Yesterday was one of the biggest red days on the stock market in a very long time. We’ve long said the pitchfork median would cap the market. In August price touched it, and I wrote that this is where algorithms start selling. That’s why I’m short; I later announced it publicly and even added to it. Algorithms have been buying since 2009, after the 2008 crash when the market fell almost 60%, and that whole move was a fifth wave. If a correction starts, we haven’t seen anything yet: a possible drop of around 38% from the highs. I’m not hoping for a crash and sincerely hope I’m wrong. But the market rose almost nonstop for years, and sooner or later a correction comes; the only question is how deep. I don’t think we collapse right away: this is a distribution phase, and a serious crash could take more than a couple of months.
On the short-term weekly chart, stocks finally pulled back to 0.31 from the recent lows to the highs, with four red weeks in a row there. In a normal market that would be a great buying spot, like last time. It’s the level bulls need to hold: below it, they’re in danger. I’ve closed most of my stock longs and fully exited the market, but that’s my own decision. Even if stocks head lower, Bitcoin could bounce first and only start falling in the first quarter of next year. Don’t confuse macro and short-term timeframes.
On Bitcoin, there’s a huge red candle since yesterday’s update. The short from the resistance we discussed worked: Bitcoin couldn’t break it, the stock dump added pressure, and I closed most of the short yesterday. On the weekly, 0.31 between the bear market lows and the highs gave a solid bounce, but it’s now broken and no longer relevant. Many people were upset, as if 0.31 were a magic level bound to mark the macro bottom. That’s not how it works: most of the time it gives strong support, as it did here, but this time it didn’t hold. On the three-month map liquidity sits right under the lows, from 74.9K down to 73-73.9K, and I think Bitcoin retests the lows before a bullish move. This is still an impulse and a correction. I don’t have many strong supports, but on a log shift pitchfork I see 74.6K and 72.9K, and they line up well with the liquidity. It’s like the start of previous bull markets: rally, pullback, weaker rally, another bounce off the lows, and we’re roughly there now. Next week I may open a long in the 74.6-72.9K range.
Open interest finally got a big flush yesterday. Through all of October it barely moved and even crept up while Bitcoin fell, and a few days ago it pumped on the rally. Yesterday, as stocks and every market dumped, OI dropped sharply, but it has since recovered a bit and is rising again. Until that changes, Bitcoin is at risk: we need a red OI candle down, which lines up with local lows. Fear & Greed is at 31, fairly deep in fear. ETH looks similar to Bitcoin; the market review comes on Sunday.
Trading cryptocurrency involves substantial risk. This analysis is for educational purposes only and is not financial advice. Past performance does not guarantee future results.
