Bitcoin Should Rally in an Overlapping Fashion to Around $72K

Early last week, I showed, using the Elliott Waves (EWP), “I prefer the larger ending diagonal (ED). EDs are hard to forecast price structures as they consist of five waves, which [in turn] most often are comprised of three overlapping waves to the upside and downside. BTC is most likely in wave-iii, subdividing into three (a, b, c) waves … [with] wave-c to ideally $66050-72175. … A daily close back above last week’s high ($60062) will favor the upside diagonal. A daily close below $53900 is needed to shift the odds in favor of the Bearish option (a diagonal to the downside).

The above “if-then” scenario is the power and beauty of the EWP as it allows for straightforward elimination of options and increases one’s trading success’ odds. BTC has rallied over the last nine days since my last update. With the additional available price data, I know the ED pattern to the upside is operable: blue lines in Figure 1 below, as so far BTC has done nothing to invalidate it. Please compare to the ED example inserted in Figure 1.

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

The Contracting Diagonal pattern suggests a choppy rally to around $72K.

As said before, EDs are choppy, terminal patterns, and the recent price action supports this notion as BTC is barely above its March 13 wave-i top of $61749. Because in contracting diagonals the 3rd wave cannot be longer than the 1st wave I find BTC should ideally top at a maximum of $69K. This level corresponds with the (red) wave-iii=i relationship, the (green) 1.382x extension for minor-c of wave-iii, and the (grey) c=a extension of grey minute-c of minor wave-c, exemplifying the fractal and complex nature of the internal waves of a contracting ending diagonal. Once wave-iii completes, wave-iv should drop to around the lower blue trend line, which should be around $62K. (Red) wave-v of (black) wave-5 of an even larger (blue) wave-III will target about $72K. From there, BTC should then fall back to the beginning of the ED pattern to complete wave-IV: the low $50Ks to the low $40Ks. Only then is BTC, IMHO, ready to set up for a rally into the six digits: blue wave-V.

What does it take to invalidate my preferred POV? A first warning will be on a daily close below $59K, with a “lights out” on a daily close below $55355. Why? Because if BTC drops that low from current levels, the ED pattern as shown will not complete. Please remember that BTC is, IMHO, in a larger-degree terminal pattern, and the price action over the next few weeks will not be as easy to trade, track and forecast as it was before. Thus, one has to “anticipate, monitor, and adjust” to allow for safe trading now more than ever.

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

Ethereum Gunning for $2800?

In my previous article on Ethereum (ETH) from four weeks ago, I looked for as low as $1200+/100 in ETH before the next rally to new all-time highs (ATHs). All ETH gave us was, however, $1549 on March 23. Although in Bull markets, “downside disappoints and upside surprises,” that shallower than expected pullback meant we’re dealing with another impulse move higher. See Figure 1 below.

Figure 1. ETH daily EWP count and technical indicators.

A rally to as high as $2860 should be expected

Using the Elliott Wave Principle (EWP), I now label the late February low as a 4th wave (blue IV), and blue wave-V is now underway. It is subdividing into five smaller waves, in black. Waves-1, 2 have already been completed, and wave-3 is now underway, which should ideally target $2340-2595. As you can see, wave-1 consisted of clean and clear five smaller waves (red waves-i, ii, iii, iv, and v), and so does the current wave-3. The target zone is based on standard Fibonacci-extensions for 3rd waves: 1.382 to 1.618 times the length of wave-1, measured from the wave-2 low.

ETH should now be in red wave-v of black wave-3. This wave can even move beyond the target zone, but for now, all I can go by is “the known unknown,” i.e., standard Fib-extensions, as U.S. Secretary of Defense and congressman Donald Rumsfeld once said.

But what I do know is in an impulse move, wave-4 always follows wave-3, and wave-5 always follows after wave-4. Thus, once wave-3 completes -ideally- in the target zone, wave-4 should bring ETH back to around $2160+/35. From there, wave-5 should target $2775+/-100 to finalize the larger blue wave-V. I then expect a retest of $1450+/-75, an almost 50% haircut, before the next significant, multi-month rally starts. The above-described path forward is exemplified by the black, red, and green arrows in Figure 1.

Bottom line: A month ago, when ETH was trading in the mid-1700s, I was looking for $1200+/-100 and then a run to $3000. Although the anticipated path of lower and then higher was correct, all ETH gave us was a drop to the mid-1500s and now the rally to new ATHs is underway. Besides, it means I am adjusting my upside projection based on the current price action slightly to $2775+/-100. But remember, in Bull markets, downside disappoints and upside surprises. So I will continue to monitor the price action to see if ETH decides to deviate from the anticipated path. Because all we can only do is “anticipate, monitor, and adjust.”

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

S&P500 on Track for 4375?

Last week I foundThe S&P500 is still in a 100% Bullish uptrend … and a move below the early-March low (SPX3725) is needed to confirm a more pronounced correction down to SPX3250-3500. Until then, the index can still try to move higher to SPX4065-4185…”

Fast forward, and the S&P500 (SPX) is now trading at SPX4095. Target zone reached. So was that it? Using the (EWP) see figure 1 below, I think there’s still more upside in store first before the subsequent more significant multi-week correction unfolds.

Figure 1. S&P500 hourly chart

The S&P500 can reach SPX4375 assuming standard Fibonacci-based wave extensions.

In this update, I want to focus on what is shown inside the larger green square. I’ve drawn in the typical 3rd, 4th, and 5th wave targets for a standard, Fibonacci-based impulse pattern that started from the early-March low (red wave-iv). Green (minor) waves 1 and 2 have been completed, and now wave-3 is underway, which should ideally target between SPX4210-4275. 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 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.

Thus, as long as the index stays above the grey (minute) wave-i high at SPX3978 on any short-term pullback, while on its way to ideally SPX4210-4275, then the in Figure 1 shown EWP path (grey arrows) should unfold, and the index will reach higher than I initially anticipated March 11th.

Bitcoin Bears Are Likely Going To Get Paid Later.

Why is BTC not continuing its unabated rally? I even have had traders sign up for my Premium Crypto Trading Service, literally thinking BTC would only and always go up. Well, no. BTC, like any other financial asset, still must go through its Elliott Waves (EWP).

Two weeks ago, based on the available data, I concluded, “If BTC moves below $52625 without making a new ATH first, my preferred “flat wave-4” scenario continues to play out as initially anticipated, with the added “flavor” of an irregular flat. Therefore, the ideal downside target can be adjusted to $43K+/-1K for a classic C=A relationship. Once the downside region is reached, I then expect the rally to $75K+ to take hold. If there is no overlap with $52625 over the next several days, and BTC can instead reclaim its 10d and 20d SMAs, to be followed by a rally over $60K, then the impulse pattern with an ideal top at $63.4K is favored. Only then can the Bears have another shot at, with a potential downside target of $40+/-1K.

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

More downside was correct but limited. Can BTC, therefore, still reach $70K?!

Fast forward, and as I preferred, BTC moved lower. It dropped below $52625, bottomed at $50406 on March 25, but never reached $43K +/- 1K. Instead, it rallied back to $60K. Thus, my idea BTC would see the low $40Ks when below $52625 was wrong. But, as said at the beginning of my update, BTC has not moved much over the last two months (on February 21, it reached $58K, and today April 6 it is still at $58K). Unfortunately, sideways price action is the hardest to interpret, especially from an EWP perspective, as it leaves the door open to many options. But eventually, one option will be chosen by the market, the smoke will clear, and the subsequent path will then be much easier to forecast, track and trade. As usual, all we can do is “anticipate, monitor, and adjust.”

So, what is next? With the current and additional price data at hand, I now prefer the larger ending diagonal (ED), as shown in blue Figure 1A. EDs are hard to forecast price structures as they consist of five waves, which most often are comprised of three overlapping, waves to the upside and downside: the green a, b, c’s of the larger (red) waves i, ii, iii, (and iv and v). As you can see, the red wave-i rally of the black (major) 4 low made at the end of February was three waves (green a, b, c), with the c-wave made up of five smaller waves (grey waves i, ii, iii, iv and v). The subsequent decline, red wave-ii, was also three waves. BTC is most likely in red wave-iii, which is also subdividing in three green (a, b, c) waves. Wave-a completed, wave-b is likely still underway and soon to be followed by green wave-c to ideally $66050-72175 depending on the exact Fibonacci-extension it will have. From there, a wave-iv and v await but let’s focus for now on the potential wave-iii as the internal price structure is complicated enough. Right!? Well, such is the nature of EDs: hard to forecast, track and trade as there are few firm rules (see here for a summary)

The Bearish option is the diagonal to the downside to complete black major 4. See Figure 1B. The market has still left this major-4 option on the table but is close to invalidating it. A daily close back above last week’s high ($60062) will favor the upside diagonal. A daily close below $53900 is now needed to shift odds in favor of this Bearish option.

Thus, while BTC has not done much over the last two months, it will soon tip its hand and tell us which of the options it will prefer: breakout is Bullish and targets the low $70Ks ultimately, while a breakdown is Bearish and targets the low $40s once again before reaching the $70Ks.

Can The S&P500 Still Reach Over 4000?

In my article from a little over two weeks ago, see here, I had “three individual and independent tools/methods pointing first and foremost higher and towards the same target zone/region (SPX4065-4185) for a significant top.” Fast forward, and the index reached as high as SPX3984 on Mach 17 and made a secondary high of SPX3982 yesterday. Was that all she wrote, so to say, or can we still expect the target zone to be reached. Since markets are stochastic, dynamic, and probabilistic, nothing is ever set in stone. Therefore, one must continuously (re)assess the charts to see if once assertions based on prior price data are still correct with the new price data at hand: anticipate, monitor, and adjust if necessary.

Figure 1. S&P500 daily chart

The S&P500 is still in an uptrend, but technical indicators are diverging.

A strong uptrend has price above its 10-day SMA, which is above the 20-day SMA, above the 50-day SMA, and subsequently the 200-day SMA. Besides, all these SMAs should be rising. In short, price>10d>20d>50d>200d and all SMAs rising = a 100% Bullish price chart. It is then logical to expect a Bullish outcome. Conversely, when price<10d<20d<50d<200d and all SMAs are declining, then the chart/index is 100% Bearish, and one should expect Bearish outcomes.

Moving averages are, however, not predictive but trend following and therefore they are not the holy grail. Adding technical indicators, such as the MACD, RSI, a stochastic oscillator (FSTO), and Money Flow (MFI), can give another layer of evidence to assess the next likely move. So let’s put the current daily chart of the S&P500 to the test (see Figure 1 above)

We can observe that the index is above its rising 10d>20d>50d>200d SMA. Thus it is still 100% Bullish (green horizontal arrows). What about the technical indicators? The MACD is on a buy, the RSI is above 50, while my stochastics’ based Buy/Sell indicator is on a buy as well. However, the MFI is weak as it is below 50. Besides, the RSI, MACD, and MFI are all negatively diverging (red dotted arrows). What does that mean?

As the price is rising, it is doing so on less Strength, less Momentum, and less liquidity. Now divergence is only divergence until it is not, i.e., it only takes a few solid up days to erase it, but for now, it must be noted and suggests the uptrend is weakening. But, based on the SMA setup, the uptrend is still intact. The index is still above the lower black dotted trendline, connecting the March 2020 low with the October 2020 and March 2021 lows. However, the dotted purple trendlines suggest an ending diagonal pattern, i.e., wedge, is forming, which resolves bearishly when completed. See here.

Bottom line: The S&P500 is still in a 100% Bullish uptrend based on its SMA-setup and trendline support and the technical indicators. However, the latter are negatively diverging since at least mid-February telling us the uptrend is weakening and running on less liquidity. The Bears’ first order of action is to close the index back below its 50d SMA, which should bring it back below last Thursday’s low. A move below the early-March low (SPX3725) is needed to confirm a more pronounced correction down to SPX3250-3500. Until then, the index can still try to move higher to SPX4065-4185, albeit all the divergences.

Bitcoin Bears: Pay Me Now Or Pay Me Later?

I shared that the cryptocurrency was most likely in a more significant 4th wave, taking weeks to complete. Back then, I preferred for BTC to “top around $54.7K to $ 56.1K, for a b-wave, before the next leg lower (wave-c) should target about $39.2-40.6K.

But, I was conscious of the fact that “BTC can have one more trick up its sleeve as 4th waves of this magnitude are often more a sideways affair where recent gains are digested more in price than time, i.e., a trading range is made. This means the red b-wave/bounce can even target as high as $64.3 (ranging from $56.9 to $64.2) before that pesky C-wave takes hold … bringing the price back to $40+/-2K.

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

Bitcoin can still try to reach $63.4K, but odds favor more downside.

Fast forward, and indeed BTC had a trick up its sleeve, rallying to a new all-time high of $60.7K five days ago. That was precisely the 1.618x Fibonacci-extension of (green) minor-a, measured from the minor-b low (see Figure 1A above). Classic irregular flat in EWP terms: see here? Not so fast just yet, as this pattern also means the recent ATH could have been a 3rd wave (red wave-iii) because 3rd waves often extend that far as well. The Bullish thesis suggests BTC is now in red wave-iv, with the last wave-v to ideally $63.4K before topping (see Figure 1B above).

What would it take for BTC to invalidate my original thesis? As long as it does not move below $52625 (the minor-a or red intermediate-i high), it can still try to reach $63.4K because 4th and 1st waves are not allowed to overlap in a common impulse. Only in a diagonal (see insert in Figure 1B) do we see such overlap. But those are erratic patterns, and I would not try to bank on them.

What do the charts favor? Currently, BTC is below its 10- and 20-day simple moving average (SMAs), while all the technical indicators are pointing down, i.e., on a sell. Not a good sign for continued upside. Besides, the MACD-indicator made a lower high at the recent ATH compared to the late-February price high. Thus the recent rally was on much less momentum and strength.

Bottom line: the chart setup on the daily time-frame is short- to intermediate-term relatively weak. Suppose BTC can now move below $52625 without making a new ATH first. In that case, my preferred “flat wave-4” scenario continues to play out as initially anticipated, with the added “flavor” of an irregular flat. Therefore, the ideal downside target can be adjusted to $43K+/-1K for a classic C=A relationship (see Figure 1A). Once the downside region is reached, I then expect the rally to $75K+ to take hold. But, if there is no overlap with $52625 over the next several days, and BTC can instead reclaim its 10d and 20d SMAs, to be followed by a rally over $60K, then the impulse pattern as shown in Figure 1B, with an ideal top at $63.4K is favored. Only then can the Bears have another shot at, with a potential downside target of $40+/-1K.

Bounce in Gold Underway?

In my previous and first update for Gold, I assessed, using the Elliott Wave Principle (EWP) and Technical Analyses (TA), if it was ready for a bounce before the next leg lower. It was trading at $1723 back then.

Two weeks later and the instrument dropped a little lower than the ideal “equal length” (see Figure 1) would like ($1670 vs. $1725), over the next few days, only to now rally slightly back above to where it was back then ($1723 vs. $1733). Thus the “thick” orange path I had drawn in appears to be transpiring, albeit with some slight initial undershoot.

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

A Bounce followed by the next move lower still most likely

Back in early March, I anticipated “this bounce to last several weeks and target the declining 200-day Simple Moving Average (200d SMA), now at $1860, but it should be at around $1820 horizontal resistance by then.” If I adjust the current anticipated orange path lower (from the start of red, intermediate, wave-a?), then we should indeed see close to $1820+/-20. That should complete red wave-b? similar to the bounce from September to October 2020 (thin orange arrows). From there, the last decline (red wave-c?) to ideally around $1640+/-20 should follow to complete the mirror image of the initial drop in 2020 (black, major wave-a). In EWP-terms, this would then be a double zig-zag.

Such a lower low will then, ideally, set up a nice positive divergence on the technical indicators (green dotted arrows), signaling the next leg higher is to commence. It is not necessary but preferred. The market does not owe us anything, so we have to wait and see. But, Gold will have to move to and close above $1870 from current levels to tell us the early-March low was already blue Primary wave-IV, and wave-V to new ATHs ($2300+/-100) is then underway. For now, that is not my preferred POV, neither does the chart even remotely tell me that is the case.

Bottom line: The early-March anticipated bounce is now most likely underway and should ideally move Gold to around $1820+/-20. From there, I still “expect several weeks of downside back to $1620-1680. After that, I anticipated the next Primary-V rally to ~$2300+/-100. However, a weekly close below $1605 targets $1495 and strongly suggests a Primary-V wave may not happen as the decline is almost too deep for a wave-IV, and the odds are not in favor of it anymore.”

Should You Chase Ethereum Here Or Wait For A Pullback?

In my previous article on Ethereum (ETH) from three weeks ago, I was “… looking for a somewhat tricky, whipsawing, move higher, ideally to around $1880+/-40, but it could even challenge the recent all-time high. From there, I expect several weeks of downside back to $1200+/100. After that, I anticipated the next rally to ~$3000+. However, a weekly close below $1200 targets $900…

Fast forward, and ETH topped this week, so far, at $1891. Thus, using the Elliott Wave Principle (EWP) and Technical Analysis (TA) was once again a powerful way to forecast the price levels to be reached three weeks in advance. Therefore, it is time to become more cautious by, for example, raising stops, maybe take (partial profits), etc.

In this week’s update, I would like to look at the weekly and monthly charts to better understand ETH’s big picture potential (months to years out). See Figure 1 below.

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

A retest of 1200+/-100 and then rally to new all-time highs.

As you can see, the weekly and monthly charts feature two different EWP wave-labels, but both point to higher prices (anticipated paths). The weekly chart’s EWP points to two more rallies (black major-5 and blue Primary-V) after an initial pullback (major-4) before this Bull run is over. Whereas the monthly chart suggests, we could see three more rallies (add purple Cycle 5). I always have an alternate (more Bullish) EWP count for Bull runs like ETH is in to ensure my Premium Crypto Trading Members do not miss out or get caught on the wrong side. The market will eventually tell me which one is correct: “anticipate, monitor, and adjust if necessary.”

What we do know, with all certainty, is that the weekly technical indicators (RSI5, MACD histogram, FSTO, and MFI14) are all negatively diverging (red squares). Although divergence is only divergence till it is not, it means ETH is now moving higher on less strength, less momentum, and less liquidity. The latter is essential because liquidity drives markets. If the buying dries up, only selling is left. However, ETH is well-above all its important Simple Moving Averages (SMAs), which are all rising and Bullishly stacked: 10w>20w>50w>200w). Thus this is still a 100% strong, Bull market.

The monthly chart is different as there are no negative divergences on the technical indicators. Instead, the RSI5 is getting very overbought, suggesting there’s less room for upside left over the next 1-2 months. See the 2017 rally for example. However, the monthly Money Flow is still strong, and so is the MACD. Only the FSTO is not in favor of more upside.

Nonetheless, also on the monthly chart, the SMA setup is 100% Bullish: ETH is well-above its rising SMAs, which are also Bullishly stacked: 10m>20m>50m. Thus, this is still a 100% robust, long-term Bull market. Hence, the one-degree higher EWP count compared to what is labeled on the weekly chart has merit.

Bottom line

ETH’s weekly and monthly charts are 100% Bullish and suggest plenty of upside left over the coming months to years. However, negative divergences are creeping in on the weekly chart suggesting a pullback is most likely imminent. A daily close below $1657 will be a severe warning that the $1200+/-100 level will be revisited to complete a more significant correction before ETH can move to new ATHs again.

Buy Ethereum with Binance

A “Buy the SP500” Signal Was Given: SPX4000+ Is Most Likely Next.

In last week’s article, see here, I showed and explained one of my -reliable- “buy/sell the S&P500” indicators, as it had reached the “buy zone,” but no “buy the SPX500” signal was given. I concluded, “When it does give a buy signal, I expect it (based on the Elliott Wave Principle [EWP]) to be a good one that can last for many weeks and bring the index to as high as the low 4000s, which is my ultimate target for the current Bullrun that started in March last year.

Well, on Monday, the indicator gave a “Buy the SPX” Signal as it moved up and out of the buy zone. The index has since not looked back. I share this indicator daily with my premium major market members, and they use it to their full advantage.

Figure 1. Market Breadth-based Buy/Sell Indicator in Buy zone, but no buy signal yet

Buy Signal given, how high can the S&P500 go before the next correction looms?

The buy/sell indicator does not predict how high or low the index can go, and for that, the EWP is the go-to tool of choice. Figure 2 shows my detailed EWP count for the S&P500 using the hourly chart and the daily chart with straightforward, technical analysis (TA) based symmetry upside targets. Remember, symmetry is essential for the markets; as I forecasted, mid-February SPX3950 would be an important top: see here.

Figure 2. Detailed EWP count for the S&P500 and simple symmetry upside targets for the S&P500.

All that is left is then a wave-iv and wave-v to end the rally that started in March 2020. But for now, let’s focus on the upside target zone. Namely, if we add the length of the September 2020 and the early-November 2020 rallies to last week’s lows, blue arrows, then we have symmetry targeting SPX4065-4125. Hence, both symmetry and the EWP point to a similar upside target zone. Besides, the index is back above the 10-day Simple Moving Average (10d SMA) as well as its 20d SMA and 50d SMA and has remained well-above the 200d SMA (solid green small arrows). Thus the index is in a 100% Bull market as all SMAs are also rising with the price.

Bottom line: I now have three individual and independent tools/methods pointing first and foremost higher and towards the same target zone/region (SPX4065-4185) for a significant top. Combining methods: EWP + TA + Market Breadth is, IMHO, one of the most potent ways of analyzing and forecasting the markets as it provides a weight-of-the-evidence approach. All three methods point towards the same: higher prices, and thus I must expect higher prices as long as last week’s low holds.

Bitcoin: Back to $40K First Before Heading to $75K?

While such percent pullbacks are the norm for this cryptocurrency, the question remains: is the current rally only a “dead cat bounce,” or is BTC heading for new all-time highs straight away again? Using the Elliott Wave Principle (EWP) I will try to answer that question and present the most likely answer. Unfortunately, there are no certainties in the financial markets, but plenty of if/then scenarios.

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

The Elliott Wave Principle still suggest a next leg lower first before moving higher

This February decline is what I call an “initiation wave,” red wave-a in figure 1, and has set in motion a more extensive correction: black wave-4 in Figure-1. After an initiation move, there’s always a “dead cat bounce first before the next leg lower starts. In EWP-terms, this counter-trend rally is called a B-wave. B-waves always consist of three smaller waves: a, b, c. In Figure-1, I have labeled the B-wave in red and its smaller waves in green.

IMHO, green wave-c of B is now underway or has possibly already been completed, and red wave-c should ideally target around $41K. Why is that? Because 4th wave (black major-4) often retrace approximately 23.60-38.20% of the prior, same degree 3rd wave (wave-3), shown with the black box. Besides, C-waves are usually equal to the length of the A-wave. Since red wave-a went from $58.4K to $42.9K, and the current red wave-b rally should typically top around $54.7K to $ 56.1K, the next leg lower (wave-c) should thus target about $39.2-40.6K. Are you still hanging with me?! As you can see, this price target range fits well with the 23.60% retrace level mentioned prior.

C-waves can, however, extend and, in this case, go as low as $29.8K, which is close to the 38.20% retrace at $32.2K, but for now, I prefer the upper end of the black box as in Bull markets downside often disappoints and upside surprises. How do we know the next leg lower is in order? It is confirmed on a move below the end of red wave-a low, but warning bells will already be ringing on a break below yesterday’s low ($49.3), followed by a break below the green wave-b low at $46.3K.

Now, BTC can have one more trick up its sleeve as 4th waves of this magnitude are often more a sideways affair where recent gains are digested more in price than time, i.e., a trading range is made. This means the red b-wave/bounce can even target as high as $64.3 (ranging from $56.9 to $64.2) before that pesky C-wave takes hold, i.e., “the rug gets pulled from under,” as they say, bringing the price back to $40+/-2K once again. That would be called an irregular flat in EWP terms: see here. How do we know if this tricky B-wave pattern is evolving? Break and daily close above the ATH, with the first warning on a daily close above $55.9K.

Bottom line

shorter-term, I am looking for this counter-trend rally to fizzle out soon before we see the next leg lower. Since BTC is in the heart of the most strong Bull market leg, it can see a dead cat bounce exceeding the recent ATH. Thus, before one is brave (or stupid) enough to short a raging Bull, the price will have to -at least- close back below $46.3 to suggest the $39.2-40.6K range is ideally next from which the next multi-week leg higher to $75K can start.

Buy Ethereum with Binance

Can the S&P500 Reach Around 3770 Before Moving to 4000?

Almost two weeks ago, see here, I anticipated, based on the Elliott Wave Principle (EWP) and Technical Analysis (TA): “the S&P500 … should now be in (grey) wave-c to end (green) wave-4 at ideally around SPX3770+/-10p. Once this C-wave completes, I expect a strong rally to ideally SPX4185+/-10p for (green) wave-5 of (red) wave-iii … though it can stall at SPX4085

Although the index took a short detour with Monday’s high at SPX3915, it got as low as SPX3723 so far today. That is lower than anticipated, albeit I was still only off by 1%, and it could now be heading for SPX3670 (see my February 16 article here) But, will it go that low, or should one start buying now?

Monday’s detour shows the market can have many tricks up its sleeve before ultimately doing what it is “supposed to do,” which can cause confusion and uncertainty. Thus we should also apply other objective tools that can give reliable buy and sell signals. If we combine the EWP, TA with such buy/sell signal tools, we have a compelling way to buy and sell at low risk and with high reward. One of these tools I have and share with my premium major market members daily is shown below.

Figure 1. Market Breadth-based Buy/Sell Indicator in Buy zone, but no buy signal yet.

I am waiting for a buy signal.

This Buy/Sell indicator is based on market breadth, and when it drops between 0-5, like now, the market correction is often reaching its end as the index is getting very oversold. But only when it moves back above 5, like in February, March, July, September 2020, and January, February 2021, is the correction is over: green circles. Similarly, when the indicator reaches very overbought readings of >90 and then drops back below 90, we have a reliable sell signal on our hands.

There are a few false signals and occasions when the indicator doesn’t reach 0-5 or >90 before the S&P500 rallies or corrects again, like August and November 2020, but no indicator, tool, and method is flawless. An indicator like this gave a sell signal late-February 2020 before things went severely south in March, avoiding sitting through a 35% crash, and then got you back in late-March for a 15% multi-month rally. It is proof that it can prevent a lot of pain while also providing many occasions with many gains.

For now, the indicator has not given a buy signal yet. It can take a while -like in March or September 2020- but telling us a sustainable bottom in the index is getting much closer than a top. When it does give a buy signal, I expect it (based on the EWP) to be a good one that can last for many weeks and bring the index to as high as the low 4000s, which is my ultimate target for the current Bullrun that started in March last year.

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

Should You Buy Gold Soon?

Gold reached an all-time high (ATH) of $2089 on August 7 last year and has since been in an ugly downtrend, losing almost 15% of its value. See Figure 1 below. Meanwhile, I have helped navigate my Premium Members through this uncertain period, using the Elliott Wave Principle (EWP) and Technical Analyses (TA).

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

The Elliott Wave Principle points to a bounce followed by the next move lower.

GOLD is per the EWP in a double zig-zag Primary-IV correction (see here for an explanation): black (major) waves a, b, c. Each of these waves consists of three waves (aka. fractals): red (intermediate) waves a, b, c. Gold is, IMHO, now in the last leg lower: major wave-c, which should ideally target between $1620-1680. Note that the red, intermediate, current wave-a is equal in time and price to the red, intermediate wave-a that completed September last year at this week’s low: dotted black and red down arrows, respectively. Perfect time-price symmetry. Thus, if the double zig-zag analogy holds, we should now see a -complicated- red b-wave bounce similar to the September->October 2020 move before the last red wave-c of black wave-c (orange arrows).

I anticipate this bounce to last several weeks and target the declining 200-day Simple Moving Average (200d SMA), now at $1860, but it should be at around $1820 horizontal resistance by then. Note that price is below its declining 20d SMA, which in turn is below its declining 50d SMA, and which is subsequently below the 200d SMA. That is a 100% Bear market setup. I must, therefore, treat every rally as a counter-trend bounce, aka Bear market rally, until the charts have improved enough, i.e., price>20d>50d>200d SMA to tell us the anticipated next rally (Primary V) is underway.

Namely, the bigger picture EWP count -see Figure 2 below- anticipates wave-c to target around $1675 as well (red arrow), from which the blue Primary-V of (purple) Cycle-C should rally to the $2200-2400 target zone.

Figure 2. GOLD monthly chart with detailed EWP count and technical indicators.

Bottom line: shorter-term, I am looking for a somewhat tricky, whipsawing, move higher, ideally to around $1820+/-40. From there, I expect several weeks of downside back to $1620-1680. After that, I anticipated the next Primary-V rally to ~$2300+/-100. However, a weekly close below $1605 targets $1495 and strongly suggests a Primary-V wave may not happen as the decline is almost too deep for a wave-IV, and the odds are not in favor of it anymore. Hence, at current price levels, the risk/reward for GOLD on the long side is IMHO 120/600 = 1 to 5. Quite good, if I may say so, but for now, I prefer to wait things out until confirmation of a new uptrend. Trade safe!

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

Can the S&P500 Reach Around 3770 before Moving to 4000?

A little over a week ago, see here, I showed

“… the S&P500 has reached its symmetry breakout target of SPX3950

and,

“… my detailed Elliott Wave Principle (EWP) count has the index complete a 3rd wave, and … wave-4 will be underway … to SPX3770-3670. Once the correction is over we should expect SPX4200s before the next larger correction, possibly a much larger top of the Super Cycle degree will commence.”

Fast forward, and the index topped that same day (February 16) when my article was posted. It is currently trading at SPX3850s. Thus a 100p loss since.

Figure 1. S&P500 hourly chart with technical indicators and horizontal support/resistance levels.

The market is in a C-wave.

Corrections, in EWP-terms, always consist of at least three waves: a wave-a down (aka the initiation move), followed by a wave-b up (aka the dead cat/oversold bounce), and then a final wave-c down. The hourly chart of the S&P5000 in Figure 1 above shows the index completed most likely (grey) wave-a on Tuesday, (grey) wave-b yesterday, and should now be in (grey) wave-c to end (green) wave-4 at ideally around SPX3770+/-10p. Essentially the pattern so far looks similar to the January correction: (grey) wave-iv. It bottomed at SPX3694 on January 29. Hence, it appears also February is ending on a weak note, with the index so far only having progressed 2.0% YTD. Not yet the raging Bull everybody thinks it is.

Regardless, so far, the current correction is still a typical “run-of-the-mill” 3-5% correction: nothing out of the ordinary and even relatively healthy. Once this C-wave completes, I expect a strong rally to ideally SPX4185+/-10p for (green) wave-5 of (red) wave-iii. From around that level, we should expect another correction: (red) wave-iv back to -ideally the green 100% Fib-extension (SPX3925+/-10), etc.: see red dotted arrow path. But before we look around too many corners, let’s first focus on the current correction. A move back above yesterday’s high will signal it has ended and the run to ideally SPX4185, though it can stall at SPX4085, is underway.

 

Should You Buy Ethereum Soon?

Last week I showed, see here, using the Elliott Wave Principle (EWP) and Technical Analysis (TA) that Ethereum (ETH) was most likely about to embark on a nasty correction to $1300s. It was trading at $1920s then, topped a few days later at around $2040 and dropped this week to as low as $1361…

Thus, (black) major-4 -as shown in last week’s chart, is IMHO now underway and has already reached the ideal target zone as outlined last week ($1300+/-100). So is this wave-4 already complete, and can we now expect the rally to $3000+? Hold your horses, not so fast. Let me explain.

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

The Elliott Wave Principle points to a bounce followed by the next move lower.

This week’s “flash crash” is what I call an “initiation wave”; it has set in motion the more extensive correction: blue wave-a in Figure-1. But, from EWP -and from studying chart patterns in general- we know that there’s always this “dead cat bounce” first before the next leg lower starts. In EWP-terms, this counter-trend rally is called a B-wave. B-waves always consist of three smaller waves: a, b, c. In Figure-1, I have labeled the B-wave in blue and its smaller waves in green.

IMHO, wave-a of B is now underway or has possibly already been completed, and green wave-b should ideally target $1495-1575, from which green (minor) wave-c will target $1845-1930, ideally. This upside target zone is based on a simple c=a relationship. It also matches well with a typical 62-76% retrace of the initiation wave-A. The caveat is that 4th waves are often the least reliable, i.e., most variable, and in addition to that, hardest to forecast price structures. In general terms, they can be considered as a healthy consolidation, i.e., profit-taking, after a big run-up (the prior wave-3) with lots of shorter-term twists and turns, rips and dips. Many would then call the “bull flags.”

Whatever we call it; after wave-A comes wave-B (now underway) and then wave-C: green-red-black path in Figure 1, which is not accurate in time. Assuming wave-B tops around $1880+/-40 and that wave-C=A, then wave-4 should bottom around $1200+/-100. From there, I anticipated the next larger multi-month rally: major wave-5. If the 2017 rally is of any guide, see last week’s article, then please know the major-4 wave back then was a 70% correction, but followed by an 1100% rally (!). Please keep these numbers in mind in anticipation of the pending wave-5.

Bottom line: shorter-term I am looking for a somewhat tricky, whipsawing, move higher, ideally to around $1880+/-40, but it could even challenge the recent all-time high. From there, I expect several weeks of downside back to $1200+/100. After that, I anticipated the next rally to ~$3000+. However, a weekly close below $1200 targets $900. That translates to a 55% correction, and if 2017 is of any guide, it would still be fully within the norm.

Thus, trade ETH accordingly: sitting through a 40-50% correction thinking it will go to $3000 is not a strategy. It is dead money, which could be allocated somewhere else. And hope is never a strategy but a disaster recipe. Trade safe!

Buy Ethereum with Binance

Is Ethereum About to Embark on a Large Correction Back to Around $1300?

Using the Elliott Wave Principle (EWP), I count the 2017 high in ETH as a (blue) Primary-I/A, the 2018 low as Primary-II/B, and the current rally Primary-III/C. See figure 1 below. Although I prefer the five-wave impulse count because ETH has always had impulse patterns to the upside, I must admit that at this stage, I do not know if ETH will only do three large waves up (blue A, B, C) or five (blue I, II, III, IV, V). The market will eventually tell us. Regardless, either pattern is still looking higher (think $3000+) after a pending more extensive correction: (black) major-4.

Figure 1. ETH Weekly chart with technical indicators and horizontal support/resistance levels.

The Elliott Wave Principle points to the next more extensive correction.

ETH experienced a rough first two weeks in 2021, as the instrument went through the (red) intermediate-iv correction. It bottomed right in the ideal target zone (red square), which outlines a typical 23.60-38.20% retrace of the prior entire intermediate-iii wave. That $912 low on January 11 was a ~32% correction. Classic! Since then, it has moved impulsively higher, i.e., in a five-waves-up-three-waves-down fashion, and should now complete intermediate-v, as per the anticipated red path. All of this I had already outlined to my Crypto Trading Members in December. Hence, no surprises so far.

Now I anticipate the black path to unfold, also because negative divergences (red dotted arrows) are setting up on several technical indicators (RSI5 and MFI14), which often foretell a correction. The smaller wave-count, not shown here but available to my Premium Members, suggests ETH should soon top around $2000+/-100 and then embark on a move down to about $1300 before moving back up to ~$3000.

A correction of the major-wave degree to $1300 would be a 35% correction and fit with the prior intermediate wave-degree. As shown in Figure 1, the major-4 correction during the 2017 rally retraced almost 70%, which would translate to around $600 (!) for current conditions. However, the recent rally is more Bullish than the 2017 rally, and in Bull markets, the downside often disappoints and upside surprises. I do not expect such a deep retrace, and for now, I focus on $1300+/-100. A weekly close below it would target $900 once again and be a sizable 55% correction.

The S&P500 Reached its Symmetry Target of 3950: What is Next?

From late-August to early-November last year, the S&P500 index (SPX) traded between SPX3590 and 3230. A 360p range. See Figure 1 below. By mid-November, it finally managed to break out, hold the breakout, and rally with a few pullbacks along the way. Notably, the most recent ~160p correction, which ended late-January.

Markets love symmetry because we humans love it, e.g., we are most attracted to people with symmetrical faces. Since the markets are driven by human sentiment, it is no surprise markets try to achieve symmetry.

Thus, if we add the 360p range to the breakout level of SPX3590, we get 3590 + 360 = 3950. See blue arrows in Figure 1 below. In November, I told my premium major market members this level would be reached. The exact path was, of course, impossible to know beforehand and frustrating at times, but today it was finally achieved: bingo. So what is next?

Figure 1. S&P500 Daily chart with technical indicators and horizontal support/resistance levels.

Using Elliott Wave Principle to Answer the “What is next? question.

Before answering the question, let us review the daily chart once is more. Price is in an uptrend channel: Bullish. Price is above its rising 10-day Simple Moving Average (SMA), which in turn is above the rising 20d, 50d, and 200d SMAs. A 100% Bullish setup. All the technical indicators are on a buy: Bullish. Thus, before we all get too excited, there is no reason to look down if the charts remain Bullishly setup. A first warning will be on a close below last week’s low.

Namely, my detailed Elliott Wave Principle (EWP) count has the index complete a 3rd wave, and a move below last week’s low means the last smaller 5th wave of this 3rd wave up has completed and a wave-4 will be underway. See Figure 2 below.

Figure 2. S&P500 hourly chart with detailed Elliott wave Principle count.

Graphical user interface Description automatically generated with low confidence

This wave-4 will then ideally target SPX3770, but it can also move as low as SPX3670. A typical 5-8% correction, in other words. The lower price target would fit with the red dotted arrows in Figure 1. A symmetrical correction equal to the October 2020 correction would move my EWP count to a one-degree higher wave. Thus, the daily chart and EWP count in the hourly chart align with my recent article, where I show the current low volatility would most likely be followed by a period of high volatility.

Regardless of which wave-degree is operable, both EWP counts tell us to expect higher prices once the pending correction to SPX3770-3670 is over. Based on the “80/20 rule,” we should expect SPX4200s before the next larger correction, possibly a much larger top of the Super Cycle degree will commence.

 

Is Volatility Giving a Warning?

It has almost been a year since the Volatility Index (VIX) -aka the fear index- has closed below 20. The two years before, it was mostly around the low to mid-teens. The last time the VIX closed below 20 was February 21, 2020. Does this mean there’s no complacency anymore in the markets and only fear?

While the VIX is a real-time market index representing the market’s expectations for volatility over the coming 30 days, the lesser know VXV measures implied volatility three months out. One way to look at fear/greed is to use the VIX divided by the VXV: VIX/VXV ratio, as it filters out higher baseline readings liker now. See figure 1 below.

Figure 1. VIX/VXV daily ratio

Chart, histogram Description automatically generated

High readings, i.e., spikes, coincide, clearly, with market bottoms as there is a lot of short-term “fear”; the VIX is very high. Since market bottoms form quickly, the ratio shows spike-highs. Conversely, when the readings become very low, i.e., traders and investors expect barely any volatility over the next 30 days, the market is -based on historical evidence since March 2009 low- close to a correction.

Low VIX/VXV readings and future market performance.

The current VIX/VXV ratio sits at 0.754. When the rate is about this low, vertical blue lines, returns for the S&P500 are often less than stellar. Namely, in 2012 the S&P500 lost 10-14% eventually. In 2015 the index stalled almost a year, adding a mere 3.5%, only to lose nearly 15%. Similarly, in 2016, albeit the pullback was shallow (-5%). In 2017 there were several <0.75 readings, and the market ignored those, gaining almost 20% since the first reading in August 2020 but losing at least 6% since the last <0.75 reading from December 2020. Besides, less low readings, like in 2018 and 2019, can still lead to 20% losses.

Thus, although the ratio is not precis in nailing the very top because as said tops take time, the current low readings warn that the S&P500 is closer to a significant, albeit interim, top, than a bottom. And as usual, “forewarned is forearmed.” IMHO, it does not mean to go full-on short or abandon all ships. It means one could, for example, raise stops, take partial profits, etc., which have never caused anyone any pain.

 

Is the Dow Jones Setting up for a 10-15% Correction?

Figure 1. Daily DJIA chart, with detailed EWP count and technical indicators

Namely, the index has now reached and stalled within the ideal green and upside target zone I’ve outlined to my Premium Members for quite some time now. These target zones are for (red) intermediate wave-c of (black) major-c of blue (primary) III and can be used for buying and selling, go long or short, with lower- and upper ends as possible stops, respectively.

When an index reaches such Fibonacci- and EWP-based target zones, expect a reversal or stalling for some time before moving higher to the next target zone.

Negative Divergence supporting Elliott Wave Principle Count

So, let’s see what we can expect. In this case, there is negative Divergence on several technical indicators (red dotted arrows).

  • the daily RSI5
  • the daily MACD
  • the daily Money Flow Index (MFI14)

Although divergence is only divergence until it is not, it supports the thesis that a 3rd wave is completing as the rally is losing steam and less money is funneled into the index. The latter is critical because liquidity drives markets and low liquidity rallies can lead to swift declines as there’s no buying power to “stop the bleeding,” so to say.

Besides, it appears a diagonal/wedge pattern is developing (black dotted lines): often, price will collapse out of it when completed. For example, a similar wedge and negative divergences formed during 2019 into early 2020. See Figure 2 below.

Figure 2. Daily DJIA chart, with detailed EWP count and technical indicators for 2019

Chart Description automatically generated

Bottom line

A decline to $28750+/-500 should be expected over the next few weeks. A break and close below $30870 will go a long way to confirm this preferred thesis. But, as long as the Bulls can close the index above $31290 support, a final rally to around $31840+/-50 cannot be excluded before blue wave-IV will start.

From the wave-IV target zone, I then expect a last rally into the upper blue wave-V target zone to complete the rally that began almost a year ago and which may very well be the final rally since 1932—more about that in my next article.

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