Equities markets have extended their decline, but Bitcoin and select altcoins have not given up much ground,
Equities markets have extended their decline, but Bitcoin and select altcoins have not given up much ground, leading some traders to believe that the bottom is in.
The United States equities markets have been under a firm bear grip for a large part of the year. The S&P 500 and the Nasdaq Composite have declined for three quarters in a row, a first since 2009. There was no respite in selling in September and the Dow Jones Industrial Average is on track to record its worst September since 2002. These figures outline the kind of carnage that exists in the equities market.
Compared to these disappointing figures, Bitcoin (BTC) and select altcoins have not given up much ground in September. This is the first sign that selling could be drying up at lower levels and long-term investors may have started bottom fishing.
In the final quarter of the year, investors will continue to focus on the inflation data. Any indication of inflation topping could bring about a sharp recovery in risk assets, but if inflation remains stubbornly high, then a round of sell-offs could follow.
Let’s study the charts of the S&P 500 index, the U.S. dollar index (DXY) and the major cryptocurrencies to determine if a recovery is on the cards.
SPX
The S&P 500 index (SPX) has been under intense selling pressure for the past few days but the bulls have held their ground. This indicates that bulls are buying the dips near 3,636.
The first resistance on the upside is 3,737. If bulls thrust the price above this level, the index could rise to the 20-day exponential moving average (3,818). In a downtrend, this is the important level to keep an eye on because a break and close above it will suggest that the bears may be losing their grip.
Sharp declines are usually followed by strong rallies. That could carry the index to the downtrend line and then to the 50-day simple moving average (4,012).
The bears are likely to have other plans. They will try to extend the downtrend by sinking and sustaining the price below 3,636. If they manage to do that, the index could plummet to 3,500 and later to 3,325.
DXY
The U.S. dollar index surged to 114.77 on Sept. 28, which pushed the relative strength index (RSI) into deeply overbought territory. This may have attracted profit-booking by the short-term traders which pulled the price near the 20-day EMA (111).
The bears will have to yank the price below the 20-day EMA to suggest that the bullish momentum could be weakening. That could clear the path for a possible drop to the 50-day SMA (108).
The zone between the 50-day SMA and the uptrend line is likely to witness aggressive buying by the bulls because if they fail to defend the zone, it will indicate that the index may have topped out.
On the other hand, if the price turns up from the current level or rebounds off the 20-day EMA, it will indicate that the bulls continue to buy on dips. Buyers will then again attempt to thrust the price above 114.77 and resume the uptrend. The next target objective on the upside is 118.
BTC/USDT
Bitcoin bounced off the strong support at $18,626 on Sept. 28, indicating that the bulls continue to fiercely defend this level. The long tail on the candlestick of the past two days shows that bulls are buying the intraday dips.
The bulls pushed the price above the 20-day EMA ($19,602) on Sept. 30 but are struggling to sustain the higher levels. This shows that bears are selling near the 50-day SMA ($20,621).
If bulls do not allow the price to drop below the 20-day EMA, the likelihood of a rally to the downtrend line increases. The bears are expected to mount a strong resistance at this level but if bulls clear this hurdle, the BTC/USDT pair could signal a short-term trend change. The pair could then rise to $22,799.
Contrary to this assumption, if the price turns down from the current level or the 50-day SMA ($20,625), the pair could again drop to the $18,626 to $17,622 support zone.
ETH/USDT
Ether (ETH) has been declining in a descending channel pattern for the past several days. In the short term, the price has been stuck between $1,250 and $1,410, indicating demand at lower levels but selling near the resistance.
The price action inside the range is usually random and volatile. Hence, it is difficult to predict the direction of the breakout with certainty.
If the price breaks above $1,410, it will suggest that the bulls have absorbed the supply. That could propel the price to the resistance line of the channel. The bulls will have to overcome this barrier to suggest a potential trend change.
On the other hand, if the price turns down and breaks below $1,250, the bears will attempt to cement their advantage by pulling the ETH/USDT pair below the channel. If they succeed, the…
cointelegraph.com