Coronavirus & Middle East Escalation Shake Markets – Cryptos – Gold & The Dollar Strengthen

Bitcoin triggered for a long again as Bitcoin Cash appears to have taken the lead showing relative strength among its peers.  Gold is also pushing higher and this may be the beginning of the next leg higher.

Stocks seemed to be on cruise control as markets continued to push higher, and the risk was an event off the radar that would be a catalyst for a selloff.  The Coronavirus was an initial catalyst and with the attack on the US Embassy in Iraq earlier today likely to add fuel to selling pressure.

Oil is now pushing into an area where probabilities of a bullish reversal are elevated, but it is still too early to look for a trade.

Also we are going live with our video today I believe so look for Marc to post how to access it.  This way you can see the charts as we talk about them.  Our radio show starts at 4PM Est time so make sure you tune in and feel free to call in as well.

Bitcoin Weekly

BTCUSD

Bitcoin closed the week as an inside pinbar after two weeks of solid buy side order flow.  This is setting up nicely for a continuation higher off a weekly consolidation.  A week worth of order flow is showing buyers are stepping in on the dips, not looking to exit.

Taking out the 8800 level would be a broader long signal, and as we have been mentioning over the past couple weeks, the environment is improving and there is nothing wrong with adding a small position in cryptos.

With investing buying the low is difficult as you are buying when the market looks its worst and there is no evidence of a reversal.  This can result in taking some additional pain.

The other strategy is to wait for more evidence that the environment is improving, but this results naturally when prices are higher.  You get one or the other, better prices or better environment, you will never get both.

Over a month ago, we were looking for the market to take out 8k initially and we like to see a couple closes above along with signs that the market is poised to move higher.  We had a retest of the level and now three weekly closes above this level.  This increases the probabilities of a move to 10k.

Our initial target for position traders is 13,150 and the key level to take out here is 10k.  This does not guarantee we hit 13k but the market will be in an environment conducive of a continuation of bullish momentum, putting the probabilities in the bulls favor.

Remember it is not about being right or wrong, but being positioned with the probabilities in your favor.   As levels are taken out, and we see closes above these levels, the probabilities of a move higher increase.  We are also in a position to move higher after a 7 month consolidation.

Really like what we are seeing here period.

 

Bitcoin Daily

BTCUSD (Daily)

Solid swing higher off our initial support level and this is the kind of price action we want to see here. We have hit two of our three targets in both swing trades, one of which we have been in for over a month.

So we are not adding another trade as we have two targets out there yet (one for each trade).  We did send out an alternate trade Friday for newer members, but we like the improved structure here and the current shorter term target is 9920.

This overlaps with the broader initial target of 10k so we are looking for some selling pressure in this area.  Market targets are not precise but general areas to look for strength or weakness.

A pullback off the 10k level and a broader higher low would be another signal to go long.  Do not chase here, you are either in or not.  The market may provide another setup, but taking a trade AFTER the breakout is chasing, and that can lead to getting hammered.

Quite simply the market is behaving as expected and we are just sitting back letting it play out.   IF you are not in a trade, it is important to wait for a setup, either in the form of a continuation or pullback and bullish reversal.  Do not chase here.

‘If one does arise we will send out another alternate signal if we are still in our current trades.

Bitcoin Cash Daily

BCHUSD (Daily)

One coin we have liked for over a month is Bitcoin Cash and if we were going to add any inventory this was the one we were looking at.  Now have you missed the opportunity?

Not really there is still a lot of room left to run and since I am already invested in the market in order for me to put fresh money to work I needed to see improvement in the environment.

This implies that I am not getting the best prices, but being already vested I chose the better environment.  This is starting to look like a much better environment and I am fine with waiting for the next broader correction.

Either way for those that took the position trade or bought at lower levels, I like the 380-420 area to take in a little profit.  At least something.  Lets zoom out.

BCHUSD Weekly

BCHUSD (Weekly)

As mentioned above, there is a lot of room to run here, and the 800 level is one that is very reachable at this point.  So why not buy here?  Well there is a broader support / resistance level around 450.0 with the next level of resistance at 600.0.

What I want to see personally is the probabilities of the current low (in red) being a broader higher low.  Taking out the initial resistance area (in blue) increases the probabilities that this is a broader higher low, but we really need to see a push into the 600 area and a pullback off that area that fails to take out the 180 level to confirm.

In short there is still not enough evidence, though the probabilities are favoring a broader swing higher.  Is there much of a difference between adding at 300 and 450?  Sure there is but it goes back to giving up better prices for a better environment.

Since I am looking to add fresh money, I want a better environment so I am waiting.  However for the more aggressive investor or position trader, we have been mentioning for weeks this is an area to add off an improving structure off a potential higher low.

So close to the next major resistance area, I am going to wait.  This does not mean there are no trade setups, but they are shorter term trades like swing trades.

S&P

S&P

Steep pullback off the 3325 level which was the next area to look for a top after taking out the 3250 area.  However as bad as it appears, this is not a jump on the short train yet.

Broader corrections unfold over a period of weeks not days, so we are likely to see some buyers step in here as bad as it looks.  Now can it simply just continue lower?

Sure this is an extreme move with no significant pullback so we could see some increasing momentum over the next couple days, but we do not want to short until we get a bounce and either a short setup off a lower high or double top.

I know with all the news on the Coronavirus, attack on the US Embassy, why would anyone buy here?  Because smart money may have insight the retail trader does not, and news is often lagging what smart money already knows.

Remember the markets are known for making the most pain for the most traders, and if everyone is jumping in short here I want to step back.   The market is always pricing in all information in real time, so it is likely already priced in here.

Now it can get worse, but we do not want to speculate on news, we want to see how the smart money positions here, and if they step in to buy this dip, or they continue selling after the open.

Pre-market traders are often smaller traders and they are often wrong especially going into a Monday open.  Let the market settle here as it has hit the first resistance level at 3250.  Want to see how price reacts.  The key level to take out  is 3200.

The other item that is not getting much talk this morning is the Primary Election next week.  Bernie is pulling well in Iowa and regardless of your political affiliation that is not going to be received well by the market if he takes Iowa.

We are sitting on a pile of cash, been taking profits throughout this rally and are prepared either way the market decides to react.  We have numerous stocks on our radar to start buying a broader swing and even this initial swing if the market provides an opportunity.

Gold Weekly

XAUUSD

The Gold Swing trade we issued a couple weeks ago, finally hit our third target.  Sat through a lot of crap, but holding to our conviction we are not rewarded not chasing.

The 1600 level is going to likely be a psychological barrier which may take a couple attempts to push through.  We are still looking for longs and if we get a continuation setup, or a pullback and bullish reversal we will look for another trade.

Have to be patient with Gold as it is a slow mover.  Either way we maintain our broader target of 1650 over the next six months.

We spoke about proportionality with market cycles and this is likely entering a 5th Wave of an impulse swing that started out of the 1175 area.  These are very clear structures which is why we have been trading Gold over the past few months.

 

Dollar Index

DXY

The US Dollar is showing additional signs of strength as it is attempting to take out the 97.80 resistance level.  A tight consolidation here and we can look for a continuation move higher.

So we are looking for a long USD trade today.

Summary

We are going to wait to see how the market reacts after the open and will look at putting some of our capital to work with stocks that are selling off on fear here.  We have plenty of cash on deck and no sense in not taking some small bites on a pullback in some stocks we like.

As for cryptos, you are either in and looking at levels to trim or waiting for the next setup.  Nothing to do here but let the market play out.  Chasing is a reactive move and can result in reacting if it pulls back and taking losses you do not need to.

Missing an opportunity is not the same as a loss.  Losses are finite, opportunities are infinite, so just wait for the next setup.  There will be one.

 

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