The false signals make me paranoid, but the big bear move does look most likely.
If this was all a big bear market rally, typically would be over now.
Let’s start with a few points and then we’ll expand upon each.
When viewed from a bird’s eye perspective all the big crash signals proposed are still valid. As per these crash norms, probability of a crash would still be very high.
We’re inside of the zone in which these signals would forecast crash entry signals.
The macro possible reversal range is quite big (Small relative to the target trade, but a lot of moves that can hurt to be persistently short in).
High probability setups have a good expectation of working, but when they fail, they will usually have spectacular failures and strong counter moves.
A wide possible reversal range and risk of spectacular failure if wrong is a very tricky/risky situation to trade short only strategies in.
If it takes a long time to work out you’re wrong, and price is making a strong counter-move; you’re in one of the worst possible situations a trader can be in.
The best thing to do is to expect anything and plan in such a way as to have no surprises.
We don’t know if bull breakouts will be 50 points, 500 points or 5,000 points trends. But if there’s a high chance of 50, we might as well look for longs and get stops into even to benefit if it continues to uptrend - Also offering lower risk on shorts into rallies.
I think it’s very likely a trend is coming from the next breakout. Up or down, it’s likely to be a trend. Markets have essentially contracted for 7 months. This is like a coiled spring. A lot of energy built up and something strong likely after it.
If a bear is coming, our current prices have a very good chance of being the top of the bear market rally.
Using a macro signal, we have a wider possible reversal zone and it’s wise to consider failure of smaller chart bear patterns will often produce strong spikes to higher in the signal area.
Based on the points covered so far, our optimal strategy is to bet on the bear at big levels. Plan bullish momentum breakout levels and buy dips on to retests of breaks if bear levels fail.
Trailing stops on long positions will allow you to bet on next bear levels and only get taken out the long trades if the market reverses from resistance.
I think it would be really bad to be caught out on the next breakout. be it bull or bear. As such, I just plan how the extremes of both moves would look and feel comfortable I can probably deal with them and most things in-between.
I think the case for the bears looks good currently. My opinion is very fickle because it’s always contingent upon price action around the levels defined. Currently things look really bearish.
The overall macro TA case is very strong. If there was not a crash, this would be an anomaly based on norms I’ve noticed in crash patterns.
The fundamental case for a bear is significantly strong. I don’t think much about fundies and will bet against all the logic of them in the blink of an eye based on TA signals. The TA tells me when it’s not working, fundies I’d struggle to know in a timely manner. But the case seems strong. Almost absolute. Economic policies are overtly bearish and there’s a whole slew of possible triggers to put us into the strong bear break.
The fundie case for a crypto catalyst has a lot of weight. It’s also supportable with TA patterns. The bounce so far not being able to break the levels bulls usually would have to for a squeeze rally to start. I’m always suspicious of the obvious in the market, but none of this is looking good for the bulls.
Let’s put it this way, if there was to be a big market crash now it would not be hard to explain to people 20 - 30 yrs later why it happened. I posted saying this 6 months ago and we have all the more possible reasons to support it now than we did then.
My only big concern for the macro bear is it looks obvious. And when things look obvious in the market a tiny percentage of the time it will be the case and most of the time something dramatically different happens. Since most of the time something bad happens, it’s best to be prepared for this every time.
This all looks like the perfect storm. It’s probably either going to be just that (Giving us sensational headline grabbing bear moves) or it’s going to be the most vicious of traps. I feel it’s extremely likely at some point the mega bear comes, but I feel almost certain if the bear signals failed, they’d so do spectacularly.
Plan is to define the big bear levels to bet at and have plans for momentum long trades upon failure of the bear levels. I think there’s big trend coming one way or the other. Being able to position at this point for either side would be great. I’ll have plans that attempt to optimise my chances of doing that to either side with least risk.
Yellow zone is where I think the big decision is to be made here. If we turn away from it, strong downtrend. If we break it, strong near-term bull momentum and review upon hitting the next resistance level.
Expanding on points:
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