The S&P is down 20.5% from its high, on the daily timeframe its made a lower low and is about to retest the .618 Fibonacci level. This Fibonacci level is the most important level out of of 7 that are on the chart, testing and failing to break above this level while having a lower low on the chart will lead to a high chance of testing the bottom of the S&P at a price level of 3636. If the dollar is to keep going up further and the S&P breaks past the .618 level, it could potentially test the high of 4120 or better yet a critical level at 4167 that could make or break the S&P. For now, there is a potential for the S&P to go up because of the daily bullish divergence that hasn’t played out yet which can lead Bitcoin to go up in price in the short term if this were to happen.

Bitcoin has respected this current broadening wedge for quite a bit, reacting with bullish momentum from hitting the bottom of it yet again. What’s interesting is bitcoin hit the bottom of the descending wedge (in orange) before making its ascent back up above 19,000. The move up after breaking the descending wedge caused BTC to go up 22.45% but with the CPI readings that the FED announced, this caused markets to stumble leaving BTC down 20.6%.

Cumulative Volume Delta (CVD) is the total trading volume in either Spot (buying bitcoin itself) or futures (betting on bitcoin going up or down). On a 4 hour view, people have been selling bitcoin on spot and shorting bitcoin using future contracts either with a dollar pair or a stable coin pair. Open Interest is the total amount of positions that are opened as of now. In just 3 days open interest for coin margined contracts (meaning total positions of shorts/longs that are currently opened) went up by 500 million dollars. Putting both indicators together it shows a story for the bigger picture of what total traders are doing. When the price of bitcoin went up from 18400 to 22800, CVD for spot and futures started going up, this means that people were buying and longing bitcoin. What’s interesting is Open interest for both stablecoin-margin contracts and coin-margined contracts stayed stagnant, this indicates that as people were starting to buy bitcoin and long it, there were almost no new positions being added into the market at that time. The positions that were added to the market mostly came from stablecoin-margined contracts, once bitcoin went down from 22800 to 19600 all the new people entering positions got liquidated from over longing bitcoin causing a long squeeze. Currently everyone is selling their bitcoin and shorting but now with 500 million dollars worth of positions added to coin-margined contracts by a whale, people are anticipating a move up to trap all the shortening positions that shorted the bottom of the price. Taking all this information in mind from the dollar index to what bitcoin traders are currently doing, it’s very likely that there could be a further price fall caused by the downfall of the S&P. If the S&P were to break the .618 Fibonacci line bitcoin could go up in price and all those new open interest positions can trap shorts leading to a powerful move up.

On the daily timeframe you can see that there is a broadening wedge. This is a wedge that hits most of the highs and the lows consistently, the top of the wedge is increasing while the bottom is decreasing, giving it the name broadening wedge. During July, Bitcoin was doing well by creating higher highs but it began to see a slowdown during the month of August. It was using the green .618 Fibonacci level as support but at the same time being sold off at the top of the wedge. While it was still creating higher highs, those highs started to become weaker. When the first big drop happened in mid August There was a candle close right at the .382 level near the wick off at the end of July, this is where bitcoin tested whether this double bottom was going to test the previous high or fail and dip lower. It then was obvious that Bitcoin failed and kept making new lower lows losing all the progress that it made. So why is this important? It’s important to know the current trend and price action of a trade so you can equip yourself with a good buy opportunity or take a good trade. What’s known so far is that bitcoin has made lower lows and has no chance of testing up to higher levels until it breaks the previous high of 20577, if it fails once again to get above this level, there’s a high chance that it will make new lows.

Here is a close look at what’s happening on a shorter time frame. Shorter time frames make up what happens in the larger time frames, so it’s always important to check every time frame and use it to your advantage. On the 4 hour you get a closer look at what’s happening on the daily, it’s obviously making lower lows and higher lows pushing the price down further. Something that’s noticeable that’s harder to see on the daily is that there’s a falling wedge and price action is shrinking, meaning the candle sticks have less space which in the end causes a huge explosion in price when it escapes the wedge. In Bulkowski’s website, he says that this type of wedge has a 68% chance of breaking to the upside once it exits the wedge. Keep in mind while it’s breaking to the upside at first, it’s very possible for the price action to bait out traders and come to the downside right after a huge price swing up. The relative strength index (RSI for short) tells if a securities price is overbought or oversold and is used to show if there are any divergences. A divergence tells you a weakness in price level, for example in the above chart, the RSI make a higher low while the price level of bitcoin itself made a lower low showing a weakness of people that are selling, eventually leading the price to go up briefly. What’s certain is that on the 4 hour timeframe the price must exit the wedge in order to see which direction bitcoin can break out of. If it breaks up, it has a chance of retesting the 20577 level and creating a higher high pushing the price up further, if it breaks lower, there could be a possible double bottom at 17600.

If you didn’t understand Market sentiment, meaning higher highs or lower lows I will make a post explaining it in further detail as well as how to use other oscillators and trading methods. For now, here are some links to help you get started on learning what each is:

https://www.investopedia.com/terms/m/movingaverage.asp

https://thepatternsite.com/fallwedge.html