Daily Archives: March 5, 2018

Bitcoin Rally Review: $12,000 Or Bust?


Looking for a different perspective, I decided to use the line type settings. With line type settings most of the erroneous spikes disappear or smooth out, and no gaps will show up. Switching between bars and line settings can also change any wave count.

The first thing I saw was that it can work as a diagonal decline. If the crash to that $6000 bottom is a “C” wave, completing wave 3 in Minor degree, then this Bitcoin bear market is not finished yet.  The problem is, where in this 4th wave rally are we?

I don’t have the magic location, but I love the challenge of counting out a set of 5 waves  that may be impulse related. Besides that, this market decline is good practice because we will get the same puzzle again, once the general markets hit their market lows. The only difference will be that the last part of the DJIA decline will be a 4th wave in Intermediate degree, followed by 5 waves in Minor degree.

Over all volumes in Bitcoin trading has been dramatically curtailed, which tells me Bitcoins as an investment is fading fast.

Over 1541 Cryptos are presently posted, with a total capitalization of about $445 billion, US dollars. Since its hay days of 2017, about $275  billion US dollars have gone up in digital smoke, and I’m sure that smoke will keep on coming.

Sheila Bair says bitcoin has no intrinsic value — but neither does the dollar – MarketWatch

This describes my sentiments exactly as most Bitcoin investors don’t even know what “intrinsic” value is.

I like 4th waves, but they can be pretty tough to decipher. I consider 4th waves (up or down) to be the most important wave. Keeping my degree levels low still makes sense, because you will “never” see,  5 waves down in Primary degree on a 90 minute, intraday chart. Even 5 waves down in Intermediate degree may never show up!

The Gold/Bitcoin ratio is at 8.47:1, and has only come close to this 3 times in the last year. A double or triple top in the Gold/Bitcoin ratio does not bode well for the price of Bitcoins. The Gold/Bitcoin ratio may not have any forecasting value for Bitcoins, but I’m sure this ratio will shrink much more.  A shrinking or compressing ratio means that you need fewer gold ounces to buy one Bitcoin.

If the rally that has completed was a 4th wave rally, then Bitcoins will crash below $6000. Of course, if we are in a triangle that would drag the time out some more.

I’m very bearish on Bitcoins, and hanging on to them when they can crash $4000 makes no sense to me.  Even after all this starts to play out, then Bitcoins price could flat line, just like Tulips did in 1637!

SP500 Intraday Rally Review

This week may be the last week, that any March contracts will be finished, after which I have to jump to June contracts with most of the indices I cover.  From Friday’s decline the markets found some joy and soared in hopes things will not be as bad as it seems. As long as the media is conducting a trade war, the chances for the markets to go down outnumber and reason that that this market should go up!

Trade war fears are not going to go away, as this kind of action has worldwide domino repercussions. 30-Day Fed Fund rates still have downside potential, which means that rate increases, are still to come during 2018.

We need the markets to clearly show lower highs, but these can happen in any 4th wave as well. This is what happened in the  2015 correction.  If another small degree wave 2 rally is in progress, then the SP500 cannot go higher than my “B” wave in Minor degree.  (Blue).  This “B” wave I’m showing is the start of a potential zigzag in intermediate degree.

This would be the start of a Cycle degree zigzag wave 4 correction, which the majority of analysts will call a “bear market”.

We can have market crashes without the bear market, as that is exactly what happened in the crash of 1987. The 87 crash was over in a few short months, but it sure will take longer in today’s markets. The 87 crash was only a Minor degree wave 3 crash, which the majority of wave analysts have used as a Primary degree crash. My 1987 crash Minor degree wave count,  is a “Full” 2 degrees lower, in what the experts have used.

These contracts that trade during the night, do produce some erroneous spikes that don’t show up, when switching this chart into line type charts.  The markets are still heading higher as I post, but we can take a bit more. We just can’t clear the “B” wave in Minor degree.

30-Day Fed Fund Rate 1989-2017 Review

I have been looking at the 30-Day Fed Funds futures charts. Fed fund rate is the interest rate charged between banks and by the looks of the past pattern this rate has a huge impact on the stock market and gold. Years ago I saw a chart made by Elliott Wave International (EWI) and they simply said that the “fed” just follows the 30-Day Fed Funds rate. The Fed raises rates, when the 30-Day rate allows them to.

The top line at the 100 price level would represent the Fed is giving the money away, which technically should never happen. We can see that there are small sideways movements with some lasting a bit more than a year where they do nothing. This “do nothing” time period is the start of major reversals in monetary policy.  The patterns of the moves look very “square” or flat, opening small gaps along the way.

The bottom trend line is drawn to give us some perspective, but it does not mean that the rate increases will crash that far down.

I will be looking at and posting the Fed fund rate a bit more often, and one key thing to look for is when the Fed skips rate increases for 2-3 meetings and produce a flat bottom.

For the longest period of time of about 5-6 years the Fed did nothing but then started rate operations in 2015. Of course the stock market went wild and for a year the stock market didn’t like it.  By 2016 the markets soared again, but by late January 2018, investors had enough, and they proceeded to sell off as rates were not going down. I think these rate increase cycle will end, and the Fed will have to start easing again.

When that happens then the stock market could start to soar again. This is not going to happen overnight or next week, as I would like to see the commercial traders net long positions become biased to the long side.

In last week’s 30-Day COT report, the commercial traders  positions were about as net neutral as I have seen. (1:1) Until the commercials net long positions increase dramatically, the Fed rate increases should keep coming.  We don’t know if a flat bottom will form this time, but past bottoms suggests a flat bottom will form. If they do nothing for a year or more, then a reversal of rate policy should happen.

When we look at the Euro Dollar chart, it looks just like the 30-Day Fed fund rate. Commercials in the Euro Dollar have shifted into a net long position by a wide margin so they don’t think the rate increases will last for a long run.

There will be no Elliott Wave counts that I will produce with this Fed fund rate, because 100 is the glass ceiling of “zero percent”.  Think of it as a,  “bullet proof” glass ceiling!