Daily Report – Bitcoin and Market Update (May 9 2022)

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HTF 1W:

The weekly chart does promote a breakdown idea for the recent ascending channel pattern. That brings several technical implication scenarios.

First off, the said breakdown increases the chances for BTCUSD to retrace further into the range-low territory at 28800-30000 USD region.

The bitcoin’s correlation to S&P 500 equities has increased even more on the 7-week basis, taking both into the 0.93 coefficient value. It’s historically high value, which tends to grow whenever there is a market crash – the markets tend to crash together.

Technically, bitcoin has deviated strongly against its long-term 50-week mean price at $44629. The further to the downside it deviates for the excursion, the more potential the momentum trade scenario could have – mean reversion.

Price action wise, the definite and decisive levels remain 69000 USD on the top side, and the 28800 USD on the low end of the pattern. Should either of those get broken, the trend resurfaces and is likely to continue further in the direction of the breakout.

Until the breakout occurs, the long-term thesis for bitcoin assumes the chart pattern – a form of consolidation, sideways – rather than a bear market. The thesis should be revisited, provided that the 28800 USD support breaks to the downside with a reliable weekly close underneath.

HTF 1D:

The daily chart has finally approached a key daily support at $33000 and the follow-through decision is to be made with the daily close today.

For the downwards continuation, BTCUSD needs to close the daily candle/bar below the 33000 USD support in an unquestionable manner – a clean breakdown by 1-2%, rather than by a few points. Such a breakdown would imply another signal.

The daily breakdown would also confirm a downwards Momentum Band break unseen since January 2022 or December 2021. This would confirm that bitcoin has broken outside its regular volatility range, accelerating to the downside with higher chances of continuing in the direction of the breakdown. Otherwise, a Momentum High Band resistance is at 44000 USD.

The CTF Trailer Stop is at $38559, as the trend trailer continues to move lower. A clean break above this level would mean bulls have the chance to re-gain the control over the market. Until that happens, the bears are in control and in decision with the prospect of lower targets of 30000 USD, or 28800 USD.

HTF 12H:

The middaily chart continues to accelerate to the downside, as the new yearly lows are made.

The failed wedge pattern acted better than upside target, just like failed patterns typically do – they tend to perform better in the direction opposite than the anticipated.

An overall risk-off environment in the stock market has been supportive of the bitcoin’s declines. As Russia-Ukraine war does not seem to be disappearing anytime soon, the risk-on assets, including bitcoin, remain in danger of following through to the downside.

The CTF Trailer continues to decline sharply, whereas the CTF Trailer Stop has been adjusted to $36427. A positive break to the upside could revert the chances back to the bulls. However, until that happens, the bears are in control continuously (excluding the fake trigger) since early April, potentially aiming lower.

MTF 4H:

The MTF chart slips below its local supports consistently, following through to the downside amid an extreme panic stage in the market.

The CTF Trailer drops sharply in an increasingly vertical manner, which adjusts to the current levels of volatility and price deviations.

From the daily open, bitcoin has declined by more than 7%, not long after the recent -10% retracement day. It seems given that the volatility has increased sharply, as the downwards momentum accelerates.

Naturally, it’s too early to be calling a bottom anywhere here, before 28800-30000 USD region is retested, apparently, yet a rapid volatility increase over one or a few sessions is usually followed by at least a short-term reversal.

The bulls are in danger for as long as the CTF Trailer Stop $43325 remains unbroken.

LTF 1H:

The hourly chart continues to tumble, breaching into new lows consequently as the session goes on.

A clean break below the Low Band confirms an abnormal volatility to the downside.

it’s worth accounting that the more vertical and aggressive a trend gets in the upwards or downwards direction, the closer it is to forming a reversal pattern

Eventually, the historical volatility peaks at the very reversals. This is the most illiquid point in the market, where the greatest amount of hands exchange Bitcoin – one side out of panic or fear, and the other side because of calculated risks and mean-reverting strategies.

The upper volatility bound is adjusted to 34500 USD region.

FEAR/GREED INDEX

As the history learns, the crowds is usually wrong at the extremes. The more extreme the sentiment and consensus of the speculators, the wrong-er they are, and the higher the chances for the reversal in the market.

Having said thati, I keep highlighting how the sentiment index should not be taken as a timing indicator. Just like momentum oscillators, this index can stay “oversold” or “overbought” for longer than one can remain solvent. However, it still can become a source of valuable information to aid market decisions.

The fear and panic are now skyrocketing as the index slips down to the 11 points area, seen only a few times in the history (please refer to the chart of Philip Swift @PositiveCrypto attached in this report)

All things concerned, bitcoin is reaching an opposite end of euphoria, where there seems to be a form of a panic climax, typically leading to a reversal soon after. If the stock market continues to unwind to the downside, I would argue bitcoin may still see a bit lower objectives, even below 30000 USD support. However, for now I would expect a reaction off the 30000 USD lows.

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God bless!