Stocks keep trading with a positive bias and major indexes are reaching new all time highs. Our LT wave for May suggests some weakness is up next. We will find out soon. Here is the current S&P chart:
The S&P exceeded its March 1 high yesterday, but it didn’t manage to stay above the 2400 resistance level. It may push through in the coming days, but if that doesn’t happen it will start to look like a failed breakout and that would probably trigger some selling.
The Earl indicator (blue line) has turned down, but the slower Earl2 (orange line) is still headed higher. This can go either way. A continued rally would probably target 2500 where it would test the upper boundary of the blue trend channel. A pullback could give us a revisit of 2300 for a test of the lower boundary.
I am short term neutral until we get more clarity.
Bitcoin is getting a lot of buzz recently as it keeps climbing to new record highs. I try to do a post about bitcoin once a year, so this a good opportunity for an update. I have been quite lucky with my calls on the crypto currencies. I went bearish on bitcoin in December 2013, just weeks before it peaked above $1000. In my second article I called for bitcoins to drop as low as $180, which came true a year later. And in my most recent post in October 2015 I gave a long term buy signal for bitcoin and also tipped ethereum. Ethereum has indeed grown into a strong contender in this space. You could pick up ETH for less than $1 when I wrote my piece and it traded just below $100 in the recent weeks. That’s a nice 100-fold increase in less than 2 years.
So, what’s next for bitcoin? Here is a long term chart:
Bitcoin has been climbing in a nice trend channel since 2015. BTC trades above $1700 as of today, so it looks like it’s going to test the upper boundary of the channel. A breakout above $1900 is possible and would start a blow-off phase like in 2013. But that remains to be seen.
On the downside, the $1000-1200 zone is major support that must be held. A drop below that zone would tell us that newer crypto currencies (possibly ethereum) are taking over, just like Google took over from Yahoo at some point. I still think that most altcoins will go to zero once a crypto currency becomes the clear winner in terms of linking real value and services within its coin.
The next upside targets for bitcoin remain at $2457 and $4246.
So bitcoin hits my long term target
Posted by Danny on August 14, 2017
Normally I write about bitcoin once a year, but since my last post in May the cryptos have become a very fast market and now my long term price target of $4246 is being reached. So, I will give a quick update and some new price targets.
But first I want to take a look at stock markets where some interesting things are happening too. Here is the current Nasdaq chart:
Nasdaq has reached 6400 and S&P 500 has stagnated just below 2500, which was the base scenario I mentioned a month ago. Markets had a quick dip last week. Nothing unusual, the S&P was down 1.4% for the week, but people have become so accustomed to low volatility that this was enough to get some traders panicked already. What are those traders going to do if the markets are down more than 2 or 3% in a week (or day)? We will find out some day.
Long term trend lines in Nasdaq and S&P and are being tested but not broken yet. As long as that is the case we better assume that the bull run is ongoing. We are more likely than not to get a rebound rally here. We are starting a new lunar green period and the Earl indicator is in bottom territory (but not turning up yet). Whether that rebound will be weak or strong I don’t know. A sustained drop below 6200 would not look good and then the chances for a rebound rally would dwindle quickly.
Keep an eye on August 23rd, when our LT wave will peak for August. If that paints any kind of high (rebound high, double top or even all time high) then we could very well see a new downturn in the ensuing days.
So, what about those bitcoins? In February 2014 I posted price targets based on my reversal levels calculations. Bitcoin was trading above $600 back then, but my bottom target of $180 was nicely reached by early 2015 and then bitcoin started climbing again. I reiterated my long term buy signal in October 2015, when you could still buy bitcoin at $280. Of course we had to wait longer to get to my top targets of $2457 and $4246, but here we are with bitcoin knocking on $4200 over the weekend. So, does this mean the move is now over?
I really don’t know here, because the $4000 level is a very critical juncture in the long term chart:
Some people are warning about parabolic moves and bubbles already, but that’s because they are looking at a linear scaled chart. Moves of this magnitude can only be judged on a semi-log scale chart. What we see here is a sustained (but very high) rate of change, with the move confined to a rather narrow channel since 2015. The same rate of change it also held throughout 2012 before going parabolic in 2013. A sustained breakout above $4000 that quickly heads for $5000+ would start a parabolic move like in 2013. And then it can go above $10k. A failure to do so would probably give us a peak near my $4246 target and be followed by a significant decline when traders notice that the steep rally has ended.
Both scenarios have 50/50 chance at the moment, so if you hold bitcoin from a much lower cost base then I would sell some and hold the rest at zero cost base. A tulip mania type move is possible here and then bitcoin could reach $10k or $20k before a big panic.
Meanwhile my method shows two new price targets: $6430 could become relevant as a next top target or as a resistance zone on the way to even higher levels. And there is a bottom target at $1470. This would come into play if we get a big drop. Bear in mind, not all my targets and forecasts will work out. I am probably due for some bad calls on bitcoin.
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