Bottoms Across the Board

Cross Asset Compass 7

Key Takeaways

• Risk assets are close to bottoming out as rates are putting in a significant top.

• A short-term DXY rally should not invalidate risk asset bullishness.

• Bitcoin could see $26k before $35k settles in.

• SP500 to ~$4400 very quickly before a small break. $4066 is still in the cards before the rally starts.

• Charged macro week ahead.

• The current correction in bitcoin is extremely bullish! Why? Because of the structure of the correction. The Cup-and-Handle pattern is still in play. The neckline break has happened – and it is quite normal to see a retest of the neckline area before the price moves higher. We have that setup now, only the current wave (2) is developing in an “Extended Flat”. This is bullish and the move seems to be coming to an end. 

• We believe that a final push lower towards $26.5k is coming in the next coming days (in the worst case move as low as $25.2K). This coincides with the final push higher in rates before a strong reversal lower. The minimum target for the Cup-and-Handle pattern is ~$35k. The target for wave 3 of the EW count of lower degrees is $42k or even $52K in an extended version. Bitcoin and altcoins are very close to putting in a low, which will propel cryptos to much higher levels.

• Sometimes time just goes by without much happening in markets or in a particular asset. Last week, DXY bounced a measly 0.14%, which does not seem to suggest, that a rally is coming. Yet, we still think it will come. The ABC structure needs to play out and some of the bearishness toward the DXY needs to cool.

• Currently, sentiment is at 30 and has been coming down strongly since September, when it topped around 97. The bounce will convince DXY bulls, that up-trend is back, which is required for DXY to turn lower again. We still see 105-107 as the bounce target before it rolls over and start to decline towards the 91-93 area, which will create optimal conditions for a strong rally in Risk Assets.