Blocksmith Says: US CPI Data to Weigh on ETH

13 October 2022

Ethereum on the 240 minute chart shows what looks like a clear five-wave triangle formation. The implication is for more downside and I’ll get to supportive evidence beyond ETH in a moment. The Elliott Wave triangle down continuation pattern is generally easy to spot in the wave 4 position. It is preceded by a very sharp down phase in an impulsive decline. Impulsive means the entire structure, from top to bottom, unfolds in five sections.

Three of these sections are down (waves 1, 3, 5) and two are countertrend up or sideways (2, 4). Wave 4 cannot enter the price territory of wave 1 or else its not impulsive, it’s some sort of correction. And wave 4 is very often a straggly sideways affair. Wave 3 is never the shortest wave in price change terms and is usually the strongest. We just had waves 3 and 4.

A very common pattern in wave 4 is the triangle. It tends to be net sideways in price terms, it is labelled ABCDE and none of of the waves can be impulsive themselves: they have to be three wave structures.  On these metrics, the pattern in ETH is a classic triangle. Wave E is the end of the triangle (6 October at $1,383 here) and we have already started the move down. The bottom of the pattern broke on 10 October and we have been through the telltale weak push back up and subsequent failure.

Related: Blocksmith Explains: Elliott Wave Theory

Environmentally the US core price index (CPI) data for September is released later today (0830 EST).  The general expectation is that anything above 8.3% will lead to a market rout. The median estimates from banks is for a 0.4% increase and a beat of 8.3% and in fact seven out of nine times this year any increase in CPI has led to a sell off. The CPI is the vital economic indicator at the moment because it dictates the Federal Reserve Bank’s response, whose primary goal is to curb inflation with rate hikes, which then go on to crush the market. 

It’s a fallacious argument of course because current inflation is mainly supply side generated. How could it affect ETH? Well the correlation with the S&P500 Index YTD is 91%. So what happens to SPX happens to ETH.

Christopher Grafton
Christopher Grafton

Chris has been working in the markets for over 15 years variously as a broker, analyst and researcher. He is the author of a well-known book on Hurst cycles analysis, and runs his own market analysis software platform on Bloomberg. He’s also a keen student of both the cello and Brazilian Jiujitsu.

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