9.28.2020 Weekly Outlook (Mon)
Like mentioned in last week’s newsletter, BTC hit resistance at 11.3k. And the daily “decr. in supply” alerts signaled the long opportunity around 10.5k. For the week ahead of us, I think the ideal dip buying opportunity is around 10k or when “decr. in supply” / “short squeeze” alerts are present. Three resistances above: red diagonal line in chart below, 11.3k, 11.9k. Given Elliot wave is not showing a clear picture, I’ll be relying on retail sentiment biases for this week’s shorter term trading. Please pay close attention to the dashboard post updates.
For longer term traders, fundamentals are still bullish, and the market sentiment has been on the bear side since we dropped to 10k. This sentiment is adding fuel to the bull side. In other words, we may drop to 10k, but the chance of dropping to 9k is still slim at this point.
Smart Money Action
The on-chain smart money actions are now stable at a bullish level and are higher than the July level when we had the 10k break out. This not only is similar to the on-chain developments before prior bull runs, but also indicates a strong support at 10k.
Grayscale: raised $900M in Q2 (its ATH quarter since inception). Even though $900M is not significant when compared to the mkt cap, it does indicate a switch in accredited/institutional investors’ view on the crypto space – where the money comes from to push the next ATH. We’ll keep an eye out for Q3 stats.
China’s financial channel, cctv-2, claimed crypto as the best performing asset class of 2020 this week. Since the channel is strictly controlled by the Chinese government, the fact that such news is reported shows a potential loosening on crypto regulations in China. This is consistent with the Chinese CB crypto experiments.
Last week, BTC mining difficulty just got adjusted to its all time high with an 11.35% increase, 10x higher than that of end of 2017. This means, firstly, the security of the bitcoin network is improving significantly despite the price decrease compared to the 2017 20k ATH. Secondly, miners are profiting ever since the March capitulation, and more miners are joining the game at the current price level.
Overall market sentiment is now neutral. For the seller group sentiment, this group remains in a bull trend. If we drop to the 10k level again this week, another “decr. in supply” alert will likely occur. These have been generating great R:R setups and returns. Bull trend means buying the dips.
Margin & Futures Market Actions
Neutral TO BULLISH
Daily chart speaking, the margin market has been on the bearish side since the drop to 10k. This means, despite some short-term drop potential, the chance of us dropping to 9k this week is low. Periods of overly bullish/bearish sentiments have been marked out in the chart above. You can make your own judgements. Prolonged overly bearish sentiment is the textbook scenario to initiate upward momentum. This is THE most important factor to pay attention to during the next 7 days given the current complex EW situation. I’ll cover these in the post updates on the dashboard.
As for the CME institutional traders’ positions, not much has changed this week and the trend remains bullish. Do note CME positions are for futures, and thus acts as a leading indicator rather than a coincident indicator. In early bull runs (and when there’s still time to the future maturity), it’s also in the whales’ interest to push the price down, lowering average cost.
Global Market Impacts
To ease the COVID impacts, the Fed is using all means to boost the economy, which means a continued rise in inflation. This will fundamentally push up the value of gold, bringing up bitcoin along the way as the main value proposition of bitcoin remains store of value rather than remittance.
The weekend gap has already been filled.
Support / Resistance
Short-term Resistance at 11.3k, 11.9k. Support at 10k.
Neutral to bearish (Short-term)
Likely in a flat structure (A-B-C). Out of 1-5 & A-C, B is always the most complex wave. And now, we are potentially in (b) of B. Soooo, many alternative counts. To simplify matters, watch out for the diagonal red resistance. If we break above it, we’ll likely first test 11.3k, then 11.9k. If not, we’ll likely be consolidating between this resistance and 10k this week. There’s a potential that A is still in development, with wave 4 developing. However, if that’s the case, we’ll still likely be range bound between 10k and 11.3k for the week ahead.
Daily RSI looks bullish. Bull trend support (40) held, and we are potentially finding support above RSI’s MAs. Potential MA up-cross soon.
1D up-crossed from the negative side. MACD will turn positive soon with a potential price EMA up-cross.