Blocksmith Says: Ignore Media Chatter – BTC is Looking Up

14 October 2022

Just a note on yesterday’s ETH downside call on the intraday timeframe: it worked perfectly for its time horizon until a hotter than expected CPI print was absorbed by traders. Overall market sentiment was excessively bearish running into yesterday’s data point and technically price was in oversold territory. It then dumped and pumped, or in other words, the market capitulated near-term.  

Why this kind of thing happens on ostensibly super bad news is a mystery to people not involved day to day in the markets as well as journalists (who should be ignored at all costs), but it goes something like this: too bearish sentiment, i.e. “it couldn’t be worse!” level sentiment means just that, the worst case for now is baked into the price. This can be summed up in the phrase “sell the rumour, buy the fact.”

Oversold really just means there is much less urgency on the sell side of the book because the best of the downside move is probably behind us. And if urgent sellers are absent (because oversold) then buyers can just step in and ramp prices up unimpeded.

That we have seen the final low, for example in the bellwether S&P 500 Index, is highly doubtful and we are not expecting a meaningful cycle trough until mid-November. And remember we have the mid-term elections in the US on 8 November which will very likely see the incumbent Democrats crushed. Since they are the party associated with all things chaotic at the moment (proxy war, runaway inflation, wide open borders, crime, senility, wokeness, etc.), this could well be taken as a regime change signal to the market and inject some long overdue optimism.  Anyway, lets look at a chart before we get too carried away.. Bitcoin daily:

We very likely just passed through the first 20-day cycle trough in the new 80-day cycle that began on 22 September. There are four 20 day cycles in an 80-day. Price is aggressively challenging the August downtrend line and promising to breakout. Volatility (average true range – ATR) is at two-year lows. Very low vol leads to high vol typically. Looking up for now.

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.

Newsletter graphic

Info Blocks In Your Inbox.

If you want relevant updates occasionally, sign up for the private newsletter. Your email is never shared.

Subscribe to our newsletter