BTCUSD 2014 vs Now & Moving Averages versus Oscillators
Updated
There are a lot of similarities between BTCUSD in the 20014 bear market and the current bear market, and the primary similarity that I see the bulls following is found in the moving averages. The chart has three moving averages:
We see very similar circumstances, we had a death cross, rapid price decline and and then the 50MA traced the top of the falling wedge for both bear markets and the 200W came in as support. If you have a moving average system you would be looking to accumulate as much as you could so long as BTCUSD found support on the 200W on the 3d or weekly timeframes and would only start to worry if we closed a candle (or couple) below the 200w. The 2014 chart doe show some wicking below the 200 after the price action moved out of the wedge and the buying support was strong enough to go parabolic.
What is missing in the current market that was present in the 2014? Bullish divergence.
When we look at the current bear market we see we are out of sync.
*The RSI entered into oversold conditions and hit the the 200w moving average WITHOUT any classic divergence at all.
*We DO have the small hidden bullish divergence that caused an uptrend BUT this uptrend only took us to the bisector of the wedge and not the top of the wedge as we saw in 2014
*We have no classic bullish divergence against the wedge or 200w . The green question marks suspect the low will be below the 200w, against wedge support, and hopefully with classic bullish divergence.
*The MACD shows that the low established in July 2018 is congruent with the low established in December, so we don't have any bullishness there to help out.
In short, the oscillators have not “turned the corner” yet in the same manner they did in 2014. This turning the corner is most clearly seen with the V on the RSI bottom in 2014. Without any bullish divergence keeping us on top of the 200w the strong possibility remains that we will fall either below the 200W here at the bisector of the wedge, or at the top of the wedge.
Here is something I hope you appreciate and consider: in 2014 prior to breaking out the price action hit the top of the wedge/50 3d SMA and died 30% before it found support on the 200W MA again. Price action coiled and tightened between the 50 3dD and the 200W for three months before breaking out of the 50 at the green arrow in the chart below, failing, and retesting the 200w again (blue arrow). We don’t have the bullish divergence in the oscillators to consider that happening in the next 6 months
Finally, a look at the S&P 500 and its 3x leveraged inverse ETF, SPXU pared down with only volume on the 3 month/quarterly chart. The SPX for 2014 into 2015 put us in the middle of a sideways consolidation of the uptrend of 2008 and today. We had various hammers and doji candles showing the uptrend was slowing down and then we saw a reversal in 2015. What do we see on SPXU for the last quarter in 2018? A massive spike in volume, 491.5M shares traded, 5x the 20 period average. Billions of dollars shorting the S&P in one instrument alone means that is billions not going to investment or consumption. That doesn’t even look at the S&P Inverse x1 or x2 funds, or the NASDAQ inverse funds, or the Dow Jones inverse funds, or any of the real estate inverse funds. I don’t have the time to add up all of the major inverse funds, I just use SPXU and SH as my criterion with was is happening in the market, and the big players are shorting.
The question needs to be asked: where is the money for a bull run going to come from? Paper losses and real loses are going to make it very difficult for BTCUSD to inflate, and it is going to be damn near impossible without any bullish divergence to wake up the bulls with real money.
(note) Since the first week of January I have been drawing the falling wedge with a bisector and that has held true as resistance over the last six weeks. From time to time I have looked for micro-structures within my larger maro structure and some have been right, and some have been wrong. But if you hit the play button on the link below you will see the bisector has been pretty accurate, which gives me faith that the overall wedge is strong. If you take anything from this post it should be the falling wedge, and you can play that as you see fit.
- Dark Blue: The 200w SMA (Programed the CM_Ultimate to be on a different timeframe than the current view
- Light Blue: the 3D 200 SMA
- Orange: The 50 SMA
We see very similar circumstances, we had a death cross, rapid price decline and and then the 50MA traced the top of the falling wedge for both bear markets and the 200W came in as support. If you have a moving average system you would be looking to accumulate as much as you could so long as BTCUSD found support on the 200W on the 3d or weekly timeframes and would only start to worry if we closed a candle (or couple) below the 200w. The 2014 chart doe show some wicking below the 200 after the price action moved out of the wedge and the buying support was strong enough to go parabolic.
What is missing in the current market that was present in the 2014? Bullish divergence.
- The large black arrow on the 2014 chart shows when the RSI hit oversold conditions with congruent divergence,
- The small black arrow shows a micro bounce with hidden bullish divergence that pushed the price action to the top of the wedge and then price action came down again onto the 200W MA with classic bullish divergence.
- The green arrow shows where we hit the 200w/Wedge support with classic bullish divergence compared to the large black arrow
- The support of the falling wedge matches up with classic divergence of the MACD, which followed an upward slop starting in the May 2014 low and held strong as the price action went out of the wedge, through the parabiolic move at the end of 2015 and through the consolidation triangle until 2016.
When we look at the current bear market we see we are out of sync.
*The RSI entered into oversold conditions and hit the the 200w moving average WITHOUT any classic divergence at all.
*We DO have the small hidden bullish divergence that caused an uptrend BUT this uptrend only took us to the bisector of the wedge and not the top of the wedge as we saw in 2014
*We have no classic bullish divergence against the wedge or 200w . The green question marks suspect the low will be below the 200w, against wedge support, and hopefully with classic bullish divergence.
*The MACD shows that the low established in July 2018 is congruent with the low established in December, so we don't have any bullishness there to help out.
In short, the oscillators have not “turned the corner” yet in the same manner they did in 2014. This turning the corner is most clearly seen with the V on the RSI bottom in 2014. Without any bullish divergence keeping us on top of the 200w the strong possibility remains that we will fall either below the 200W here at the bisector of the wedge, or at the top of the wedge.
Here is something I hope you appreciate and consider: in 2014 prior to breaking out the price action hit the top of the wedge/50 3d SMA and died 30% before it found support on the 200W MA again. Price action coiled and tightened between the 50 3dD and the 200W for three months before breaking out of the 50 at the green arrow in the chart below, failing, and retesting the 200w again (blue arrow). We don’t have the bullish divergence in the oscillators to consider that happening in the next 6 months
Finally, a look at the S&P 500 and its 3x leveraged inverse ETF, SPXU pared down with only volume on the 3 month/quarterly chart. The SPX for 2014 into 2015 put us in the middle of a sideways consolidation of the uptrend of 2008 and today. We had various hammers and doji candles showing the uptrend was slowing down and then we saw a reversal in 2015. What do we see on SPXU for the last quarter in 2018? A massive spike in volume, 491.5M shares traded, 5x the 20 period average. Billions of dollars shorting the S&P in one instrument alone means that is billions not going to investment or consumption. That doesn’t even look at the S&P Inverse x1 or x2 funds, or the NASDAQ inverse funds, or the Dow Jones inverse funds, or any of the real estate inverse funds. I don’t have the time to add up all of the major inverse funds, I just use SPXU and SH as my criterion with was is happening in the market, and the big players are shorting.
The question needs to be asked: where is the money for a bull run going to come from? Paper losses and real loses are going to make it very difficult for BTCUSD to inflate, and it is going to be damn near impossible without any bullish divergence to wake up the bulls with real money.
(note) Since the first week of January I have been drawing the falling wedge with a bisector and that has held true as resistance over the last six weeks. From time to time I have looked for micro-structures within my larger maro structure and some have been right, and some have been wrong. But if you hit the play button on the link below you will see the bisector has been pretty accurate, which gives me faith that the overall wedge is strong. If you take anything from this post it should be the falling wedge, and you can play that as you see fit.
Note
The price action is proceeding to the wedge resistance so this will be a major test of the market structure. In the final price action of the 2014 falling wedge was the price action hit the wedge resistance and then grinding down some 30% before finding support on the 200w and drifting out the wedge. Price action would find support one more time on the 200w months later before finally taking off and never returning to these levels again.
Expecting a replay of the price action proceeding to the wedge vertically and not horizontally and then testing support on the 200 seems very likely in both the bearish and bullish scenarios and so you day and swing trades should be unaffected by the ultimate outcome up until we resolve the 200w test.
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