Welcome to this week’s issue of Bloodgood’s notes. The idea of this newsletter is to give you an overview of the previous week’s fundamentals and what happened on charts as well as to remind you of this week’s articles, secret TA tips, and trading calls. Basically, it’s about giving you all the key info in one place.
Table of contents
- Fundamental overview
- Bitcoin and Ethereum chart
- Blood’s content recap
- Concluding notes
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More traders open SHORT posititions on S&P 500 ahead of FOMC, another bank down and crypto showing bearish signs.
In the past couple of newsletters, I mentioned that net positioning on the S&P 500 was getting more and more short, and this trend still isn’t slowing down. For the third week in a row, shorts are getting more aggressive, which is definitely something to bear in mind when thinking about stocks. Maybe the crowd will turn out to be right after all, but if one thing is for sure, it’s that the market doesn’t make things that easy very often. Especially not when everyone seems to be positioned the same way.
With that said, all eyes are now on the FOMC this week. Given that economic data have been stronger than most expected, another 25 bps hike is the most likely option here. If the Fed decides to pause instead, then that would provide the perfect opportunity for those shorts to get rinsed and for stocks to rally, along with crypto, of course. In fact, Bitcoin could rally even more than you’d expect in that scenario, because what is arguably the biggest narrative driving it this year—bank solvency goes down, BTC number goes up—has just made quite the comeback. First Republic Bank ($FRC) kicked the bucket and was just sold to JPMorgan Chase, in case it wasn’t already obvious that any US bank outside of the “Big Four” (JPMorgan Chase, Bank of America, Wells Fargo, and Citigroup) is, to put it mildly, absolutely and utterly screwed.
Apart from the fact that the FRC chart is one among surprisingly many banking stocks that look like absolute rugpulls, this collapse is notable because it came after the Bank Term Funding Program (BTFP) and all the talk about regulators stepping in to protect this crumbling sector. The key takeaway is that the BTFP clearly isn’t enough in these economic conditions; the government will have to step in with more “temporary” and carefully worded fixes, but if you listen carefully, you’ll hear that all of them make the money printer go brrrrrr.
Bitcoin shows weakness over the weekend, so let’s jump in.
On the weekly timeframe, BTC remains stubbornly stuck beneath the significant $30k mark. This level is proving to be a bit more of a hard nut to crack than initially anticipated. However, a broader retrace towards the $24k zone would be completely standard, helping reset overbought indicators. Right now, the RSI is above the 60 level, the short-term EMAs are aligned around the $24k mark, and the weekly 200 EMA remains flat. This $24k-$25k zone is in confluence with the summer range high and the aforementioned EMAs, making it a prime spot for bids.
The daily level screams bearish, with volume dwindling over the past few days and a lower high being formed. Currently, it’s testing the last EMA of our cloud. Furthermore, the RSI is probing the 50 zone, so if we don’t see a bounce here, I anticipate the $26,800 low to be tested, potentially putting in a new low.
In my opinion, the safest strategy here is to play the short-term EMA cloud (made up of the 13, 25, and 34 EMAs). Stay on the sidelines if BTC loses this on the daily timeframe and leap back in once it’s reclaimed.
SPX, Gold and DXY
The S&P 500 was showing strength into the close on Friday.
The RSI remains on an upward trajectory, and the 4096 level has been reclaimed. However, SPX is nearing the weekly 100 MA, which had a rejection in Q1 of this year. If it reclaims the MA, it could signal further upside, providing some breathing room for crypto.
Gold is still glued to the 1981 level. We’ve previously discussed that we anticipated more downside for gold, but it’s still defending the support. However, as the saying goes, the more a level is tested, the weaker it becomes. Gold is in dire need of a bounce here, or the 1916 level could become a reality.
The U.S. Dollar Index is teetering on the edge of its last level before a breakdown. It’s clearly in a downtrend and barely defending the last low. Frankly, I’m surprised DXY hasn’t plummeted further, considering what’s been going on lately in terms of macro developments.
Bitcoin looks weak, but Ethereum looks even weaker.
The short-term trend (composed of EMAs) has been lost, and the $1,784 low is now within sight. As a swing trader, I’m primarily interested in the level below that, at $1,653, which also coincides with the daily EMA 200. If the EMA is lost, we’ll be looking at the 2017 ATH zone once again. With these levels in mind, it’s time to start placing your bids!
Ethereum/Bitcoin is once again inching below our key level, and as promised, I’m sharing the next level I’m bidding on. I’m targeting the 0.054 BTC – 0.057 BTC zone in case it wants to retest that area. However, as you can see, the weekly EMA 200 should also serve as a solid buying opportunity.
Blood’s content recap
Bitcoin Accumulation levels
“Scalping Strategy #7: Vwap bands
1. Choose a coin and add “Volume Weighted Average Price” Indicator
2. Switch to 5 min timeframe
3. Wait for price to close above bands for LONGS
4. Wait for price to close below bands for SHORTS
5. TP is 2RR for both, SL on lows/highs
Chart example here.
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Sharing tips and guide on how to be eligible for upcoming aidrops.
As if the banking crisis isn’t enough, there’s also been more fuss about the US debt ceiling over the past few days. With the US government getting uncomfortably close to a historic debt default, there’s a political fight over what to do about this. Of course, both parties agree that the debt ceiling must be raised—the only difference is that Republicans want to cut spending as well, while Democrats aim to get the debt ceiling raised with no strings attached.
Looking into the history of the debt ceiling is an excellent illustration of some of the fundamental flaws of the fiat monetary system, but this isn’t the place to delve into that. I might write about that if there’s interest (make sure to let me know on Twitter if you’d like to see it), but for now just keep in mind that, even if you’re right long-term about Bitcoin and crypto in general, you’ve still got to survive all lower time frame turmoil first (unless your strategy is just about slowly stacking sats). Last week gave us a lovely reminder of that, with a flash crash that rinsed quite a bit of leverage from the system, even though BTC fell less than 10%. Always be prepared for that kind of thing to happen, and don’t forget that the rinse on Wednesday was just child’s play compared to what BTC is capable of.