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Crypto Update: Carnage Everywhere (But This is How Panic Bottoms are Formed)

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The downtrend that has been dominant throughout January is likely entering its final phase today, as correlations are sky-high, all majors are crashing, and forced liquidations are accelerating the decline. Volatility surged higher as expected, and technical trading is still the name of the game, with no significant news behind today’s move, even if the mainstream media might find an excuse this time around as well.

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Market dynamics that are rooted in the historic late-year run-up in the segment are mostly to be blamed for the current trends, but now the long-term charts are oversold the short-term momentum is also getting stretched, so a durable bottom is likely very close. That said, short-term traders, especially using leverage, should remain cautious of volatility, and proper position sizing and risk management are vital in the current environment for such strategies.

BTC breached the $8200 support level in early trading today, and now it’s likely headed for an optimal final low for the cycle near $7650 that we have been monitoring throughout the correction. Should the crash spike below $7650, further support zones are between $6800-$7000 and $5750-$6000.

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BTC/USD, 4-Hour Chart Analysis

Ethereum gave up its short-term relative strength, as we expected, and the coin is still likely headed below the prior crash lows, being in an earlier phase of the correction than the rest of the majors. Below that $740-$750 zone, key levels are at $625, $575, and $500, and traders and investors alike should wait before entering positions in ETH.

ETH/USD, 4-Hour Chart Analysis

Altcoin Bloodbath

LTC/USD, 4-Hour Chart Analysis

With the total market cap of the coins falling almost to $350 billion, there is no real hiding place from the decline in the sector, and all of the majors are getting crushed. Litecoin is headed to $100, Ripple is near the $0.68 support, Dash is at $500, with 60+% losses now across the board top-to-bottom.

While it’s impossible to pick an exact bottom in such an environment, and panic selling and liquidations could still continue, long-term investors could add to their positions at the current levels.

Stay tuned for our detailed technical analysis later on today.

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Disclaimer:  The analyst owns cryptocurrencies. He holds investment positions in the coins, but doesn’t engage in short-term or day-trading, nor does he hold short positions on any of the coins.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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27 votes, average: 4.85 out of 527 votes, average: 4.85 out of 527 votes, average: 4.85 out of 527 votes, average: 4.85 out of 527 votes, average: 4.85 out of 5 (27 votes, average: 4.85 out of 5)
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4.7 stars on average, based on 107 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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3 Comments

3 Comments

  1. Tarik

    February 2, 2018 at 2:41 pm

    so far, accurate as usual

  2. alecuk

    February 2, 2018 at 3:14 pm

    Yooo Mate! Your the best dude! Look at the volume coming in on GDAX when BTC hit $7,540!

    That was the bottom for at least a few days me thinks!

    Rollercoaster!

  3. donnyw

    February 2, 2018 at 4:16 pm

    I want to rate 5stars but my phone screen is small and I hit maybe 4 or 4.5 lol.
    Mate you are always on the spot, thank you very much, you are my first analyst I was looking when in doubt.

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Analysis

Daily Analysis: The Usual Post-Fed Pump and Dump…

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Wednesday Market Recap

Asset Current Value Daily Change
S&P 500 2700 -0.51%
DAX 12,470 -0.14%
WTI Crude Oil 61.28 -0.83%
GOLD 1325.00 -0.43%
Bitcoin 10480 -8.71%
EUR/USD 1.2336 0.61%

The script that we laid out for the FOMC meeting minutes has worked almost perfectly, with the major US indices completing a roundtrip that triggered most of the “weak” stop-losses, before a powerful move lower into the close.

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The predictable late-session intraday volatility aside, markets were quiet and choppy for most of the day, and the Dow, the Nasdaq, and the S&P 500, all closed just slightly lower, while covering 2% during the session, with the tech-index’s relative strength evaporating in late trading.

S&P 500 Futures, 4-Hour Chart Analysis

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Forex Markets and Commodities

What drove the decline in equities was the renewed rise in US Treasury Yields, and to answer the most important question of the day; yes, in fact, the yield-Dollar correlation of the past few months broke down, and today the Greenback rallied together with bond yields.

10-Year Treasury Yield, 4-Hour Chart Analysis

While that is how it should work according to common sense and economic theory, the recent inverse correlation helped a lot of trends in reaching extremes, and those extremes now might reverse.

The outperformance of US markets, the Euro strength, and the weakness in European equities were among those trends, and it’s interesting to see that the bullish technical setup in the EUR/USD is crumbling and the US indices are in the deepest correction since the Brexit.

EUR/USD, 4-Hour Chart Analysis

While there is no assurance that these changes are permanent, for now, we remain short-term bearish on US equities, and continue to look for upside in the battered Dollar.

At the end of the day, the Dollar finished higher against all of the major fiat currencies, although the Yen showed notable relative strength amid the stock rampage near the closing bell. Interestingly the USD vs. risk-on pairs trend continues to lead the other asset classes, as we have noted several times, and that could be something to monitor in the coming days and weeks.

Commodities had a mixed but ultimately bearish session, with oil and gold suffering both suffering losses amid the risk-off shift, although crude already traded lower before the FOMC release, while gold traded in close correlation with the Euro throughout the day.

Cryptocurrencies

The segment had a decisively bearish session, with only a few coins showing considerable relative strength amid the sell-off. Bitcoin, Litecoin, Dash, and Monero are still the leaders of this cycle, while Ethereum is the most notable laggard, pulling most altcoins lower as well.

ETH/USD, 4-Hour Chart Analysis

On a positive note, the majors held up relatively well amid the stock turmoil, but the next few days will be crucial, as important support levels could be tested. That said, most of the coins are well clear of the crash lows, and there is more than enough support below that, combined with the still present bullish signs should keep investors confident that a new uptrend is underway and new rally highs are ahead.

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Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 107 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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Analysis

Technical Analysis: Altcoins Lead Markets Lower as Bitcoin Still Looks Strong

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All of the largest digital currencies are in the red today, following heavy overnight selling, a bounce in European trading, and another round of losses around the US market open. Ethereum is still in the worst short-term shape among the giants of the segment, and that’s in line with the slightly delayed cycle of the coin that we have been monitoring.

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The technical divergence between the leaders of the market and the laggards yesterday is still dominant with the 6 coins that spearhead the rally, BTC, LTC, NEO, Dash, Monero, and ETC, are still in much more bullish setups than the rest of the majors.

Bitcoin is also well below its recent rally highs after breaking down under the key $11,300 level, and a test of the $10,000 support now looks likely, while a move to the $9000-$9200 zone would still keep the rising trend intact.


BTC/USD, 4-Hour Chart Analysis

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The overbought short-term momentum readings are being cleared, and despite the slightly bearish volume patterns, we expect the coin to continue its new bullish cycle after the correction, with targets above $11,300 ahead at $13,000 and $14,250.

ETH/USD, 4-Hour Chart Analysis

Ethereum is now trading below the key $845 level as the correction continues, as we expected, and the coin remains stuck in the dominant declining trend, for now. We still expect a breakout in the coming weeks, but a test of the $740 level is possible before another rally. Further support below that is at $625 and $575 and we don’t expect a new low in the coin, so investors could still accumulate the coin near the main levels.

(more…)

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 107 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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Analysis

Pre-Market: All Eyes on the FED and the Dollar (Again)

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FED-Days usually bring very special sessions with a choppy illiquid environment before the “big announcement”, an almost usual stop hunting spike in both directions right after the release, and a rather random, but strong trend in the close that usually defines trading for the next days.

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For this reason, a lot of traders like to take the day off until the FED-decision, and only trade after the event. Why are we talking about this today? Because although there is no interest rate decision this month, the meeting minutes of last month will be published this evening, and what moves the market in this period is rate expectations, not actual decisions.

And by the market, we mean basically all traditional asset classes, and through the rising trend in yields and the consequences of that, rate expectations arguably affect the cryptocurrency segment as well. So what do we expect from the FED? Nothing. We will leave that to the rest of the players, and trade upon the reaction of the market; after all that is what counts. At the end of the day, central banks will try to prop up the market, we can take that for granted.

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S&P 500, 4-Hour Chart Analysis

The overnight session in stock futures was in line with the above-mentioned expectations for a quasi-Fed day, with no clear trend in Asia or Europe, and very choppy price action across the board. Yesterday’s late-session decline is still weighing on investors sentiment, but there are clearly positive signs as well, even as we remain bearish for the coming weeks.

The key levels to watch are still the same, the 2735 and 2700 levels in the S&P 500 (25350 and 24800 in the Dow), and the Nasdaq could remain crucial to keep the hopes of bulls up, should it retain its relative strength.

Dollar-Yield Correlation Switch?

EUR/USD, 4-Hour Chart Analysis

Currency traders might have noticed a subtle shift between US Treasury Yields and the Dollar since the Volatility-Armageddon (actually a bit later than that). In the “old regime” the rise in yields was through the changes in rate-expectations was actually hurting the value of the Dollar, while lately, that negative correlation disappeared and even reversed briefly.

Why is that so important? Because the previous correlation helped the rally in US equities as yields rose, while the new regime could mean that European and Asian stocks will finally gather relative strength, should yields continue to rise. Tonight we might get closer to the solution of this puzzle, as the reaction to the FED-minutes will show how correlations are shaping up now.

Currencies and commodities are also little changed today, although the Dollar continued to edge higher overnight, while enduring a small sell-off as we approached the US open, despite the largely negative European PMI indices.

So watch the Dollar, the Nasdaq, and most of all Treasury Yields today in late trading, and expect choppy conditions until the very end of the US session.

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Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 107 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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