UPDATED - December 22, 2017
Referencing the below picture here from 12/11/17 we outlined that the correction Dec 7 correction that pulled back -31% pulled back to our reload zone target but had yet not fulfilled a very key requirement that we've discussed ad nauseam in several posts which is this:
ALL PIVOT-HIGHS ON BITCOIN INEVITABLY GET RETESTED
So we defined in our last post that the last pivot high was around the $11,485 area. Today we got a -8% breach below that showing Bitcoin has bounced off the lows here at around $10,000. That brings us to a full correctional low of -47.72% so we will now update the table. First, take a look at this updated chart that now shows you that we indeed did tag that PRIOR PIVOT HIGH. The old pivot high can be identified on the chart easily by just distinguishing where the last mountain top was before Bitcoin took up on it's next leg higher. In the case here, we tagged 2 of those mountain tops which was $11,500 area and the $10,000 area.
Again these are the 2 most important things we look for when distinguishing key requisites for what we want to see to formally call a bottom. There's a check list that we go through with 5 key indicators but the 2 most important CORE INDICATORS are the following:
CORE INDICATORS FOR A BOTTOM :
→ Firstly, we want to see a pullback in range from -30% to -41%. As of today we can now say -30% to -47% pull back range is historically sufficient behavior to suggest that a bottom is near.
→ Secondly, we want to see Bitcoin tag it's prior pivot high
Ok so we got both of those 2 core indicators for a bottom. What this suggest is that the bottom is likely very much in. Now let's acknowledge the updated table with the current stats ...again we've been publishing and updating this table along the way since as far back as July of this year. We've added a new column which at the very right titled "TAGGED OLD PIVOT HIGH?" Notice that on the December 17 correction, we got our -31% pullback but we didn't get a revisit of the prior pivot high. That was a warning to us that the a retest of the lows was likely. Table now updated below:
Ok so we just discussed the CORE INDICATORS FOR A BOTTOM but here is our full check list
5 KEY INDICATORS TO CONFIRM THE BOTTOM IS IN
✓ -31% to -47% pullback
✓ Tagged old pivot high
✓ Surging Record extreme volume at the lows
✓ Bullish Crossover on Stochastics & MACD momentum oscillators
✓ Buy Signal flipped green on the BotTrigger Trend Direction Signal
So that right there is a our 5 Key Indicators at discerning when the bottom is is officially in check list. Of the 5 mentioned above we have 3 confirmed as completed with ✓ and 2 that are still to have officiated as designated with our X:
Just because we have 2 x's here doesn't mean the bottom isn't in. In all likely hood, the bottom was already in once we hit that $10,000 level. The last 2 indicators on our check list don't matriculate to a ✓ buy signal until higher prices are confirmed. In other words they are "delayed indicators" that will need more data to confirm that bottom was in.
Anyone who hasn't already been buying in this area, we feel is a confident area to do some buying. This would be the area if you haven't already. We don't mind waiting for higher prices till we officiate a buy alert.
This post is ongoing as this continues to unfold in real-time and we'll announce when the next update is published. Stay tuned....most importantly STAY CALM. This too shall pass. Just like they always have.
Bitcoin vs the CME & CBOE Options Trading | Oil Poised to Climb Higher
ORIGINAL POST - December 11, 2017
Beyond an epic display of power, Bitcoin exceeded our 10k target before end of year by 2x hitting a high of $19,697 at the end of last week, Thursday. We discussed this in our last post titled "Bitcoin Strong Like Rocket..." explaining what were some of the variable tailwinds causing that most recent surge. Those factors are still very much part of everything that's likely to continue pushing Bitcoin higher. Will we have pullbacks and correctional periods? Most certainly. This December pullback now marks the 6th Pullback on Bitcoin since the beginning of the year, ranging from -30% to -41%. We'll always keep this table in our study as a reference & testament to what inevitably has been the outcome after every correction.....so despite gut wrenching -40% corrections, getting cut almost in half...Bitcoin has triumphed every single time and eclipsed to all time new highs.
Now notice that we're on pullback # 6 and this correction may still very much be still in progress. In other words, we could see a retest of the highs, fall short on momentum & price, followed by a deeper low. In our last analysis of Bitcoin's November correction, we had evidence to suggest that Bitcoin would tag the $5500 area...that indeed happened. However, we also made a case for why the pullback was likely to go deeper into the red before bottoming out...that did NOT happen. Bitcoin hit our 1st target of $5500 and authoritatively said ADIOS! and took off higher new all time highs. Point is, do not underestimate the community of buyers behind Bitcoin. That community is only growing stronger in numbers, capital, & interest. With a mathematically fixed supply of only 21 million Bitcoin that will ever be minted and with only 16 million + currently in circulation....keep remembering that there simply isn't enough Bitcoin that can be mined fast enough to fulfill demand. As interest & capital inflows grow into the crypto space...both the crypto market cap & Bitcoin itself has only upside growth from here. And with the CME introducing Bitcoin trading options (effective today), this only now puts Bitcoin on the radar even more so for big money interests to have exposure to this asset class for their clients. Do you really think they're going to be on the shit end of the stick and risk not having Bitcoin exposure for thier client's portfolio? Not a chance. It's going to be big money interest, institutions, & hedge fund capital that are already getting involved.
But let's discuss this recent Bitcoin pullback & acknowledge some downside targets that are still possible even after all the hoopla. Daily Chart:
After hitting that high target, we saw Bitcoin sell off with a -31% correction in less than 2 days. That was very much what we call a Blow Off Top or Exhaustion Top. Take a look at this hourly chart and you can see the exhaustion run.
Now, this doesn't necessarily mean that Bitcoin has topped. It's likely just a near-term indicator to suggest that momentum has subsided and is gathering steam for another retest of the highs. So that's what we'll be watching for. How it deals with a retest of the $20k level is what's important. Notice that as of right now, Bitcoin is building a small little bull flag here in this mid $16500 area. A breakout above the bull flag has a measured move target of around $17500 vs a breakdown of this pattern would suggest a pullback near the $15,750 area. Take a look at the zoomed in view on this pattern:
These patterns are inherently bullish and so the bias is towards the upside. Until proven otherwise, the benefit of the doubt continues to go to the buyers on Bitcoin. So let's not fight that trend.
I've lost track of the number of bitcoin bash articles out there today. It’s easy to find things to read about bitcoin plunging, crashing, heading to zero, or whatever. If you only listen to the noise, you might miss the fact that bitcoin just had the best weekly performance of any asset in the history of mankind. Where are those headlines? Rallying $5,000 in one week is what would need to happen if bitcoin were to reach its lofty price targets. It’s safe to say bitcoin is tracking ahead of schedule of what we anticipate will be Bitcoin $70,000 in 2018. Remember, if Bitcoin is really an asset class that has the ability to head to $1 million per coin in the next 5 years, that means it's going to have to get it's head up in quick order. I'm inviting all of you to really stretch your imagination of what's possible. I've said this before, and I'll say it again...I acknowledge that to most any reader who is unfamiliar with the crypto space and the inherent technology of blockchain innovation, saying that Bitcoin can be worth $ 1million + is something that sounds like an asinine cheerleader. We are not Bitcoin cheerleaders. We are objectively in synch with the innovation and technological breakthrough that Bitcoin & the whole infrastructural new economy that blockchain technology is inspiring. There are over 1400+ cryptocurrencies on www.Coinmarketcap.com now growing at a total crypto market cap nearing 550 Billion in capital. I remember when this space was just 50 billion in market cap. Right at the onset of every revolutionary innovation comes with it the haters, trolls and negative talking heads in the media. This is far from my first rodeo: from the .com crash, to the iPod & iPhone boom, to the blackberry, to the financial crisis, Airbnb, Uber, Netflix, FB, Google, nearly all of these were forms of Boom &/or Bust cycles. And the media loves to negatively rail on innovations....largely because it's the most sellable content. Humans just love to fester on the worst and so click/watch/fish for negative commentary....so just acknowledge the talking heads industry is a very profitable one that will never go away. Now certainly there are legitimate discussions around issues that merit negative criticism, we are not naive in distinguishing this.
This phenomenon of scrutiny and negativity in spite of positive price action reminds me of all the negativity that surrounded Apple in its early days. For a number of years the media despised Apple; any sliver of bad news was blown out of proportion to create fear mongering news flow. Wall Street obsessed over margins, release dates, antenna gate, Steve Jobs health, closed system vs. open, etc… It’s funny, now that Apple’s hyper growth days are behind it, nobody hates Apple anymore. Why does this happen? Perhaps it’s human nature to despise and question new innovation. I’m the exact opposite. Innovation of the status quo is how we grow as a society. I see blockchain as a superior highway for modern day commerce. It’s much better than archaic reliance of fiat currency being sent over the unsecured Internet. Bitcoin is +$5,000 on the week. No more needs to be said.
The industry will take time to get up and running after CBOE launches bitcoin futures today. We're investigating which brokerages are ready to accept trades. TD Ameritrade is already showing bitcoin futures available.…over time they all will. Bitcoin needs to settle into sustainable volumes before many of the brokers will service it. We feel no urgency to jump in this week, this is a long term play. We'll be publishing an official report on how & what our Bitcoin Call Option Strategy will be once we get a wrangle on the various options that are all coming out. And then model a plan accordingly to the landscape of options. When we do enter calls or puts, it will happen gradually. We feel good about all the BotTrigger analysis that’s been done over the last few months to prepare us for the new frontier of blockchain investment. This one isn’t going away anytime soon.
In the broad market, many are worried about the Nasdaq’s ‘sell on the news’ response to tax reform. Also of concern is Trump’s decision to recognize Jerusalem as Israel’s capital; there’s now increased risk of conflict in the Middle East. Should we be worried? The answer is no. After briefly spiking to an intraday high of $17 last Friday, $UVXY has dropped all the way to $12 today. $UVXY is the predominate volatility index that measures fear & complacency in the market. In this very strong bull market, the fear index keeps declining as investors continue to throw risk out the window and confidence in the markets continues to improve. Low volatility remains the trend. Let the trend be your friend. We’re likely on track to see UVXY drop near $6 by the end of January. We've been waiting to buy $UVXY puts to play the trend of low volatility, but we haven't gotten a spike up for us to buy those puts at a discount. So we're still holding off on our purchase as of now. Take a look at how this downtrend continues to transpire. Owning those $UVXY option puts is the play to capitalize on this downtrend:
Mnuchin remains very much in control of the Treasury trading desk.
If volatility does unexpectedly spike, we’re hopeful that $USO (Oil fund) will capture the increase due to conflict in the Middle East. $USO is up about slightly today, despite Trump’s decision regarding Jerusalem. There’s an important report floating around that suggests Saudi Arabia and Egypt both gave Trump the green light to recognize Jerusalem. Public reactions and condemnations from Saudi and Egypt are not genuine. This makes sense. We doubt Trump/Kushner/Mnuchin would have moved forward without the blessing of their allies. This means the Middle East is now a powder keg like never before. Interestingly enough, Jeff Gundlach in his recent market commentary mentioned that it’s time to own commodities at this stage of the growth cycle. Oil peaked in the late 1990’s just before the bursting of the dot com bubble and then peaked again in 2007 just before the financial crisis hit in 2008. Gundlach said, ‘The fascinating thing about where we are today is that the [commodity trend] line is no longer moving down relative to stocks as it has since 2008. So it’s not a value trap. [Commodities have] actually bottomed out and are no longer under-performing and … are at the level where historically they’ve been a good buy. If you’ve ever thought about buying commodities, … you should buy them now, because commodities look to be, on a historical basis, in a very interesting kind of price point.’ Judging from the current climate in the Middle East, it’s likely we’ll be able to add USO exposure on a rise above $11.75 in the near future. We would not be surprised to see oil rally significantly in 2018.