The bloodbath in the bitcoin markets continued well into the early morning hours in the US as we expected, reaching down to a new cycle low of 4237 $ on large volume before the bulls began to get active once again at those levels due to longer-term support and the pace and magnitude of the selloff over the course of this week. Since that support developed in the low 4000's $ more buyers emerged which pushed price back up to the 4700 $ region where the market consolidated on mixed technicals as bulls and bears fought for near-term control, but it appears as though the bears have won again as price is heading lower right now. With that in mind, the bears still have a big advantage overall which means we'll need to see at least a successful retest of the lows before even discussing a reversal, and we continue to have a gut feeling that a final puke into the [members-only content] $ is needed in order to truly be able to call a sustainable bottom which is why we are staying conservative with the now active MT ProTrade until further notice.
We want to stick with the 4-hour chart today given that the added granularity is helpful, and we can see that the cascade of selling over the past 36 hours consisted entirely of [members-only content] signals and bearish candle formations while market structure has remained broken on all timeframes, although the current bounce off of the 4237 $ low sparked a [members-only content] signal and a very bullish candle formation that has already printed which means we have a new demand area to work with for the time being. Also note that there isn't all that much near-term resistance until the confluence area around [members-only content] $, and we know that shorts have been spiking over the past 24 hours, so we would not be surprised to see this countertrend move continue up to or slightly above [members-only content] $ before rolling back over to the downside once again (although we also wouldn't be surprised to see price break down again straight from here). With that said, we have no doubt that the bears will try at least one more time to push price to new lows considering all of the moving averages are stacking to the downside, strong dynamic resistance continues to build overhead, and the Ichimoku Cloud continues to press lower out in front of the market, so we're staying cautious overall.
Moving on to momentum and volume, notice that RSI and the Stochastic have begun to move up out of oversold territory but with plenty of room to run still, Willy has yet to truly reverse but is looking close to moving higher, MACD appears to have bottomed for now but shows no divergences at this time, and PPO has shifted back to [members-only content] signals, all of which support the idea of another leg higher over the near-term but none of which show signs of a sustainable bottom yet. Additionally, while exchange volumes have spiked higher recently, which is what we want to see in terms of a capitulatory bottom, we still don't think they're large enough and the A/D line remains quite weak neither of which are signaling that a legitimate cycle low has been put in yet which is why we are expecting at least one more bout of heavy selling before all is said and done.
Next up is the daily chart to see if there are any signs of capitulation that we missed on the short-term charts, but for now we don't see much to dispute our outlook above given that SCMR continues to print [members-only content] signals while market structure remains firmly bearish, hence our still negative outlook. We can also see that all of the moving averages are accelerating to the downside, multiple levels of strong dynamic resistance continue to build overhead, and the Ichimoku Cloud is still moving swiftly lower out in front of the market, all confirming that down is still the path of least resistance. Granted, there is a chance that a continuation higher before the daily close could spark a bullish hammer candle reversal out of the new demand area, although given the current price action we are seeing in the marketplace we think that is unlikely moving forward.
As far as momentum and volume are concerned, notice that RSI and the Stochastic have both crossed over into officially oversold territory, Willy is getting very close to fully recharged, MACD is moving steadily to the downside, and PPO just started flashing [members-only content] signals for the first time since April, all of which point to the possibility of a sustainable bottom in the very near future but also leave the door open to the final flush to the downside that we are expecting in the near future. The volume indications appears to be supportive of this outlook considering exchange volumes are certainly beginning to look capitulatory and the volume profile setup is getting very thin on both sides of the market, both encouraging for the bulls, although the A/D line continues to get hit to the downside telling us that the bulls are not active enough to put a stop to the downtrend just yet.
While this update may sound quite dire in tone overall we want to be clear that we are very encouraged by what we are seeing from a longer-term perspective given this type of washout to the downside is what the market has needed to finally flush out all of the hot money/weak hands so that we can start to create a legitimate foundation from which the next bull market will be built. Granted, we are still expecting another selloff below [members-only content] $ before the market ultimately bottoms which is probably not what bulls want to hear right now, but it is important to know that we are in the final innings of what has been a brutal bear market in 2018 so brighter days are finally on the horizon regardless of what materializes over the remainder of the week (which could get even uglier).