We had a very busy and interesting week last week. This was so even though we didn’t have any major macro news coming out.
As early as the start of last week, BTC showed weakness. It started rotating to the downside after range-trading on the weekend and was pressed down throughout the day. Sellers were not able to finish the day below key support at $29,200.
That gave the market a relief rally early on Tuesday to cover the whole Monday down-move and BTC started consolidating.
This time, buyers couldn’t push the market further up. It started looking heavy and then on Wednesday, huge market sell orders came to the market sending it aggressively down.
BTC closed below $29,200 on Wednesday, a bearish sign. It kept being pressed down until the end of Friday with occasional flashes down. On weekends, the market took a breather trading sideways, eventually finishing the week almost $3k lower than it started.
We’ve seen quite a big change in how the market is trading since last week. We’ve had sellers in control stepping in lower and lower, selling aggressively at the market and absorbing any slightest attempts to push it higher.
It looks like a repositioning of big players, creating waves of sudden sell-offs and shallow retracements. If this pattern continues, it will be reasonable to trade from the short side but mindful that the longer it continues, the bigger probability of deeper retracements.
It’s reasonable to trade with current momentum instead of trying to find the bottom. For now, the market is trading in the $27,100-27,900 range. It seems more likely to unfold eventually to the downside with $26,500 as the next important support before $25,300-25,000.
On the other hand, daily close above $27,900 would be bullish but we would like to see the subsequent acceleration to the upside to stay long there.
If instead, we see the market grinding up we would be cautious and ready to flip short if there is any rotation to the downside.
As always, be ready for different scenarios, not stubborn but flexible to change your bias. As the market keeps on trading, it shows you more pieces of the puzzle so you can make more informed decisions on what’s more likely to come next.
The focus on the macro front will be on FED’s preferred inflation measure - PCE on Friday.
Although it’s not very likely to affect FED’s rate decision next week with an 80% of 25bp hike, it will play a role in shaping market expectations for FED’s further actions.
Some other data points to watch:
Tue: CB Consumer Confidence, New Home Sales
Wed: Durable Goods Orders
Thu: GDP, Jobless Claims, Pending Home Sales
Fri: Chicago PMI, Michigan Consumer Sentiment
Bear in mind that we have BOJ rate decision with the new governor late on Thursday, so watch out for potential hints on policy shifts. Also keep an eye on earning reports throughout the week which can affect the market.
Remember however, that markets can move a lot even without major data coming out, driven by sentiment and market positioning, which we’ve been experiencing many times before (even last week) and expect to continue. That can be amplified by the month’s end this week.
Stay vigilant and have a great trading week!
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