US Stock Market Correction and BTC
Hello Steemians! I started talking about the the US stock market correction and its relationship with the cryptocurrency markets in my previous post, but didn't quite finish it. I thought I should discuss it little bit more and get the facts straight. Let's look at the daily chart of S&P500 (SPX) and find key levels:
This market correction which started Jan 29, 2018, is only 10 trading days old, and it is worth 350 points on SPX. This puts the market back in October 2017. Just to keep this in perspective, it took nearly 4 months to rally 350 points, which is considered one of the sharpest rallies in the history of the stock market. However it took only 10 days to wipe the gains. That is the power of a downward move: They always fall faster than they rise.
My current hypothesis is market is possibly doing a Dead Cat Bounce (DCB), and the correction lows are not reached yet. Details of this chart pattern can be found here:
http://thepatternsite.com/dcb.html
The trouble is that this DCB pattern currently have a very large 200 SPX point range. That is extremely volatile and very hard to trade for a short-term trader. For market to rally, the lows must hold and prices must bounce above the reaction high of 2725 and continue to rally. When this doesn't happen, the market will roll over and try to break the low of 2528 and head lower, thereby completing the DCB pattern.
Why this is important for the cryptocurrency market? It is hard for the cryptocurrency markets to rally without the help of the stock market. A market crash will induce more fear in the crypto space. There is no shortage of FUD in crypto at the moment. Here is the look at the daily chart of BTC:
BTC is holding the bounce, however it is currently printing a bearing candle at its downward sloping 10 EMA. This is not good. BTC must clear its 10 EMA to the upside to suggest we have found a short-term bottom.
Disclaimer: This is NOT professional advice, this is all just my own opinion and experience. I am NOT a Certified Financial Adviser. Consult professionals for any financial, accounting or legal related questions you have.
I am not affiliated with or paid for any of the website links shown in the article above.
Nemo,
You said, "it took only 10 days to wipe the gains."
The reality is this........
The fear of loss is greater than the fear of gain.
No one fears a market going up, it can only lead to irrational exuberance.
Yet, when it goes to such heights as we have seen lately, fear kicks
in. The shoulda, coulda, woulda, but didn't mindset.
I explain to some people, it's like a boiling tea kettle, eventually it's got to let out some steam! :)
Second, you never hear about people going to parties and bragging about the losses they took on any sort of investment. No, they only brag about their gains. The bigger the better. Imagine though, you went bragging about how much your investments went up and at the next party you went to, they asked you how your investments are. What? You didn't sell out? The best thing to do is be humble, and count your money. ;)
In closing, I read an article by Rick Newman yesterday.
He posed the question, "When was the last time you saw the market behave like this?"
He responded to his own question, "Not long ago at all. Just two years ago, in February 2016, stocks bottomed out around 14% lower than the peak reached in May of 2015. "
I thought that was interesting, especially since it's February.
Thank you for these excellent comments. I am glad to hear my own thoughts echoed in your voice. I have been trading currencies and futures for the last 20 years. It is the same story every time. I remember vividly the day Lehman collapsed. By some absolute luck I was holding some IBM puts, but in my small trading group I didn’t have the guts to say it. We all lost money, a lot of money and we all shared losses and ordered double the scotch we ordered in the evening. So my thoughts are this, people who brag about their profit are amateurs. Market is very humbling, it provides instant gratification and instant negative feedback at equal weight. To me it has always been people first then money (to pun intended)
interesting observation about stock markets and crypto relationship. even more interesting is that the money is going out of everything, stocks, crypto, gold, bonds and the dollar. where is it going?
That is the question we are all trying to figure out collectively. Present observation is it is not going anywhere and staying in cash only temporarily. Even if some amount of it going to go in bonds, it bound to come back into stocks, because really there is no other game in town. Crypto still need mainstream adoption.
or is there another game in town (or out of town) that we don't know about? if it's not the US dollar, maybe another fiat currency or perhaps a secret crypto known only to a few? private islands? mansions?
As far as I can tell, there is no other game in town or out of town. Crypto is actually very transparent, you can easily see money inflow and outflow. Interesting thing is although now a lot of people know about crypto, very few actually own substantial part of their net worth. This is a blessing and a curse at the same time, if you can guess what I mean :)
lol. yes, that's why it's being attacked on all fronts. but...that goes for cryptos people know about and every crypto wants to be promoted and be used. could there be an elite only crypto that the masses aren't aware of?
Nice post.I respect you very much because you contribute to steemit.I will do activities like you.I would like to extend the steemit..
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