Do not index
Do not index
Macro Downtrend - Price Is Below
To introduce today’s newsletter, let’s briefly recount a key idea:
Bitcoin is still hovering below the Macro Downtrend, some 425 days prior to the Halving.
Historically, Macro Downtrend breakouts have occurred 366-396 days pre-Halving.
So this suggests that price could break it in March the earliest or April at the latest.
This is something we’ve been discussing for weeks, suggesting a relatively quiet February macro-wise, and thus far this has been the case.
In fact, there is still scope for a bit more downside in preparation for the trend acceleration phase that lies ahead:
The blue region represents a tremendous historical pool of liquidity for BTC and price has launched out of there last month.
The green horizontal represents a proverbial “gate” to this pool of liquidity and dipping into the green level would be price’s way of “closing the gate”.
In technical terms, that would constitute a retest and so a revisit of the green ~$19500 level is on the cards.
This would be healthy for price progression.
And the Monthly RSI suggests so as well:
The Monthly RSI is following the green path very well, needing to perform a successful retest of the green area itself (i.e. the bottom of the macro Red Wedge which is confluent support with the previous 2015 and 2019 Bear Market Bottoms).
The RSI is slowly reaching the retest zone, so price needs to dip a bit more for the RSI to enter retesting territory (green).
The Monthly attests to the possibility of BTC dropping lower:
After all, BTC rejected from the Monthly Range High and the Monthly Range High remains untapped since the break back into the blue-blue range.
Speaking of the rejection at the Monthly Range High, that level was confluent with the overextension beyond the upper Bollinger Band that we spoke of in this newsletter from a few weeks back:
Whenever price overextends beyond the upper BBand, it needs to return back into the BBands as part of a mean reversion.
And price has done that.
But the BBands are useful for timing tops and can be useful for timing bottoms as well, especially if support is found at the mid-point of the BBands (orange) which interestingly enough is confluent support with the Monthly Range Low.
But not only that - there is tremendous historically transacted volume at this region as well, according to the VPVR indicator:
The green region, which highlights the BBand mid-point area, represents a High Value Node on the VPVR and is located below the Monthly Range Low support.
So it’s likely BTC will enjoy a fervent buy-side reaction should price get there.
This makes a lot of sense, especially when we consider the inverse Head and Shoulders idea from January 30th, mentioned in a previous newsletter:
The Right Shoulder of that iH&S formation is of course located below the Monthly Range Low support, inside the High Value Node (green box).
And if we zoom it, this will disrupt the VPVR indicator, but the reason for the zoom in is to show that BTC may be turning the green level of $21800 into new resistance:
And late last year in 2022, a similar “Weekly Close below green” scenario preceded a resistance flip to reject price lower inside the blue-blue range.
So on the Weekly, we are seeing that this green level could flip into new resistance.
And if we zoom in a bit more, to the Daily timeframe, we’ll notice that there may be a bearish formation feeding into that potentially bearish scenario.
A Head & Shoulders may be forming:
It’ll be interesting to see how the Right Shoulder of this Daily H&S forms, right now it is the very beginning of a cluster of price action so it’s unclear if the cluster/Right Shoulder will form a little below the green level as per the chart or if the cluster is actually forming right now:
In which case this will change the Neckline for this H&S, which means that it would be higher rather than lower.
Either way, the Neckline will be the validation point for the breakdown which would confirm further downside inside the Monthly blue-blue range.
In short, this Daily Head and Shoulders could feed into the Weekly inverse Head & Shoulders.
Because while things may seem bearish in the short-term, in the mid-term things are developing into a bullish outlook:
So let’s look ahead.
Let’s assume the Right Shoulder of the inverse Head and Shoulder forms just below the ~$20000 level.
The Neckline of the iH&S would be the orange Lower High resistance.
And breaking beyond that Lower High resistance would enable a validation of the iH&S formation.
And a breakout would see price fill in a rather substantial Volume Gap between $23300-$29000.
Very little historically transacted volume resides in this area, owing to the reality that little supports and resistances have developed there over time.
So a breakout from the inverse H&S would likely see price fill that gap.
And how does that tie with the broader picture?
The neckline of the Weekly inverse Head & Shoulders would be a confluent resistance with the Macro Downtrend on the Monthly in April.
So essentially, a breakout from the inverse H&S would equal a break beyond the Macro Downtrend into a confirmed Bull Market.
But let’s for the sake of discourse assume that the IH&S breakout occurs sooner, in March - then BTC would need to break the ~$23400 level that is the Neckline of the pattern but the Macro Downtrend would represent the price point of ~$25000.
Would BTC get rejected by ~$25000 (Macro Downtrend) to enable a post-iH&S breakout retest of the ~$23400 Neckline of the iH&S?
There are a few scenarios of course for how things could play out but the main point is that things are looking bullish for the mid-term, even if some short-term downside needs to feed into that mid-term bull bias.
Thank you for reading.