is now a support area.
So 12 weeks to break through support and in one swing higher we have taken it back and pushing the 38.2% retrace of the overall bearish swing. This is not how bearish market work. They tend to fall apart not print an outside candle which takes back the bulk of the selloff.
Initially it could be argued that this is simply a short squeeze. However, shorts are already squeezed so this is most likely buyers stepping in, not shorts covering, though there may be a few still in from higher levels exiting here.
Also many sold their inventory from 9500-10k thinking they were going to pick it back up in the 5000-6500 area. Well now they are thinking, "crap I better buy my coins back". This fuels additional buying pressure.
In 3 days the market took back 40% of what took 16 weeks to hit the low during the corrective cycle. This is NOT bearish, this is actually very much bullish. Thinking this is a bull trap is naive at best. This was a solid move and is proving to be sustainable.
Ohhh yeah this is an extremely bearish chart!! I know the 2 hour chart is showing a flying bat pattern with an inverted triangle but the monthly chart is still very bullish with a broader trend still in play. The key here is we are looking for order flow.
Orderflow over a period of years is still to the buy side here though we have had some down periods, there is a distinct series of higher highs and higher lows. Now could this be a "B" leg in a broader correction?
Sure it could but not a high probability, more like a 40-1 long shot.
Proportionally we are looking at a move into the 20k area for this next swing higher. I know, I should make it 60k just to get everyone excited. Sure we can go there, but we still have to take out 20k first.
From an EW & Fibb standpoint the 25-30k area is of interest which I split the difference at 27,500. It is an area not a pinpoint number. Regardless there is nothing bearish about this chart, and moreover an outside candle on the monthly would imply a potential swing higher.
In addition, leg IV was into the previous wave 4 area just like we have here. There are a lot of similarities, so lets take a look at last year's corrective cycle and see if it compares to the current one and back to our herd sentiment which is the focus here.
Remember at 3500 everyone calling for a push into the 2k area? Remember at 4500 when everyone was "locking in profits" calling it a bull trap. We are seeing the same type of sentiment here and because the market is indicative of sentiment, whallaaaa the chart pattern is the same.
So we are likely to hear from the Furu's on how this is a bull trap, the bears are in control and of course how they closed out their short position BEFORE the $150 million liquidation on Bitmex, which nobody on TV happen to be a part of.
Sentiment is what drives markets and the herd's sentiment is the same when the market conditions are similar which leads to a pattern that looks similar to the last. How many were ready to throw in the towel, sold their inventory because we were setting up for that big move lower? Many and now they are trying to twist the move to prove this is a bearish market.
But look at the broader time frames which carry so much more weight. They are all clearly bullish and that is why we remain bullish in the long term. The matching patterns above do not happen magically, they happen because the herd of Furu's do the same thing over and over.
So ignore the noise, ignore the Fools making false claims. That 150 million in liquidation was those that follow these Furu's and the Furus themselves who will be posting 30 articles on how they are right. Of course they will not admit they were wrong, or they will blame something else like the news. Sure the news may have been a catalysts, but the market was in a position to rally regardless.
Now do you jump in here? Well if you are in already you are not guessing here which is why we told our followers there was nothing wrong with fading the market and adding small positions as it pulled back. There is no guessing, there is a strategy and a plan. Which do you think works out better in the long term?
Taking back the 9350 support level was key and the fact we took it out decisively further adds weight to the bullish thesis. Emotionally it is not a good idea to chase. This is an impulsive move and we can pull back to retest the 8500 level. Directly above the 9600 there is resistance between 10,000 & 10,500 so the R:R does not make sense. We would rather wait for a clear signal after some consolidation and not just jump in here.
Nothing to do here but let the market play out and wait for a potential setup via a pullback and bullish reversal or a continuation pattern. Other than that, enjoy the rally as this is likely the start of wave 3 in the broader wave V cycle.
These are the same Furu's who were posting parabolic moves to 60k when Bitcoin hit 13 a few months ago. The same Furu's trying to time their long term investments with every move in the market. The same Furu's that will be calling this a bull trap!
First most of these guys have less than 5 years of experience and the bull market made them to appear as chart masters. Do not confuse a bull market with genius, they profited from the latter.
Enough of that, there really has not been much to write about over the past few months, because as we mentioned in July, this was likely going to be a multi week / month consolidation. Nothing changed in our opinion until now!
Sentiment:
What causes markets to top or bottom is simple, they run out of buyers or sellers and nothing else. Fundamentals may be what guides what we position in, but sentiment is what drives markets. Never think an equity is ever over priced, or under priced for that matter. It is all about sentiment.
Back in July Sentiment was high with Furu after Furu fighting to have the highest target on their chart. Then those same Furu's were selling their longer term inventory, shorting this market and calling for capitulation into the 5k area. Sure it was possible we pushed lower, but based on what? A 2 or 4 hour chart pattern at 7300?
What we were actually seeing was sentiment getting overly pessimistic. Not everyone, but the majority of the herd was pessimistic. But Why?
Technicals
Patterns repeat because the herd continues to do the same thing over and over. Patterns are formed due to order flow and nothing else. They are not magical indicators so it is important to not only identify the pattern, but understand the position and sentiment of the market when they form.
Before that lets go over some technical levels which provide a perspective of the strength of this move.
Many are too focused on a 2 hour and shorter term time frames and "attempt" to make sense of the broader market from this information. Completely pointless. The weekly carries so much more weight. Let's break it down.
It took nearly 12 weeks for the market to take out the 38.2% retrace and then the 50% retrace. However this was right into the previous wave 4 fractal leg which is a traditional area of support. Forget the EW count, this was an area of historical consolidation before the final swing higher and is now a support area.
So 12 weeks to break through support and in one swing higher we have taken it back and pushing the 38.2% retrace of the overall bearish swing. This is not how bearish market work. They tend to fall apart not print an outside candle which takes back the bulk of the selloff.
Initially it could be argued that this is simply a short squeeze. However, shorts are already squeezed so this is most likely buyers stepping in, not shorts covering, though there may be a few still in from higher levels exiting here.
Also many sold their inventory from 9500-10k thinking they were going to pick it back up in the 5000-6500 area. Well now they are thinking, "crap I better buy my coins back". This fuels additional buying pressure.
In 3 days the market took back 40% of what took 16 weeks to hit the low during the corrective cycle. This is NOT bearish, this is actually very much bullish. Thinking this is a bull trap is naive at best. This was a solid move and is proving to be sustainable.
Ohhh yeah this is an extremely bearish chart!! I know the 2 hour chart is showing a flying bat pattern with an inverted triangle but the monthly chart is still very bullish with a broader trend still in play. The key here is we are looking for order flow.
Orderflow over a period of years is still to the buy side here though we have had some down periods, there is a distinct series of higher highs and higher lows. Now could this be a "B" leg in a broader correction?
Sure it could but not a high probability, more like a 40-1 long shot.
Proportionally we are looking at a move into the 20k area for this next swing higher. I know, I should make it 60k just to get everyone excited. Sure we can go there, but we still have to take out 20k first.
From an EW & Fibb standpoint the 25-30k area is of interest which I split the difference at 27,500. It is an area not a pinpoint number. Regardless there is nothing bearish about this chart, and moreover an outside candle on the monthly would imply a potential swing higher.
In addition, leg IV was into the previous wave 4 area just like we have here. There are a lot of similarities, so lets take a look at last year's corrective cycle and see if it compares to the current one and back to our herd sentiment which is the focus here.
Remember at 3500 everyone calling for a push into the 2k area? Remember at 4500 when everyone was "locking in profits" calling it a bull trap. We are seeing the same type of sentiment here and because the market is indicative of sentiment, whallaaaa the chart pattern is the same.
So we are likely to hear from the Furu's on how this is a bull trap, the bears are in control and of course how they closed out their short position BEFORE the $150 million liquidation on Bitmex, which nobody on TV happen to be a part of.
Sentiment is what drives markets and the herd's sentiment is the same when the market conditions are similar which leads to a pattern that looks similar to the last. How many were ready to throw in the towel, sold their inventory because we were setting up for that big move lower? Many and now they are trying to twist the move to prove this is a bearish market.
But look at the broader time frames which carry so much more weight. They are all clearly bullish and that is why we remain bullish in the long term. The matching patterns above do not happen magically, they happen because the herd of Furu's do the same thing over and over.
So ignore the noise, ignore the Fools making false claims. That 150 million in liquidation was those that follow these Furu's and the Furus themselves who will be posting 30 articles on how they are right. Of course they will not admit they were wrong, or they will blame something else like the news. Sure the news may have been a catalysts, but the market was in a position to rally regardless.
Now do you jump in here? Well if you are in already you are not guessing here which is why we told our followers there was nothing wrong with fading the market and adding small positions as it pulled back. There is no guessing, there is a strategy and a plan. Which do you think works out better in the long term?
Taking back the 9350 support level was key and the fact we took it out decisively further adds weight to the bullish thesis. Emotionally it is not a good idea to chase. This is an impulsive move and we can pull back to retest the 8500 level. Directly above the 9600 there is resistance between 10,000 & 10,500 so the R:R does not make sense. We would rather wait for a clear signal after some consolidation and not just jump in here.
Nothing to do here but let the market play out and wait for a potential setup via a pullback and bullish reversal or a continuation pattern. Other than that, enjoy the rally as this is likely the start of wave 3 in the broader wave V cycle.
A lot of comments on this is a "bear market." This is not a bear market, and if you go back to the initial dip in June and go back to my post in late June, it was mentioned that this was likely going to be a period of consolidation that could last weeks or a month. So it went on for 3 months, big whoop it is still a consolidation.
On shorter time frames you can make a case that there are a series of lower highs and a lower low, make a case that the market is down 40% off the high, but you have to then ignore we are STILL up 300% from the broader low.
I put a simple trend line from where the initial swing started. Had this been a slow grind higher it would be a bull market. Just because the market got ahead of itself, does not imply the bullish trend is over especially since the broader up trend is still in play.
Markets get ahead of themselves and return to test the mean trend. Since 2012 this has been the case. Market gets overly exuberant, pulls back, retests the trend, gets ahead of itself, retests the trend and the cycle goes on.
There is a distinct trend from 2012 that I put right on the monthly chart (above) that is still in tact. It is bullish in the long term period. Those that attempt to make an argument of a bearish trend, based on a 2 or 4 hour chart or a series of intermittent lower highs and lower lows on smaller time frames AFTER a market got ahead of itself lack the experience to identify a simple trend.
There are short term trends and broader trends. Either way from a daily perspective, this was nothing more than a consolidation or correction after the market went up nearly 450% off its low. It is still up 300% off its low.
Make any case in point you want in an attempt to confirm your bias point that this is somehow a bearish market. But at least put your money where your mouth is and post "Short the market here it is still bearish". I do not see anyone saying "I'm short the market" all I see is a bunch of haters that were probably the ones liquidated on Bitmex!