I've really started to like parallel channels a lot as part of very simple TA. On the daily or weekly charts in particular. It works pretty well for Bitcoin, it works especially well for stock indices, particularly SPX/SPY for longer term trends.
It's just an excellent visual of waning buying pressure as upwards price movement starts to fall out of an ascending channel, or waning selling pressure as price action starts to go sideways and up plus out of a descending channel.
With that being said, the most recent trend shift that may well be developing is Bitcoin showing weakness in the ascending channel as it just hit its high for 2023 as seen above.
This is in combination with this market cycle indicator potentially indicating we're at or near the top for the crypto space. It's also taking a bit of history into account, with Bitcoin halving cycles.
Post a miner payout halving, Bitcoin tends to enjoy it's strongest bull runs for anywhere between 12-18 months after. Then that's followed by exactly 12 months of selling off. That 12 months of selling off can be followed by a smaller rally/mini bull cycle, but that eventually starts to come back down as the next halving approaches. This is why I've been likening 2023 to what happened in 2019. Obviously, history won't repeat exactly, but it often does rhyme.
Now, channels are usually only able to be put up with some retrospective, but the idea is that the channel can at least give you advance warning when a shift is about to occur, then some time later you can put up the next channel as support and resistance of the current trend become established, project it out a ways so you can see when it does start to diverge out of the channel.
Above is the late 2021 all of 2022 Bitcoin bear market. That parallel set would have been able to have been put up months before it started the bottoming process, and did great at showing the selling pressure slowing, and the price action exiting out above of the channel before it did its final drop in December.
Go back some more. The giant parabolic move it started in 2H 2020 and carried into 1H 2021:
It stays within that channel, but that last rally in April, it's a pretty weak looking all time high at that point as it's fallen to the bottom of the channel.
Let's try with SPX.
This is coming out of the COVID crash, which had a pretty radical upwards trajectory compared to many years prior. I lined up according to the top line mostly, trying to hit two of the early peaks, it also happened to go through a gap-down during the sell off in March 2020. I also was aiming to get it close to parallel with the 4 months where price action kind of normalized 2H 2020 into 1H 2021, where there was a pretty consistent trajectory the highs had.
After a small amount of turmoil, Feb-March 2021, it resumed another 4 month period of consistent upwards movement, but this time, at a slightly less aggressive trajectory than before, which was not so easy to see unless you drew a line parallel to the previous 4 month period that had a consistent upwards march.
Then more turmoil September into October 2021, eventually followed by all time highs in December, but by that point, the highs were now mid channel instead of near the top, clearly showing waning buying pressure. And it indeed was followed by a near year-long sell-off.
Let's go there next:
The top trend line was well-established pretty early on in 2022, often got referred to as the MOAT (Mother Of All Trend Lines). If we put the bottom of the channel at the June 2022 lows, that then makes the subsequent October lows show that maybe sell pressure is waning some, as it didn't come back down to challenge that lower line.
By January '23, it was becoming more obvious that we were setting our first higher low. We did get close to re-challenging that low very briefly in March, and it's been more up than anything ever since. Time to start drawing ascending channels again. I've tried a couple spots, and it just looks like we're in one of our most bullish moments right now. There of course will be small corrections, but until a larger falling out of these channels becomes pretty obvious, I wouldn't try fighting the bulls...
This is the main one I'm looking at for the moment, I've also tried drawing a smaller channel for the more recent, aggressive upwards move from May through now, but removed it for this larger trend channel for clarity. You start drawing multiple channels, the chart gets very busy, very quickly.
For the larger market cycle top, I'll be keeping my eyes on this channel as well as ]VIX/VVIX. If I see both a falling out of the ascending channel plus an upwards divergence of the lows in VIX/VVIX, it's time to go full bear, sell sell sell!
Until then, run with the bulls. More often than not, it's ill-advised to go against them.
For the record, from this point I'm starting to turn bear on Bitcoin for the remainder of the year, but equities still likely have at least several more months of going up pretty rapidly, very similar to 2019. Equities bulls are the ones I won't be fighting here. I actually won't be fighting Bitcoin bulls either, but I am definitely not a buyer here, where I will continue to be long equities.
But, if I'm right and Bitcoin finds another nice supported low near the end of this year, that will likely be the point to buy back in/add for the post-halving mania that will ensue.
It's just an excellent visual of waning buying pressure as upwards price movement starts to fall out of an ascending channel, or waning selling pressure as price action starts to go sideways and up plus out of a descending channel.
With that being said, the most recent trend shift that may well be developing is Bitcoin showing weakness in the ascending channel as it just hit its high for 2023 as seen above.
This is in combination with this market cycle indicator potentially indicating we're at or near the top for the crypto space. It's also taking a bit of history into account, with Bitcoin halving cycles.
Post a miner payout halving, Bitcoin tends to enjoy it's strongest bull runs for anywhere between 12-18 months after. Then that's followed by exactly 12 months of selling off. That 12 months of selling off can be followed by a smaller rally/mini bull cycle, but that eventually starts to come back down as the next halving approaches. This is why I've been likening 2023 to what happened in 2019. Obviously, history won't repeat exactly, but it often does rhyme.
Now, channels are usually only able to be put up with some retrospective, but the idea is that the channel can at least give you advance warning when a shift is about to occur, then some time later you can put up the next channel as support and resistance of the current trend become established, project it out a ways so you can see when it does start to diverge out of the channel.
Above is the late 2021 all of 2022 Bitcoin bear market. That parallel set would have been able to have been put up months before it started the bottoming process, and did great at showing the selling pressure slowing, and the price action exiting out above of the channel before it did its final drop in December.
Go back some more. The giant parabolic move it started in 2H 2020 and carried into 1H 2021:
It stays within that channel, but that last rally in April, it's a pretty weak looking all time high at that point as it's fallen to the bottom of the channel.
Let's try with SPX.
This is coming out of the COVID crash, which had a pretty radical upwards trajectory compared to many years prior. I lined up according to the top line mostly, trying to hit two of the early peaks, it also happened to go through a gap-down during the sell off in March 2020. I also was aiming to get it close to parallel with the 4 months where price action kind of normalized 2H 2020 into 1H 2021, where there was a pretty consistent trajectory the highs had.
After a small amount of turmoil, Feb-March 2021, it resumed another 4 month period of consistent upwards movement, but this time, at a slightly less aggressive trajectory than before, which was not so easy to see unless you drew a line parallel to the previous 4 month period that had a consistent upwards march.
Then more turmoil September into October 2021, eventually followed by all time highs in December, but by that point, the highs were now mid channel instead of near the top, clearly showing waning buying pressure. And it indeed was followed by a near year-long sell-off.
Let's go there next:
The top trend line was well-established pretty early on in 2022, often got referred to as the MOAT (Mother Of All Trend Lines). If we put the bottom of the channel at the June 2022 lows, that then makes the subsequent October lows show that maybe sell pressure is waning some, as it didn't come back down to challenge that lower line.
By January '23, it was becoming more obvious that we were setting our first higher low. We did get close to re-challenging that low very briefly in March, and it's been more up than anything ever since. Time to start drawing ascending channels again. I've tried a couple spots, and it just looks like we're in one of our most bullish moments right now. There of course will be small corrections, but until a larger falling out of these channels becomes pretty obvious, I wouldn't try fighting the bulls...
This is the main one I'm looking at for the moment, I've also tried drawing a smaller channel for the more recent, aggressive upwards move from May through now, but removed it for this larger trend channel for clarity. You start drawing multiple channels, the chart gets very busy, very quickly.
For the larger market cycle top, I'll be keeping my eyes on this channel as well as ]VIX/VVIX. If I see both a falling out of the ascending channel plus an upwards divergence of the lows in VIX/VVIX, it's time to go full bear, sell sell sell!
Until then, run with the bulls. More often than not, it's ill-advised to go against them.
For the record, from this point I'm starting to turn bear on Bitcoin for the remainder of the year, but equities still likely have at least several more months of going up pretty rapidly, very similar to 2019. Equities bulls are the ones I won't be fighting here. I actually won't be fighting Bitcoin bulls either, but I am definitely not a buyer here, where I will continue to be long equities.
But, if I'm right and Bitcoin finds another nice supported low near the end of this year, that will likely be the point to buy back in/add for the post-halving mania that will ensue.