Mooning Commodities, CryptocuCommodities Market Outlook – Crypto Down As Risk-Off Continues | Market Update
Report Date: March 9th, 2022
Bill Noble, Senior Market Analyst, Token Metrics
The Market Update is centered around using technical analysis to successfully and responsibly navigate the crypto market. It is not intended to be a trading calls newsletter. While technical analysis is an extremely powerful tool, please be aware that it can be temporarily disrupted by large news events.
Total Crypto Market Cap – Weekly Chart
Data as of 3/9/2022 – Past performance not indicative of future returns
Looking at a weekly time frame for total cryptocurrency market cap (TOTAL), we see one important level to watch. A weekly close above $1.84 trillion would be a sign a short-term crypt rally could unfold. If Bitcoin stays above $40,000, TOTAL could move as high as $2.25 trillion. That number could imply a move to $47,000 in BTC. Conversely, if stocks start falling again, the move to $42,000 could have been all the upside you could get in the near term.
Total Alt Market Cap – Weekly Chart
Data as of 3/9/2022 – Past performance not indicative of future returns
The total crypto market cap excluding Bitcoin and Ethereum (TOTAL3) is currently sitting below the key pivot at $700 billion. The bearish head and shoulders pattern is still in effect. It is possible that altcoins may underperform BTC and ETH on any future rally (assuming of course there is a future rally). If BTC rallies to $47,000 or $52,000, that may be a chance to reduce exposure to low quality altcoins.
Bitcoin 4-hour Chart
Source: Symbolik
Data as of 03/09/2022 – Past performance not indicative of future returns
Looking at the 4-hour chart of Bitcoin, we see that short term bottom signals have been effective. The signals come from the work of Tom DeMark. Tom DeMark is one of the first technical analysts to use quantitative methods to predict market behavior. His most famous indicator is called TD Sequential, which counts a set of conditions related to the strength of the trend. When Sequential gets to the 13th instance of the set of conditions, a trend reversal can happen. While the indicator is complex, traders throughout the years have been trained to look for the “13” signal and the search for a bottom or a top. In the case of the 4-hour chart of BTC, a 13-bottom has appeared on March 7. Based on this signal, we think bitcoin can rally back to either $45,000 or $47,000. Support for dip buyers is at $40,900. $39,500 could be a stop loss on any new longs.
Ethereum 4-Hour Chart
Source: Symbolk
Data as of 03/09/2022 – Past performance not indicative of future returns
The 13-bottom is also on the 4-hour chart of Ethereum. Support is at $2,607. If ETH is above that level, then ETH should be stable. A move above $3,000 is possible. It’s not shown on the chart, but we are wondering if ETH can rally all the way up to $3,250. ETH underperformed on the way up on March 9 and we suspect ETH may be able to catch up to BTC and outperform during the rest of this rally phase.
Bitcoin – Weekly Chart
Data as of 03/09/2022 – Past performance not indicative of future returns
On the Bitcoin weekly chart, we see four key levels that will be of interest to long term players. On the upside, there is $42,700 and $48,900. Given the distress in the fiat currency market, a test of $48,900 may be possible in the short-term. $42,700 may be resistance in the short term.
Looking out in time to sell-in-May-and-go-away, Bitcoin may be vulnerable to a dramatic decline in risk assets. That could lead to a move to either $28,000 or $20,000. In our view, Bitcoin could be a long-term buy at those levels (not investment advice).
Legacy Charts of the Week – XLF (U.S. Banks) XLF: Daily Chart
Data as of 03/09/2022 – Past performance not indicative of future returns
XLF is an ETF that tracks the stocks of big U.S. banks. Currently, XLF sits below the bottom of an expanding triangle formation. This could be troubling as it shows there could be dramatic downside risk. If U.S. banks decline as much as this pattern implies, there could be a repeat of the Great Financial Crisis in 2008.
CBOT Wheat: Daily Chart
Data as of 03/09/2022 – Past performance not indicative of future returns
Russia and Ukraine account for a large percentage of the world’s wheat supply. Wheat rallied approximately 73% as a result of sanctions. This could create inflation of a nature that the Fed can’t stop with simple interest rate hikes.
LME Nickel
Data as of 03/08/2022 – Past performance not indicative of future returns
Due to a massive short squeeze triggered by supply concerns from sanctions, nickel was halted at the London Metals Exchange on March 8. So, the chart above shows no candle for March 9. Apparently, the up move was so sudden that margin calls on shorts may have bankrupted the short sellers. Since futures is a zero-sum game where losers pay winners with the exchange as an intermediary, a default by the shorts could create a liquidity crisis for futures exchanges, as well as the banks that lend money to these exchanges. This situation could lead to more central banks action to add more liquidity to the financial system to potentially prevent large exchanges from becoming insolvent.
Brent Crude Oil: Weekly
It is possible that oil may have found a local top at resistance at $135. That resistance comes from Rick Ackerman’s hidden pivot method.
Data as of 03/09/2022 – Past performance not indicative of future returns
Key takeaways:
- BTC may be able to rally to $47,000 or $52,000. BTC must first rally above $42,000 for that idea to be confirmed.
- We expect the inflation number on March 10 to be awful. We expect the Fed to talk tough on inflation. However, with the stress in the American and European banking systems, along with the stress on commodity futures exchanges, we expect the Fed will not reduce the amount of money it prints. It may have to increase it, which would be a net-positive for crypto.
- The CFTC considers Bitcoin a commodity. In a study done by Token Metrics in October of 2021, BTC and ETH appear to be strongly (positively) correlated with soybeans, gold, corn, copper, wheat, and nickel. Also, BTC and ETH appear to be negatively correlated with crude oil, natural gas, cocoa, coffee, and orange juice. Our read: BTC can enjoy a mini-parabolic higher to “catch up” to wheat and nickel. Based on the statistical work, sideways action in oil would allow BTC to continue the rally.
