This is the video recording of our December 9, 2022, All Star Charts Crypto Weekly Strategy Session.
Textbook Technical Analysis
This recent risk-off move in the equities market was textbook.
It’s no coincidence the S&P 500 sold off at the channel resistance and AVWAP off the highs. We’re more or less seeing a confluence of developments skew risk-off over the last few weeks.
The US Dollar Index is at a logical level to bounce, while cyclicals, which have been leaders in the equity markets, are pausing at their August highs.
Meanwhile, most crypto assets are retesting their June lows from the underside.
“Stop Losses Are Stupid”
Don’t listen to people who claim to know the future.
They’re all full of shit.
Technical analysis isn’t a mystical prediction machine. This is nothing but a simple, repeatable, and foolproof process for managing risk.
Whenever we’re looking to buy a stock, a cryptocurrency, or any other publicly traded asset, we always prioritize where we’re wrong rather than how much money we could make.
If you haven’t learned by now that risk management is paramount when managing money, you’re beyond saving at this point.
For us, most trades are rather simple.
Giving the Setups Time To Develop
There’s been no questioning how we’ve been positioned in crypto markets.
For the longest time, we’ve promoted high cash positions in this tape. Patience has been a significant virtue for traders to maintain.
Extending on this overarching theme, we yet again argued that caution is advised in the short term in yesterday’s note.
While we’ve been putting forward the utility of patience in this cryptocurrency market for some time, we especially see a confluence of concerning data points.
Most importantly, the S&P 500 is once again testing its channel resistance and AVWAP off the highs, where it has found resistance over the last year.
Further, the dollar index is retesting its breakout level from the 2017 and 2020 highs following the collapse of the FTX and Alameda ecosystem.
Hitting Resistance
It’s been impossible to ignore.
Equities and cyclicals have seen some modest gains off the lows, while growth areas and crypto markets have waned. In fact, by our calculations, this year has seen one of the greatest disparities in performance between growth and value.
You can see it when you compare something like Bitcoin or Ethereum against the Dow Jones Industrial Average.
Sure, crypto markets have been dragged down by the FTX contagion. Still, perhaps the bigger driver of this price action has been the macro flow out of long-duration growth assets (crypto included) and into traditional value areas.
We’re talking industrials, materials, and, of course, energy stocks.
But let’s not forget the broad picture.
[Crypto] Weekly Strategy Session – December 2, 2022
This is the video recording of our December 2, 2022, All Star Charts Crypto Weekly Strategy Session.
The Most Important Crypto Chart
Markets are seriously complicated.
There’s an endless number of participants, countless investment vehicles, and a million ways to analyze money flow.
Here at All Star Charts, we analyze thousands of individual markets and securities, all belonging to various asset classes. It goes without saying that we collectively look at thousands of charts every week.
There’s no substitute for setting aside time to go through our chartbooks and putting in the work.
But, every now and again, certain environments and conditions dictate simplicity. Sometimes, we can step back and identify the major themes in just a handful of charts.
Indeed, for crypto markets, it has been rather simple.
The argument has been to be long if Bitcoin’s above its prior-cycle highs and to be patient if the opposite is true.
But I’ll pose that there’s an equally significant data point that we’d be irresponsible to ignore.
Making COIN on Mean Reversion
From the desk of Steve Strazza @sstrazza
I’m pinch-hitting on the crypto note today.
It’s not so much because JC and Louis needed me to step in. It’s because I wanted to share something with you.
I want to discuss a potential mean-reversion trade opportunity in Coinbase $COIN.
I think it’s one of the best ways to express a bullish tactical thesis on cryptocurrency markets right now.
I know that’s really not saying a lot these days. The asset class is a mess. “Disaster” might be a better descriptor, particularly as it relates to the FTX meltdown.
In the aftermath of its collapse, how can we trust any of the crypto exchanges right now? Why the hell would we want to buy Coinbase? Isn’t it just the next domino to fall?
Hear me out…
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