Bitcoin’s Rally to $90K+ Took a Detour but Appears Back on Track

A month ago, see here, I showed the Bullish Elliott Waves (EWP) option for Bitcoin (BTC) looking for a rally to inittally low- to mid-$40Ks assuming a -what is called in EWP terms- 1,2,1,2 setup. Instead, it appears most likely, BTC formed an irregular flat (red) wave-ii (see Figure 1 below), completed wave-iii and is now in red (intermediate) wave-iv. Thus, IMHO, BTC took a detour but is still on track for $90K+ as long as can hold above $35495 on the current pullback. Allow me to explain.

Figure 1. Bitcoin daily chart with detailed EWP count and technical indicators.

$30K is ultimate line in the sand

What I originally viewed as a wave-i, ii, 1, 2, setup morphed IMHO into a wave-i, ii, a, b setup and the recent low on July 20th at $29320 was (green) minor wave-c of (red) wave-ii. Since that low, BTC rallied for ten consecutive days: wave-iii, which also subdivided nicely into five smaller (green) minor waves. A feat not seen since correction started mid-April. Besides, as you can see in Figure 1, BTC also rallied back above all its moving averages (10d, 20d, 50d) except the 200d SMA.

Moreover, the crypto currency was also able to rally back above its (green-red colored) Ichimoku Cloud. Lastly, the daily RSI5 and Money Flow Indicator (MFI14) have not been this overbought since Mid-April either. The latter is rather important as it shows BTC is experiencing genuine buying. All in all, since July 20th BTC has accomplished many good things, not seen since the entirty of the correction that started mid-April.

Because one can always find a bullish or bearish data point to support one’s biased view, it is the weight of the evidence approach that allows for a much more objective interpretation. In this case it is rather obvious the weight of the evidence is predominantly bullish. All BTC now needs to do is reclaim its 200d SMA. I have outlined in Figure 1 the preferred illustrative-only path BTC now should follow based on the preferred EWP count shown, as well as the technical indicators, i.e., the RSI and MFI are often max overbought at 3rd waves because those are the strongest waves, just as BTC experienced recently.

Bottom line: If BTC can hold above $35495 going forward (the red wave-i high made on June 24) and rally towards its 200d SMA from around current levels, then the chart shows a very good setup for five waves higher since the June 22nd low. That would then greatly increase the odds for a pullback, wave-2, before a strong rally to ideally new all time highs; wave-3. Ultimately, the triple bottoms around $30K made over the past three months must hold to prevent a bigger slide to potentially $20K. Based on the weight of the evidence I now prefer to look higher and maintain the Bullish perspective I already had a month ago.

For a look at all of today’s economic events, check out our economic calendar.

S&P 500 Reached the SPX 4300+ Target Zone. What’s Next?

One and two weeks ago, see here, by applying the Elliott Wave Principle (EWP), I was looking for the S&P500 (SPX) “wave-iii targets ideally SPX4289-4442, which fits very well with the SPX4315-4375 target zone found using the hourly chart (see my previous post).

On Wednesday, July 7, the index reached SPX4362, and yesterday it fell a little out of bed to SPX4289. The top reading is well within the ideal target zone and only 0.28% off the mark: well within the margins of error. Thus, is the wave-iii top in? And will the index now fall back to around SPX3940-4040 for a wave-iv, before wave-v of wave-3 rallies the index to SPX4442-4682? See Figure 1 below.

Figure 1. S&P500 daily chart with detailed EWP count and technical indicators

A break below the mid-June “FED low” is needed to confirm the more significant correction.

Since the early May low, there are now enough EWP moves in place to suggest the rally is complete. However, markets can always tag on another wave, so we have to remain vigilant and wait for a break below the mid-June “FED induced, we-will-raise-interest rates-sooner-than-we-say” drop to SPX4164 to know for sure. Using the simple moving averages (SMAs), we can also devise a “traffic light”: as long as the price is above the 10d, 20d, 50d, it is “go.”

As soon as the index closes below the 10d SMA, the light will turn orange: downside risk increases. And a daily close below the rising 50d SMA (now at SPX4217) will tell us the “traffic light” turned red, which means stop. In this manner, we have an objective way of knowing what to expect most likely next and the odds of a continued rally.

Figure 2. S&P500 hourly chart with detailed EWP count and technical indicators

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Lastly, the hourly chart above shows the index can have completed already five (green) waves up off the March low following an almost picture perfect Fibonacci-based EWP pattern, with wave-3 to the 1.382x wave-1 extension, wave-4 back to the 0.764x Fib-extension, and now wave-5 only 0.28% off the mark. When five waves are complete, always expect -at a minimum- three waves in the opposite direction. Thus, caution to the long side is advisable for swing- and short-term traders. Longer-term, this Bull has, IMHO still plenty of upside potential. It will require a break below the recent March SPX3723 low to tell us a multi-year correction is at hand.

For a look at all of today’s economic events, check out our economic calendar.

Ethereum: Potential Set Up for the Run to $9000 in Place

The ideal downside target zone was $1349-1503. ETH bottomed on June 26 at $1717 and has since staged an over 35% rally. Because the ideal downside target was not reached, the question is, “is the low in?”. In one of my recent daily Crypto Trading Webcasts, I suggested my Premium Members could initiate long positions on a close back above the 200-day Simple Moving Average (SMA). Stops could be placed on a daily close below it or at the June 26 low, for example. Straightforward, effective, and already highly profitable trading strategies.

Figure 1. ETH daily chart with EWP count and technical indicators.

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Short-term rallies look impulsive

Since the early June (black) major b-wave high there are five red (intermediate) waves down. Intermediate wave-v should ideally have bottomed around $1349-1503, but all we got was $1717. Thus wave-v could have been a failed 5th wave. Since ETH should still be in a robust long-term bull market, a failed fifth wave of a corrective C-wave down is not unexpected: buyers stepped in earlier. ETH then staged a five-day rally, which is a first since the early May all-time high, and it propelled itself back above the 10d, 20d SMA 200-d. Also, this is an encouraging sign because the last time we had such a setup at that aforementioned b-wave high. Moreover, the daily RSI5, MACD, and Money Flow Indicator (MFI) are making new highs since the >60% correction started. The only negative thus far for ETH is that it is still below its Ichimoku Cloud and 50d SMA.

However, the weight of the evidence is shifting in favor of the Bulls. Assuming the June 26 low was (blue) primary wave-IV (can also be labeled as major-4, depending on if one marks the 2017 peak as a Cycle wave or a Primary wave; respectively), ETH has an i, ii, 1, 2 EWP-setup in place. In layman terms, “it is making higher highs and higher lows.” That is Bullish. Assuming this EWP count is correct, then the internals of red wave-iii coincide well with the ideal green wave-3, 4, 5 framework. Assuming this ideal framework also applies to the internals of (black) major wave-1, we should expect it to top out around $3170-3030. This high is then only the 1st wave of the large Primary-V to ideally around $9000, and we know an impulse has five waves; we can expect a (black) major wave-2, 3, 4, and 5. The former two are shown, with the ideal wave-2 target zone shown as well. Wave-3 should then catapult to at least $4500 but will most likely extend to around $5900 instead.

Bottom line: ETH now has enough waves to the downside in place to consider the correction complete, and the postponed run to $9000+ could now be underway. The daily chart is improving from a technical analyses perspective, and as long as the Bulls can hold ETH’s price above the June 26 low of $1717, then there’s a Bullish EWP setup to propel ETH to initially the low $3000s. Warning signs of this setup not working are at first a move below this Monday’s low ($2160) followed by a move below the July 2nd low ($2017).

Has The Rally to $90K+ Started for Bitcoin?

Almost a month ago, see here, I was looking for Bitcoin (BTC) to bottom around $26K before the next rally would start. On June 22, BTC bottomed at $29247 and is now essentially stuck between $30830-34450. In sideways markets, the Elliott Waves (EWP) has some difficulties in determining the next most likely move as there are many possible options under such circumstances. In Figure 1 below, I am showing the Bullish option. My premium crypto trading members also have access to the possible Bearish path.

Figure 1. Bitcoin daily chart with detailed EWP count and technical indicators.

If last Saturday’s low holds, BTC has a Bullish setup.

Bitcoin fell a bit short of the ideal wave-v target zone of $24077-26750, as shown in my June 8 update, but did make a lower low below the May 19 $29563 (red) intermediate wave-iii low, which therefore technically suffices for a 5th wave. Yes, financial markets and crypto included do not always have to follow the ideal textbook patterns, far from it.

Thus, if BTC can hold last Saturday’s low and rally back above this week’s high from around current levels, then there is an excellent potential Bullish path in front of us. We then know the course is Bullish, but we do not know if BTC will take short-cuts, the scenic route, or follow the GPS instructions, so to say. Here I’ve outlined the ideal path, i.e., GPS instructions, as that is all I can go by for now.

Please note BTC is below its 50-day Simple Moving Average (SMA) and 200d SMA, which are Bearishly stacked (price<50<200). Thus, technically BTC is in a Bear market setup, and the odds of good things happening, i.e., higher prices, are lower than when BTC is above both SMA (price>50>200). See for example, the left side of the chart. Besides, BTC is also below its Ichimoku Cloud, adding weight to the Bearish evidence.

Bottom line: the daily chart of BTC is still bearish as its price is below critically important SMAs and the Ichimoku Cloud, diminishing the odds of higher prices. But, it has a potentially bullish setup in place if it can hold last Saturday’s low and rallies back above this week’s high. If that can happen, then BTC should be on its way to the low- to mid-$50Ks (major wave-1) before a more meaningful pullback starts (major wave-3), from where it can then stage its next significant rally to the $90Ks.

For a look at all of today’s economic events, check out our economic calendar.

S&P 500 Still On Track for SPX 4300+

Last week, see here, I showed how, IMHO, the S&P500 was in an ending diagonal (ED) 5th wave. Please read the Elliott Wave Principle (EWP) to learn what an ED, among many other price patterns, is. Using the hourly chart, I was still looking for SPX4315-4375 after the post-FED meeting dip earlier this month. This week I would like to zoom out and “dissect” the rally since the infamous March 2020 low. See figure 1 below.

Figure 1. S&P500 daily chart with detailed EWP count and technical indicators

The rally since March 2020 is still unfolding and has more room to run.

The beauty of the EWP is that in an impulse move, one knows with certainty after the third wave follows a 4th wave lower and then a final fifth wave higher. From the March 2020 low, I can count five (red i, ii, iii, iv, and v) waves higher into the June 2020 high for a (black) major wave-1. The 2nd low later that month was major wave-2, the August 2020 high the one-degree lower (red) intermediate wave-i of major-3, etc. Based on historical evidence, we know 3rd waves typically reach the 1.382 to 1.618x Fibonacci-extension of the 1st wave, measured from the 2nd waves low.

This is all “textbook,” but the market can do anything. Thus we only have an anticipated road map, which needs to be tracked daily to see if the index makes a detour, short-cut, or takes the scenic route. When the market departs, nobody knows which exact route it will take, but we have a reasonable expectation, i.e. a blueprint.

Major wave-3 should thus ideally target SPX4442-4682, but for now, the index is in (red) intermediate wave-iii of 3, and thus an intermediate wave-iv and v are still to be expected. Wave-iii targets ideally SPX4289-4442, which fits very well with the SPX4315-4375 target zone found using the hourly chart (see my previous post). Wave-iv should then ideally drop back to around SPX3940-4040, but please remember that upside surprises and downside disappoints in Bull markets. Wave-v of wave-3 should rally the index to SPX4442-4682.

Thus, short term, I am still looking for marginally higher prices, followed by a retest of the May lows before the next rally to dazzling new all-time highs starts to complete major-3. After that, I expect a multi-month major wave-4.

For a look at all of today’s economic events, check out our economic calendar.

 

Recent “Sell The S&P500 Signal” Was Only a Brief Dip: SPX4300+ Still Possible

Last week, see here, I shared my S&P500 (SPX) “Buy/Sell” indicator, which had switched to a “Sell the SPX” on June 16. The index dropped another 45p to as low as SPX4166 on Friday, June 18, but has now moved back to new all-time highs. Hence, the sell signal was correct, but my expectation the index would reach “SPX4050+/-50 before the next rally to new ATHs starts” was not entirely accurate as the SPX4166 low was too shallow.

Hence, based on the Elliott Wave Principle (EWP), I view the index as still being able to each SPX4315+/-5 because last week’s “dip” was most likely on a smaller 4th wave (grey wave-iv) of a more significant 5th wave (green wave-5 of red wave-v). See Figure 1 below.

Figure 1. S&P500 hourly chart with detailed EWP count and technical indicators

The rally since the early May low is still unfolding

Over a month ago, see here, I was looking for the index to rally to ideally SPX4315 +/- 5 for what I labeled as (green) minor-5. Back then, I had no idea how that rally would unfold, but with the new ATHs this week, I find it is turning into an ending diagonal (ED) in EWP terms. EDs are typical for 5th waves and are messy: it is all three waves instead of five, with lots of overlap. The rally from mid-May to last week’s high exemplifies this “mess”: the general trend is higher, but there are many back-and-forths daily. Of course, diagonals can always tack on another wave (while remaining diagonals), which is what happened last week as I thought the ED had ended. It sure could have, but the proportions of the smaller (grey) minute waves of the larger (green) minor waves are now with the recent rally much better and allow for the index to ideally reach SPX4315+/-5.

It will take a break below last week’s SPX4166 low from current levels to tell us the trip to SPX4050 has started. On the other hand, the index will need to break out above SPX4375 to suggest something much more Bullish is unfolding. For now, neither is my preferred POV.

For a look at all of today’s economic events, check out our economic calendar.

Ethereum: The Run to $9000 Was Delayed. Get Ready for the Next Try

Three weeks ago, see here, I showed a potential Bullish Elliott Wave Principle (EWP) path for Ethereum (ETH), “if ETH can rally above the $2920 high made last week, without dropping below Sunday’s low first ($2275) and especially not below $1736“.

Well, that rally over $2920 did not happen as the cryptocurrency stalled at $2890 on June 3 and subsequently dropped below $1736 two days ago. Thus the Bullish potential setup was negated. Does this mean the run to $9000 will not happen anymore? No, my work strongly suggests a bottom is much closer now. Let me explain.

Figure 1A below shows the monthly candlestick chart for ETH; as you can see, it has lost over 60% since last month’s all-time high (ATH). In addition, it did a 62% retrace of the rally that started in March last year. If we go back to 2017, we see ETH also lost over 60% of its value during the summer, which was also a 62% retrace. It then staged an almost 1000% rally. Thus, historically the current decline is still nothing out of the ordinary.

Zooming in, the weekly candlestick chart in Figure 1B shows ETH has so far only moved down in three EWP-waves from its ATH into this week’s low: red waves a, b, c. Corrections always move in at least three EWP waves.

Thus, based on the historical evidence and the EWP count, the current decline must still be viewed as a correction in a significant long-term uptrend until proven otherwise.

Figure 1. ETH monthly and weekly charts with EWP count and technical indicators.

Short-term, there is still downside risk, but also even more upside potential longer-term

The devil is always in the details, so allow me to zoom into the daily time frame. See Figure 2 below. It follows ETH should be in red wave-c of black wave-4. C-waves are mostly comprised of five smaller waves. In this case, green 1, 2, 3, 4, and 5. Green wave-3 reached the ideal target zone, and ETH bounced back to the ideal green wave-4 target zone. If all goes to plan, the cryptocurrency should soon do a final green wave-5 lower to the ideal target zone of $1349-1503. That sequence should set up a nice positive divergence on the technical indicators (RSI, MACD, FSTO, MFI) to allow the red-dotted anticipated path to unfold. But, if ETH can rally back above $2250 from current levels, then the odds have increased significantly that wave-5 to $9000 has already started. The next level to watch is then $2650, and ultimately $2920 needs to break.

Figure 2. ETH daily chart with EWP count and technical indicators.

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Bottom line: ETH failed to break above $2920 and instead moved below $1736 since my last update. Thus the cryptocurrency’s run to $9000+ was postponed. Now I am watching for a last more minor wave lower to ideally $1500-1300 before the rally to $9000 should commence. But a break above $2250 will start to give the Bulls an edge. The monthly and weekly charts support the notions the current 60% decline is still “merely” a correction within a larger long-term Bull market.

For a look at all of today’s economic events, check out our economic calendar.

A “Sell The S&P 500” Signal Was Given: Correction Underway

A little over three months ago, see here, I shared my S&P500 (SPX) “Buy/Sell” indicator, which had switched to a “Buy the SPX” on March 10. The index was then trading at SPX3950. Since then, it has gone through several more “buy/sell” signals, as you can see in Figure 1 below.

Back then, I was -based on the Elliott Wave Principle’s notion in that a 5th wave often equals the length of the 1st wave- looking for SPX4065-4185. The upper end was reached on April 16 when the index closed at SPX4185. A 6.0% gain in a month. Eventually, the index topped out June 14 at SPX4255 at the close, which is only 1.7% above my ideal target zone and thus within the +/- 2.5% margin of error I allow myself. Currently, the index is trading at SPX4200. Hence, another reliable forecast my premium major market members and you could trust and bank on.

Figure 1. S&P500 daily chart (blue) with overlayed Buy/Sell Indicator.

Sell signal supports the notion of lower prices ahead before the next rally

A month ago, I was looking for the index to reach ideally SPX4315 +/- 5. The S&P500 opened at SPX4257 on June 15. I was off by 1.2%, which is also within the acceptable margin of error as no one can forecast the exact highs and lows the markets will eventually make.

Thus, based on my previous two articles, I can say “mission accomplished.” The EWP count since the March low is complete (five waves up), while the forecasted upside targets were reached and slightly exceeded. Besides, with a “Sell the SPX” signal, I now expect a deeper correction lasting into the last two weeks of June. The exact date is unknown but should fall around June 23 +/- a few trading days. I continue to expect SPX4050+/-50 before the next rally to new ATHs starts. It should take the index to around SPX4500+/-100 by late July to early August. Once achieved, I expect a multi-month deep correction.

For a look at all of today’s economic events, check out our economic calendar.

Goldminers, GDX, Should Bottom Soon and Then Rally to $60

Using the Elliott Wave Principle (EWP) I will analyze the VanEcks Vectors Gold Miners Exchange Traded Fund (ETF, GDX) since its significant bottom in January 2016 and determine where it will most likely be headed next. See Figure 1A below. That bottom was blue Primary Wave-C. GDX then rallied into the summer of 2017 (black major wave-a). It took one year to correct as by the summer of 2018, major wave-b completed.

The ETF then rallied once again into early 2020 (major wave-c of Primary-A) and then crashed into the infamous March 2020 low (Primary B). The gold miners then staged a three-wave rally into -once again- the summer of 2020 (major wave-a). Yet again corrected for almost a year into the recent march low (major wave-b), and GDX has now staged a five-wave rally into its early May high. GDX is currently correcting and should ideally bottom around $35.30-36.50, but possibly as low as $33.30-34.30 before staging its next multi-month rally.

Figure 1. GDX weekly and daily charts with detailed EWP count and technical indicators.

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The Trend Has Changed From Down to Up

GDX held necessary support at $29-30, broke out of the downtrend channel it was in mid-April, retested that breakout late-April, and then also rallied above the critical 200-day Simple Moving Average (SMA) early May. Thus the trend changed from down to up. Besides, the Gold Miners are also back above the 20-week and 50-week SMA. The rally since the early-March low counts best as a motive wave: leading diagonal (red) intermediate wave-i, and the recent price action to the downside should thus be wave-ii.

We know from the EWP that after the 2nd wave comes the third wave, which makes sense from the bigger picture as GDX should now be in major-c of Primary C of Cycle-A and comprises five smaller waves: red iii, iv, and v. Strong support is at $34.40 to $33.30. As long as GDX can hold above it, the odds are excellent wave-iii can kick in to ideally the low to mid-50s and wave-v of -c of -C of -A to ideally around $60. Hence, the current correction should be viewed as a buying opportunity once the ideal target zones are reached, with a prudent stop level as mentioned above.

For a look at all of today’s economic events, check out our economic calendar.

Bitcoin Should Bottom at Around $26K Before the Next Rally Starts

Using the Elliott Waves (EWP), see Figure 1 below, I view Bitcoin (BTC) as completing the green (minor) wave-5 of red (intermediate) wave-c of black (major) wave-4. Since Elliott waves are fractal, BTC is currently wrapping up even smaller waves (grey minute waves-iii, iv, and v), with the ideal Fibonacci-based target zone shown for each, respectively.

Figure 1. Bitcoin daily chart with detailed EWP count and technical indicators.

Bitcoin should bottom soon and then rally to at least $50K, ideally new all-time highs.

As you can see, BTC has been chopping around since its mid-May low, in what is called a triangle in EWP terms. Once the triangle completes, which from a technical analyses perspective is called a Bear flag, the price will break down and travel south about equal in length to the triangle’s width: small red dotted down arrow.

That then targets right into the ideal (grey) minute-v target zone, as well as the perfect (green) minor wave-5 target zone: the 176.4 to 200.0% Fibonacci-extension of minor wave-1, measured from the top of wave-2. Note that the mid-May low was minor-3 and bottomed almost precisely at the 161.8% Fib-extension of wave-1. Then green wave-4 initially reached the 100% extension. Picture perfect so far, and thus I must anticipate a picture perfect wave-5 bottom until proven otherwise.

The technical indicators (RSI5, MACD, MFI) set up potential positive divergence (dotted green arrows), which means the currency is moving lower but on less strength, momentum, and money is moving back into Bitcoin. The latter is very important because liquidity drives markets.

When the five waves down complete, a larger irregular flat wave-4 should end, and I anticipate the next multi-month Bull run to $100K +/- 10K to start. Since the financial markets are all about probabilities of possibilities, the alternative (labeled as “alt: III, alt: a, alt: b”) is BTC will “only” rally -in three overlapping waves- to around $50K+/-5K for a bounce and then head south again. Why? Because after five waves down, one must at a minimum expect at least three waves back up.

Bottom line: BTC is IMHO fast approaching a tradeable bottom from where one can expect at least an almost doubling in price, preferably a quadrupling. As usual, I will continue to monitor the price action as we move higher to see which two it will become. I prefer the latter but will gladly also take the former. A doubling is nothing to sniff at.

For a look at all of today’s economic events, check out our economic calendar.

Gold’s Path to the Mid-2000s

Over the past few weeks, I have shared my views on GOLD’s potential path for attaining as high as $2100-2300. I showed the detailed daily charts in those articles, but today I would like to zoom out and assess the big picture Elliott Wave Principle (EWP) count using the monthly candlestick charts. See Figure 1 below.

GOLD topped in 2011 after an almost 700% (!) run since its early-2000s low. Thus, anybody who thinks GOLD is boring to trade and invest may wish to change that notion. These are cryptocurrency-like gains. After the 2011 top, the precious metal went into an almost five-year-long Bear market. It lost around 50% of its value when it finally bottomed in 2015.

Now GOLD is back at it and made a new all-time high summer of 2020, after which it went through an 8-months long correction. As I showed in my previous update, see here, GOLD should now be in a new Bull run targeting possibly as high as $2300+. Allow me to explain below.

Figure 1. GOLD monthly charts with detailed EWP count and technical indicators.

Dissecting a multi-month impulsive rally to ideally $2300.

Since its 2018 low, GOLD rallied in five larger waves (black major 1, 2, 3, 4, 5) to the 2020 ATH: blue primary III. It then declined in three waves (black major waves a, b, c) to complete blue Primary-IV. From the EWP, we know with certainty that in an impulse move, after the third wave comes a fourth and a fifth wave. So far, so good as wave-III and IV have most likely been completed. Now, wave-V should be underway (blue arrow) and subdivide into five smaller waves as shown in Figure 1; black dotted arrows.

Assuming standard Fibonacci-based wave-extensions and retraces, wave-1 should soon complete, wave-2 drop back to about $1800 before waves 3, 4, 5 take hold and bring the price to ideally ~$2300, $2100, and $2300+, respectively. Once Primary-V completes, another multi-year bear market should start (Red arrow). Given that there was no negative divergence on any of the technical indicators at the July 2020 ATH, strongly suggests GOLD needs to make new ATHs.

Bottom line. For as long as GOLD can stay above this year’s lows, it has outstanding potential to establish an impulsive wave higher to ideally $2300, possibly $2400+.

For a look at all of today’s economic events, check out our economic calendar.

Ethereum: Has the Run to $9000 Started?!

Almost two weeks ago, see here, I showed Ethereum (ETH), was according to the Elliott Wave Principle (EWP) in “[red] wave-v of [black] major wave-c of blue Primary-IV,” which “should ideally target between $1445-1850.” ETH bottomed on May 23rd at $1736. Right smack in the middle of my ideal (black) target zone. See Figure 1 below. It has since rallied and is now trading at $2750s—a 58% rise.

Figure 1. ETH daily EWP count and technical indicators.

Buy Ethereum with Binance

Long-term upside potential outweighs short-term downside risk

Last week I showed my Premium Crypto Trading Members ETH should ideally bottom around $2010-2325, and on Sunday, May 30th, it bottomed at $2275. Again, right smack in the middle of my ideal (orange) target zone. See Figure 1 above.

With two out of two forecasts correct, the EWP is once again an accurate and reliable forecasting tool. But then I always become wary as the winning streak always ends at some point. I.e., most analysts -including me- are right about 65-75% of the time.

However, if ETH can rally above the $2920 high made last week, without dropping below Sunday’s low first ($2275) and especially not below $1736, then it has great potential for the ideal impulse wave count as shown in Figure 1, and Blue Primary wave-V should then ideally target $8600-9200.

Primary-v will as shown, subdivide into five smaller (black) major waves. I have annotated where each of those waves should ideally top and bottom. Now we will let the market dictate if it wants to follow this typical Fibonacci-based impulse pattern or potentially go beyond those, i.e., extend. Wave-extensions can never be forecasted, only anticipated.

Bottom line: Two weeks ago, I correctly concluded, based on the EWP, “the downside risk from current levels is still almost 50% ($2700 vs. $1850-1445).” But also mentioned, “upside potential from current levels is now most likely 500+%.” ETH bottomed at $1736 and is up over 50% since. Suppose it can stay above critical downside levels, i.e., the lows made over the last two weeks and breakout above $2920 going forward. In that case, it has the potential to move to ideally $4400-4600 for wave-1 of wave-V, drop to $2800-3400 for wave-2 of wave-V and then rally to as high as $9200 for wave-5 of wave-V. From there, a multi-month correction will start.

For a look at all of today’s economic events, check out our economic calendar.

Ethereum: The Dreaded 50-70% Correction Came, But Is It Over?

In my previous update on Ethereum (ETH), I showed ETH was in Elliott Wave Principle (EWP) terms in an extended 5th wave. However, “It is hard to know where precisely an extended 5th wave will top, but a rally for another month to $5-6K cannot be excluded. ETH will need to see at least four consecutive down days or drop below $2644, with a severe warning on a close below $3185, to tell us the dreaded 50-70% haircut is underway. And make no mistake, it will happen as nothing goes up forever.”

Back then, ETH was trading at $4170. It topped two days later, May 12, at $4380 and plunged to $1948 a week later. A 55% drop in one week. Indeed, the “dreaded 50-70% haircut” I warned would happen had arrived and faster than you can say “sell.” However, I had given my Premium Crypto Trading Members ample warning already the week prior about the small upside potential vs. the significant downside risk. And what price levels to watch for to determine the odds of continued higher prices would diminish more and more: see the horizontal dotted colored lines in Figure 1 below, as well as my Tweet here.

Figure 1. ETH daily EWP count and technical indicators.

Long-term upside potential and short-term downside risk

When an extended 5th wave completes, the subsequent correction will, in a crash-like manner, bring the price back to about where the extended 5th wave started. Why? Because such an extended wave has gone too far too fast, sentiment is too Bullish, and indicators too overbought to allow for any more upside. A reset is necessary: when everybody has bought, all that is left is selling. And selling folks did!

Back to ETH. In this case, the extended 5th wave started, IMHO, from the late February low at $1280 (black major wave-4). Thus, please do not be surprised ETH can drop that low. Namely, the shorter-term EWP count shows ETH is likely wrapping up a five-wave sequence (black major wave-c) from the major b-wave high at $4176. Red intermediate wave-iii ideally completed yesterday. Intermediate wave-iv is now most likely underway, and wave-v of major wave-c of blue Primary-IV should ideally target between $1445-1850. Based on the 2013 and 2017 analogies (not shown here), I expect a triple-digit percentage rally for Primary-V. However, if ETH can close back above $3170 without moving to the mentioned lower target zone first, then I strongly consider the correction already as complete.

Bottom line: The dreaded “make no mistake, it will happen as nothing goes up forever” 50-70% haircut happened. As usual, forewarned is forearmed. However, with the recent plunge, the long-term risk-reward has now significantly shifted back towards the reward, while short-term there is still a considerable risk. In numbers, the downside risk from current levels is still almost 50% ($2700 vs. $1850-1445). But upside potential from current levels is now most likely 500+%. Thus, if you know your trading time frame well, this week should be seen as a gift, not a punishment.

For a look at all of today’s economic events, check out our economic calendar.

Gold’s New Rally to All-time Highs Continues

Last week, see here, when GOLD continues contract was trading at $1836, I was looking for a “top shorter-term around $1860, drop to $1745-90 before rallying to $2045-90.”

Today GOLD is trading at $1868. Thus, so far, so good. Ideally, the precious metal should top soon, fall back to around $1800-1765 support before rallying to ideally $2100-2200. See Figure 1A below. However, the late March low rally is a bit ambiguous upon further and more detailed inspection and could see GOLD rally as high as $1965 before seeing the more significant wave-2/b decline. See Figure 1B below.

Figure 1. GOLD daily charts with detailed EWP count and technical indicators.

Chart

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Drop now or later. How to know the difference?

If the Gold Bugs can hold the precious metal’s price above last week’s low (green minor wave-4 in Figure 1A and grey minute wave-iv in Figure 1B) at $1808 on any pullback, then the Elliott Wave Principle (EWP) option shown in Figure 1B becomes operable. That pullback would then be green minor-4 of red intermediate-iii of black major-1/a. If the price closes below it, then GOLD is making a lower low, will close below its rising 10-day and 20-day Simple Moving Averages (SMAs), and the technical indicators -such as the MACD, FSTO- will most likely switch from the current “buy” to “sell” sell.

Bottom line. With price now having broken out from the (grey) downtrend channel it has been in since the complex correction started late July last year and moving back above its SMAs, including the 200-day SMA (see green arrows in legend), it is apparent a new uptrend has started. But as described above, it is now a matter of the finer details on how this uptrend will unfold. I prefer the option shown in Figure 1A, but beggars cannot be choosers, and as always, I will let the market tell me which path it will choose. A break and close below $1808 from current levels will present an excellent low-risk buying opportunity, while if it holds, one can ride GOLD to at least the mid-1900s.

For a look at all of today’s economic events, check out our economic calendar.

S&P500 Last Chance for 4300s

Two days after that update, the index spiked to the (green) 138.20% Fibonacci-extension at SPX4214 (The index got to as high as SPX4219), and then dropped to SPX4128 on May 4, which is close to the (green) 100% Fib-extension at SPX4114. That sufficed for a classic Fib-based (green) wave-3, 4 structure. However, it then rallied to only SPX4238 two days ago and then dropped to as low as SPX4057 today. See Figure 1 below.

Figure 1. S&P500 hourly chart, the focus in this update is on the green and grey inserts

SPX4052 needs to hold to allow for SPX4315 +/- 5 to be reached.

The above-described path was less than ideal as the rally to SPX4238 fell short of the ideal SPX4375 target. This presents a conundrum. Was SPX4219 (green) minor-3, or was it SPX4238? Alternatively, did (green) minor-5 already top? The latter would be relatively short of its ideal target (3%), but nothing states the market must always follow an ideal textbook, patterns, far from it. The market owes us nothing. All a 5th wave does is make a higher high, and so far, it appears it did.

Now, if SPX4238 was indeed only minor-3, then minor-4 is now underway and likely complete as it must hold the 76.40% extension at SPX4052. This level is lower than the previously mentioned SPX4095 level because, in this case, minor-3 did not reach its usual potential (the 161.80% Fib-extension at SPX4276. Today the index dropped to as low as SPX4057 and thus essentially stopped right where it had to. This lower support level also means the S&P500 should “only” reach the 176.40% Fib-extension at SPX4315+/-5 for a typical “wave-5 = wave-1 “relationship.

Bottom line: With the lower than anticipated top and the index dropping to must-hold support, we will know soon enough the market’s intentions: below SPX4052 and the red arrow for (black) major wave-4 becomes operable, targeting SPX3725-3850 ideally. Or, back above SPX4215 targets, ideally, SPX4315+/-5 (green arrow).

Gold Setting up for a Rally to New All-Time Highs?

Previously I was looking for GOLD to rally to $1820+/20 and then drop back to “ideally $1680-1620 before staging a multi-month rally to new all-time highs. Conversely, this rally has already started, but the market has not given us the all-clear signal that is indeed the case.” The $1820+/-20 zone was reached, but the bears were unable to push GOLD’s continuous contract prices below $1745, which was required to usher in the move to $1680-1620, and instead, the Bulls took the ball and ran with it. Thus, the rally to new all-time highs -although originally stated as lower odds- has IMHO already started.

Figure 1. GOLD daily chart with detailed EWP count and technical indicators.

One last drop before the next rally commences.

As said in my previous article, see here, “The double bottom [in March] does present a bit of a twist. It can mean the entire correction has already been completed and blue wave-V to the low- to mid-2000s is already underway (exemplified by the blue dotted line).” Given the strength of the current rally, albeit it has not broken back above the 200-day Simple Moving Average (SMA) and the upper grey trendline of the downtrend channel price has been in since the July 2020 top, as well as the internal -impulse, looking- wave structure I view the double bottom in late March as the completion of the eight months’ long correction.

Ideally, but not necessarily, GOLD should soon rally marginally higher to around $1860 for a last, smaller wave-degree, 5th wave to complete (back) major-1/a. Then we should see a multi-week retrace back to ideally $1745-1790 for the major wave-2/b, before major wave-3/c takes hold and rallies price to ideally $2045-2090 depending on where wave-1/a tops and wave-2/b bottoms: see dotted black arrows in Figure 1 for the anticipated path.

Bottom line: The Gold Bugs were careful and did not allow GOLD one last time to ideally $1680-1620 before staging a multi-month rally to new all-time highs. Instead, they held the 50-d SMA and rallied price to new uptrend highs. This price action strongly suggests a new, more significant impulse move (see here) has started that should top shorter-term around $1860, drop to $1745-90 before rallying to $2045-90. As long as the Bulls can hold $1725 on any pullback, they are in control.

For a look at all of today’s economic events, check out our economic calendar.

Ethereum: How High Can It Fly?

While up to recently, Bitcoin (BTC) and ETH would pretty much move in unison, the former topped already on April 14 and is currently trading a the same price level it reached February 21. Meanwhile, ETH is 71% higher than on April 14 and gained almost 115% (!) since that same February date. Thus the two largest cryptocurrencies by market cap are heavily diverging. After running in parallel for many years, such divergence does not make my life any easier as an analyst. It means

  1. going back to the drawing board as all I can do is “anticipate, monitor, and adjust accordingly.”
  2. the more significant correction (50-70%) I anticipated in ETH has been postponed.

In my previous update, see here, I showed the monthly chart and how extremely overbought ETH had become on that time frame. But “overbought can always become more overbought” (the monthly RSI5 went from 98.7 then to 99.3 now), and, indeed, “in Bull markets upside surprises while downside disappoints.” I did not show the daily chart for ETH back then, but I would like to share it today.

Figure 1. ETH daily EWP count and technical indicators.

$2860 reached and exceeded by 45%, what gives?

Figure 1 above shows how I originally derived the $2700-2855 target zone. It was based on standard Fibonacci-extensions for a 5th wave (1.764 to 2.000x the length of the 1st wave, measured from the 2nd wave’s low). Given ETH topped right in the ideal Fib-based 3rd wave target zone/box mid-April, (red wave-iii), then bottom also right in the 4th wave Fib-based target zone/box a few days (red wave-iv) later, strongly and logically suggested the 5th wave would the top in the ideal Fib-based target zone too.

But no such luck, and ETH decided to present a very extended 5th wave. Thus, my work and method had it right two out of three times, which is about as good as it gets for us analysts. One can not get it right all the time.

Note, such extended waves can never be known beforehand. I only know they can happen, i.e., anticipate them, monitor for them, and if they occur, adjust according, which is what I am doing now. When 5th waves extend, it is even harder to forecast where they will top as then the sky is the limit. Will it end at the 3.0x wave-1 extension or the 4.0x or 5.0x extension? It is unknown. Accepting one’s analytical method has limitations provides the necessary humility and humbleness to remain objective.

Currently, this 5th wave is in an extension of an extension and can rally for another month to reach as high as $5-6K. It should now be wrapping up (orange) microwaves 3, 4, 5, to completed (grey) minute wave-v of (green) minor-3, followed by a minor-4 and -5 waves to ultimately achieve the important 3rd wave top I have been anticipating for some time.

Bottom line: The anticipated rally to the ideal target zone of $2700-2855 was completed in late April, but ETH presented us with a very extended 5th wave as it has so far added another 50% since. Meanwhile, BTC has done nothing. It is hard to know where precisely an extended 5th wave will top, but a rally for another month to $5-6K cannot be excluded. ETH will need to see at least four consecutive down days or drop below $2644, with a severe warning on a close below $3185, to tell us the dreaded 50-70% haircut is underway. And make no mistake, it will happen as nothing goes up forever.

For a look at all of today’s economic events, check out our economic calendar.

Bounce in Gold Complete: $1620s Next?

Two weeks later, in the follow-up update, see here, I confirmed this thesis and narrowed the bounce target to $1820+/-20. Gold rallied to as high as $1798 on April 21, 22, and has since started to decline. See Figure 1 below. Gold June 21 contracts are currently trading at $1767/ounce (not shown in Figure 1).

Figure 1. GOLD daily chart with detailed EWP count and technical indicators.

Did the bounce complete, and is the next move lower underway?

The thick dotted orange arrows in Figure 1 show the path I anticipated in early March. Besides the late-March double bottom, GOLD has followed along remarkably well. If the Bears can push the price back down $1745, the 50-day Simple Moving Average (SMA) increases the odds for a retest of $1680-1620, with $1620 preferred based on simple symmetry (C=A: black dotted arrows).

The aforementioned double bottom does present a bit of a twist. It can mean the entire correction has already been completed and blue wave-V to the low- to mid-2000s is already underway (exemplified by the blue dotted line). But for now, I consider this option lower odds, as it would require

  1. A daily close back above the 200-day SMA (now at $1857)
  2. A daily close back above the upper grey trend line of the downtrend channel GOLD has been in since late July last year.

Thus, there’s plenty of upside left (~25%) when GOLD checks the above two boxes, and I instead prefer to enter low risk, high odds trades than high-risk, low odds trades.

Back to the preferred view. The by now nine months’ long correction (!) GOLD has been subjected to, is, in EWP-terms, called a double zigzag (see here). Incredibly complex and frustrating, as I’ve had to navigate my Premium Members for many months through very erratic downward sloping price action. But now the end appears near, and my Premium Members are gearing up to buy GOLD. Are you ready too?!

Bottom line: The in early-March anticipated bounce may have completed $2 (0.11%) below the ideal target zone last week. It is hard to get more accurate than this six weeks in advance. Regardless, if the Gold Bugs are not careful, GOLD should drop one last time to ideally $1680-1620 before staging a multi-month rally to new all-time highs. Conversely, this rally has already started, but the market has not given us the all-clear signal that is indeed the case.

 

Ethereum Reached the 2800s. What’s Next!?

I say “mostly” because I did not get it right all the time, which is, of course, impossible when one is trying to forecast a non-linear, stochastic environment. And I will be first to admit “I am wrong till proven right,” as that allows for a humble, objective approach to improve my forecasting accuracy and reliability for my premium crypto members. But, as you may recall, $2775+/-100, $2700-2855 more specifically, was my next intermediate-term upside target for ETH for quite some time, and this week it has been reached.

So what is next?

Not shown here, but the daily chart for ETH strongly suggests it is wrapping up some tiny 4th and 5th EWP waves to complete the more significant (black) major-3 wave, as shown in Figure 1 below.

Figure 1. ETH monthly EWP count and technical indicators.

The rally to $2860 will soon complete

The monthly chart above tells what the big-picture, long-term trend, and EWP count is. ETH is in a solid Bull market as it is well above its ascending 10-month, 20-month, and 50-month Simple Moving Averages (SMA), with the 10>20>50. A 100% Bullish setup. In addition, the monthly Relative Strength Indicator (RSI5) is at almost 99, showing how strong the current uptrend is as the maximum possible reading is 100.

The summer of 2017 had similarly high monthly RSI5 readings (red box): 99.18 and 99.38, respectively. ETH peaked in June 2017 at $417.21, dropped to $132.64 in July 2017, followed by a rally to $1422.86 in January 2018. A 68% correction, followed by 970% gain. Quite impressive numbers. Back then, ETH completed blue Primary III, IV, and V of pink Cycle wave-1, respectively. Therefore, the instrument is in a similar wave setup now, albeit at different degrees: currently completing Major wave-3 of Primary-III. The current maxed out RSI5 reading supports this notion as 3rd of 3rd waves are the most substantial waves. Given the near-vertical ascend of ETH over the past six months, it is pretty obvious we are dealing with such a wave, and the 2017 analogy tells us we should expect a pretty decent correction soon: wave-4.

Typically 4th waves retrace between 23.60-38.20% of the initial 3rd wave but can extend to the 50% retrace. If anything, 2017 showed us it could even be more. The black box in Figure 1 shows the standard, textbook, target zone for this pending wave-4. Besides, horizontal support resides at $1900-2000 and $1300-1500. The latter area would “only” be a 55% decline for ETH and still fit well with the 2017 correction. An almost 1000% advance, even from those levels, would target the low- to mid-ten thousands. But for now, let’s focus on the pending decline, as extreme wave extensions cannot be forecasted and thus not guaranteed.

Bottom line: The anticipated rally to the ideal target zone of $2700-2855 has been accomplished. Although wave-extensions, i.e., even slightly higher prices, can not be excluded, I now expect a multi-week decline back to at least around $1900-2000, but ideally $1400+/-100. The latter would be an almost 50% haircut, which is not uncommon before ETH is ready to stage its next multi-month rally. A move and close below this week’s low at $2088 from current levels or slightly higher will signal this deep correction is underway.

 

S&P500 Still On Track For 4375

Then I expect a wave-4 down to around current levels (SPX4110+/-10) before a last 5th wave (green minor-5) rallies price to SPX4375. This [Elliott Wave Principle] EWP path forward is based on the assumption the index will follow a textbook EWP impulse pattern higher. There is nothing to tell me it will not, but it can, of course, always deviate. To be determined. But for now, this is all I can go by.

Now at the end of April, the index topped last week at SPX4191, went sideways for the remainder of the week, i.e., dropped in three waves (grey a, b, c highlighted in the grey insert in Figure 1 below) down to SPX4120+/-5p and is now making new all-time highs. Thus, so far, the SPX fell 19p (0.45%) short of the lower end of the ideal (green) minor wave-3 target but nailed the forecasted minor wave-4 target zone (4118, 4124 vs. SPX4110+/-10). All are well within the margins of error and show the accuracy of Fibonacci-based EWP forecasting.

Figure 1. S&P500 hourly chart, the focus in this update is on the green and grey inserts

The S&P500 can still reach SPX4375 assuming Fibonacci-based wave extensions continue to work.

The question now is if SPX4191 was all off (green) minor 3, SPX4124 all of minor-4 (in the form of a running flat: see here for examples of what are called “flat corrections” in EWP terms), and now minor wave-5 to ideally SPX4375 is underway, potentially subdividing in the grey “i? ii?, iii?, iv?, v?” waves. Since minor-1 and minor-3 are subdivided into five smaller (grey) minute waves, it is logical to assume minor-5 will do the same. Besides, ordinarily, 5th waves are equal length to the 1st wave, and since in this EWP count, wave-4 bottomed at the 100% extension, wave-5 should then target the 200% extension (100% of wave-1 + 100% of wave-1) at SPX4375. So far, so good.

The -even more Bullish alternative- is that last week’s high was only (grey) minute wave-iii of green minor-3 because the SPX “only” reached the 123.60% extension followed by “only” a 23.60% retrace (123.6100.0%). This option is labeled as “alt: iii, alt: iv.” Albeit wave-3 is now longer than wave-1 and has accomplished its minimum requirement (see here), it is slightly less than usual. Thus one needs to be aware of an alternative, which I am presenting here. It means minor-3 is still unfolding and can still try to reach SPX4214-4275 before minor-4 kicks in.

In Bull markets, I always prefer to have an alternate, more Bullish EWP option because they often present upside surprises and downside disappoints. The alternate option surely fits that bill. Besides, IMHO, this is simply a bit of a luxury problem, i.e., a matter of “how high can we go?”.

If the index can hold last week’s low and especially SPX4095, then I see no reason to become bearish, and I will let the market dictate me if the preferred or alternate, even more, Bullish path is unfolding. Ultimately both point to SPX4375, and as I continue to tell my Premium Major Markets Trading Members: “do not short, instead view pullbacks as buying opportunities as we keep our eyes on the SPX4375 price”.