December 9, 2022

Relative strength or just lag? — Technical review dated September 28, 2022

This week regular contributors TechnicalRoundup discuss BTC/USD endless ping pong around $20k and Ethereum move away from $1200 support. From altcoins, let's update XRP analysis and finally discuss S&P500 chart at monthly support.

Bitcoin/dollar amid S&P500 weakness

Risk indexes have decreased. And bitcoin / dollar continues to move sideways, and even gave an upward momentum. This is good! It seems to be.

Given the high positive correlation betweenBTC exchange rate and risk indices, the underlying expectation is that if traditional risk assets fall, then the crypto market falls with them. When, against the background of the weakness of the indices, the crypto market holds on quite firmly, this is a sign of relative strength.

However, this observation must be accompanied by an importantdisclaimer. In the past, this semblance of "relative strength" turned out to be no strength at all. It turned into a simple lag: indices fall, crypto holds, longs accumulate on apparent relative strength, after which the crypto market catches up and overtakes the indices on the way down, remaining in correlation with risky assets.

In our opinion, defensive positioning is more appropriate in the current situation.

From the point of view of TA, the graph may lookonly slightly better if it recovers above the weekly cluster at $21K, especially considering that last week BTC/USD recorded the lowest weekly close in this entire range. Such a recovery would create a worthy thesis: risk indices at support + relative strength of the crypto market and divergence when risk indices decline + recovery above weekly resistance.

In the meantime, we can state that support remains in the area under $20,000, and the nearest resistance is in the middle of the current range, at $21,000.

Ethereum Holds Retest Support

Ethereum/dollar is held on support at $1200.

$1,200 is the high of the daily range before the breakout, and we've slightly adjusted our weekly chart to include this area.

Here is the same problem as in BTC/USD:the high of the previous cycle range ($1400) is acting as resistance for today. This creates a fairly tight trading range between $1200 support and $1400 resistance.

Some optimism on sub-weekly timeframes can be justified here as long as the market is above $1200.

In general, the market is said to "respect"technical levels, trading in line with them, but the ranges look quite limited. Such conditions tend to encourage more mercantile trading tier-by-tier or on catalysts (hit and run style).

At the moment we are not very interested in taking longer positions or swing trading in these markets. Buy support, sell resistance, focus on survival.

As we said above, some cautious optimism seems reasonable above $1200, but it should be discarded either at the resistance or in case of a breakdown below $1200.

The big resistance on the weekly chart is the old $1550-1600 daily cluster.

DonAlt still holds XRP

Since these reviews of ours are only a thinly veiled cover for DonAlt's stories about his eccentric purchases, we will update the XRP review.

Ripple has risen since last week and is approaching resistance in pairs against Bitcoin and USD.

XRP/USD broke through the resistance of $0.40 and stoppedaround $0.50. More serious resistance is at $0.60, but short-term trading on round numbers has proven to be a very viable strategy. Donalt believes that a break above $0.40 is significant and therefore it makes sense to hold the token until at least $0.60 is reached.

Pair to BTC after 2100 SAT breakout.slowed right before the resistance of 3000-3300 SAT. There is a common theme here: a breakout, a continuation and a short pause short of key levels in Bitcoin and USD pairs.

Given that these levels are close anduntested, and given the recent upward momentum in major cryptocurrencies, Donalt remains hopeful for continued growth. The refutation of the thesis will be a complete loss of momentum and/or a return below the breakout levels.

S&P500 Hits Range Low

The macro agenda continues to determine the direction of the crypto market, which means that the S&P500 still matters. The price is testing the monthly support at $3710-3760.

Technically, the retest itself is not very good:it comes shortly after the first test of the structure and was the result of a bearish retest of ~$4300 resistance. This monthly support could generate a second bounce, but it will be much less convincing than the first.

However, technically the market is still at the support level, and this circumstance itself may be enough to provide a further bounce for the crypto market.

In terms of intraweek trading, a double bottom can be noted on lower timeframes, formed below the $3710-3760 level.

In terms of setups, break below thisa double bottom followed by a clear recovery of the $3710-3760 cluster will be a good signal that the monthly support is ready to once again offer another bounce.

We are not sure if the monthly cluster wenow testing, is a strong candidate for a long-term bottom level, but in the current circumstances, anything that offers some relief is worth considering. The market is at the lower end of the range, and it's always a good idea to be on the lookout for failed breakout setups like this.

Finally, we expect Powell's speech andthe CPI data later this week could make headlines, so be on the lookout for possible near-term volatility due to these events.

Have a nice week everyone!

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