How low can it go

Isn’t that the question on everyone’s mind?

The S&P 500 closed below its 200-day SMA today. That’s where people really start to take notice. I’m glad I took notice far earlier. I’m still sitting in an 80/20 bond/equity portfolio. The timing was more luck than skill, and I can still be wrong.

Bitcoin has been getting demolished, now hovering around $7,000. I keep seeing a lot of heavily worshipped Twitter accounts declaring these prices “gifts”. It reminds me of the first big dig in late 2013. I remember an acquaintance verbally declaring that we “will never see these prices again” as bitcoin dipped below $400.

I’m not saying we’re going to see another period like 2014-2015, but I’m not saying we won’t. But when people are so sure of something they can’t control, they’re likely wrong.

Charts I’m watching

I’m only in a couple trades right now, namely some forex “risk off” plays and short bitcoin position. Here’s what I’m seeing in each.

Risk off in forex

The general sentiment right now is “risk off”. US equities are taking a beating, and I don’t see any reason for it to stop yet. I was selling bounces today in USDJPY and GBPJPY. Take a look at the USDJPY daily chart:

The pair has very clearly broken down through major support. When equities are selling off, we generally see the Yen strengthening as a safe haven currency.

GBPJPY hasn’t had a major break lower yet, but I like how the moving averages are starting to curl over:

Take these trades at your own risk. I often identify a trend, ride it, and trade in and out of it where I see fit. I can’t possibly update every move I make.

Bitcoin consolidation

Bitcoin continues to consolidate its recent decline after a head fake to new lows yesterday. Nobody who bought yesterday’s bottom is still holding today, but they’ll tell you they are.

As a result of the consolidation, the lower timeframe charts are sloppy and range bound. You need to look at higher time frame charts to get an idea of the next move. Here’s the 4-hour bitcoin chart:

The line in the sand for me is $7,300. Above that and I’d be out of my shorts, but still hesitant to get long for anything more than a scalp. The 50-bar SMA (green one) is currently sitting at about $7,400 and falling about $30 every 4-hour candle. So if we keep sitting at these levels it’d catch up to price in about 48 hours.

Along those lines, I tweeted this today:

Most people think that returning to the mean refers to price moving. They forget that the mean is constantly adjusting too. The longer we sit at current prices, the closer the mean gets. I’ll be shocked if we’ve seen the bottom in bitcoin yet.

That said, long term, I’m a mega bull. So bring on the cheap bitcoin.

Geppy

I've been involved in the forex markets for over a decade, initially starting as an FX trader at Allston Trading in Chicago. Eventually I went on and founded my own (non trading related) company. I spend my days working from home and trading forex, equity, and crypto markets.

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