Why I’d Rather Short Bitcoin
By The Alpha Trades on The Capital
A good morning everyone, welcome to the Alpha Trades (formerly “Cryptosomniac”) BTC analysis, where I’ll also cover oil, forex, and equities markets.
First some housekeeping — We’ve rebranded from Cryptosomniac to Alpha Trades! Our community isn’t crypto-centric anymore — On the Advantage side of the Discord server, we’ve opened up equities, forex, and commodities channels. The new content has been warmly received by our community, and I’ve mapped out some profitable trades such as the USDZAR (3.3% profit). We’re excited to find better ways to serve you, so let’s get down to the analysis.
Bitcoin squeezed shorts, but closed beneath the 2020 yearly open. A wedge is developing in equities with RSI bearish divergence. Whether it be crypto, futures, or equities, expect more pullback.
Price has consolidated beneath the yearly open up until this morning. I alerted my community to my BTC short entry at 6175, and I exited half that position at 7072 when a major trendline was breached, then fully closed the position at 7085 for 1.1% profit.
BTC is developing a pennant, maybe a bull flag, or perhaps an ascending triangle. In a nutshell, BTC’s price is tightening up and could break out soon, though I wouldn’t call the direction as of this writing. I still believe there’s ample resistance to the upside, because the 2020 yearly open is acting as strong multi-day resistance. One positive sign for bulls is that price has broken out of a multi-week trend line and has hovered above it for more than 24 hours.
S&P500 Futures are climbing up, but the market sure looks like it’s tightening up in a bearish rising wedge.
Yesterday saw a pop in the s&p 500 E-Mini Futures. This morning, futures are up 2–3% and global markets across the board are green. Nations are beginning to open their economies back up, while others plan to keep movement tight until June or July.
It’s common knowledge by now that price action in equities is disconnected from ground-level reality. Yesterday, the Labor Department reported another 5.245 million jobless claims for the week, raising the total losses to 22 million. That’s about 13.5% of the nation’s workforce, and experts see that number reaching nearly 20% for the month of April.
That is a crazy number of people without work, and yet the market consistently climbs. Here’s the catch: The market you see on your brokerage account is irrational, but the “real” economy is still suffering — businesses are closed.
Though Trump issued guidelines yesterday for re-opening the economy in places where coronavirus cases have declined, this will be a slow process as nobody wants to trigger a second wave of new cases by returning to normalcy too early.
You can argue that efforts to “flatten the curve” had little effect, particularly in countries such as China, Singapore, and Vietnam where officials did record a second wave of new cases. At best, cases have gone from parabolic to a steady climb.
We want our administration to be careful.
A wedge is developing in equities with RSI bearish divergence.
With price rising as irrationally as it is on Fed shenanigans, I believe there’s a high possibility that the market forms a W-bottom before all is said and done, for technical and fundamental reasons:
Group hedge fund, for example, is facing $10.7 billion in losses. Ray Dalio’s Bridgewater Associates fund was also down about 10 to 15%, and these people are master investors.
Beyond jobless claims, earnings across the board will give the market its final leg down, if JP Morgan’s anything like a canary in the coal mine. In addition to the ongoing battle with Covid-19, this dead cat bounce can last for a while.
These fundamental drivers as well as the market pricing in the Fed’s stimulus packages are contributing to the bearish divergence we observe in the RSI and the rising wedge that has developed over the past several days. That price action tells me that price will have great difficulty breaching the 61.8% Fibonacci retracement zone mapped from the high before the covid-19 crash to the bottom.
For every dollar handed to corporations, three pennies of that went to the American people. Will the majority of Americans be saved by their $1200 checks?
Whether it be crypto, futures, or equities, markets are irrational. Given the amount of damage to the economy and technicals tightening up in a bearish fashion, I’m expecting more pullback.
Have a wonderful day and keep your stops tight.
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