Credit Risk Down, Crypto Up

Market exit signal was a false alarm in September. Bulls need it to keep falling. The swift dip of 50 bp accompanied a strong rally in equities. This will work in the opposite direction if it ever moves past 5.50 again (stimulus joke).

Below are crypto charts. Still looking good here.

Coinpocalypse Begins, Bear Market for Stocks

In September: Crypto Selling Resumes, Monster Topping Pattern on Ethereum, Watch Out FANGs

Finally, cryptocurrencies were the bleeding edge of speculative activity. The breaking of topping patterns in majors such as Bitcion and Ethereum will be a signal that stocks, particularly the FANGs, are on thin ice. Here's Alibaba (BABA), for example, sporting a topping pattern similar to Ethereum. Not as massive a topping pattern or with as low a target, but it will cause far more losses. Ethereum has a $20 billion market cap that could go back to $1 or $2 billion, an $18 or $19 billion loss. Alibaba's market cap is $417 billion. A measured move off its topping pattern would cause $117 billion in losses.

In August: The Coinpocalypse

Finally, this is a classic collapse of a speculative bubble. It might benefit stocks in the near-term, but it strikes me as bearish, and not only because the stock market was tracking with cryptocurrencies earlier this year. Consider a stock such as Nvidia (NVDA) that sold the GPUs used by cryptocurrency miners...

NVDA lost 20 percent on Thursday last week and 12 percent on Monday, and down another 6 percent this morning in pre-market trading. It is down 53 percent off its high in about 6 weeks.

There is very little support for alt-coins and even some that appear to have support levels, such as Monero (XMR) will probably be pulled lower by the undertow. The targets for Ethereum (ETH) and Litecoin (LTC) are in the single digits, if not below $1.

As for stocks such as NVDA, well the pain may have only begun. Support for NVDA is below $50. Initial support is 77 percent below the current price. If this is a bear market and not a deep correction, there is a lot of selling to come.

Coinpocalypse Lies Ahead

About three weeks ago I posted The Coinpocalypse.

There might be another stick save for the cryptocurrency market because every time it seems like Bitcoin will make the final backbreaking drop, someone steps in to prop it up. That said, with Bitcoin losing $6000 again and many charts already turning ugly, it looks like the "shitcoin" apocalypse is underway. Previously, many alt-coins would also hold above key support levels, but this time some alt-coins are in full collapse.

There was another stick save in Bitcoin and over the past two days it shed more than $1,000 and is headed back for a test of the $6,000 area. Bitcoin is important because it's the engine pulling the train. If Bitcoin loses $6,000 the bottom will drop out of everything. Technical analysis works because it based on human psychology. It works best in emotional markets filled with amateurs. Below the $6,000 level, everyone buying Bitcoin in the last 11 months will be underwater.

Ethereum is the weakest right now. It has a massive topping pattern and broke to a new 52-week low.

Ripple looks like it's ready for a waterfall decline.

A lot of cryptos look like Litecoin, off their lows but still in clear downtrends. They haven't broken to new lows yet, but if Bitcoin loses $6,000, there are going to be major losses of 50 percent or more in a lot of coins. Bitcoin might still rebound, and of course I could be wrong and it breaks out. But since technical analysis has been working well thus far, I suspect Bitcoin has at most 2 months before it gives up $6k.

The Coinpocalypse

There might be another stick save for the cryptocurrency market because every time it seems like Bitcoin will make the final backbreaking drop, someone steps in to prop it up. That said, with Bitcoin losing $6000 again and many charts already turning ugly, it looks like the "shitcoin" apocalypse is underway. Previously, many alt-coins would also hold above key support levels, but this time some alt-coins are in full collapse (I don't think it is a coincidence this is happening the same time as the Turkish lira is tumbling). The coins below are a mix of coins I know little to nothing about, as well as some that have strong networks or development teams, and some that I think will survive. I'm putting them all together because the market was blown up by speculators and the dumb money doesn't know the difference, as evidenced by the same chart patterns over and over. Consolidation will take place as some coins gain developers and others lose them, but the charts will all look the same for awhile during the panic phase of the bear market because speculators flee everything.

Sentiment is turning, as it always does. Reddit: HODL is dumb as rocks.

The horizontal I have drawn on Bitcoin is at $5968. Cryptos are so volatile that the lines are more like guidelines. What's interesting to me is Bitcoin could easily slip into the rising channel that started in 2015. Current range is $3500 to $6500. If it manages to hold in that channel, that is still an extremely bullish trend and should be celebrated as a huge victory for Bitcoin long-term. The run-up to $20,000 in the meantime means many people have suffered large losses and the sentiment shift is extreme, but Bitcoin is still far from being a failure. If you're an optimist that's a great way of looking at it. If you think it's all a scam, then that leaves plenty of room for even more losses.

Some of the charts are already starting to retrace their breakouts, such as Ripple and OmiseGo. Some are still well above support such as Decred. Some have businesses behind them, such as Golem (though I haven't checked on it recently) and the BAT is part of the Brave browser.

Many people think technical analysis doesn't work, but it's based on human psychology. It works well with cryptocurrency because it's a market filled with amateurs. The more emotional the market, the better it works. Also, there may have been manipulation by people who understood TA. Whatever the reason, the charts are already breaking down or on the cusp of the last line of support for many coins.

I usually don't include the volume, but it helps illustrate why TA can be effective. Many of the alt-coins have sharp run-ups on low volume. Those HODLs, if they're still HODLing have a profit. Litecoin might be the best example given its size and popularity. There's an area of support around $40 to $50, from July to November 2017. Volume is higher and there could be many HODLers in that area. If Litecoin stays above $40 many may hold. If they sell, then there are very few HODLers left. That's why the price could waterfall decline and retrace the April to July 2017 run up. Then it may stabilize in the single-digits assuming it is a survivor.

Finally, this is a classic collapse of a speculative bubble. It might benefit stocks in the near-term, but it strikes me as bearish, and not only because the stock market was tracking with cryptocurrencies earlier this year. Consider a stock such as Nvidia (NVDA) that sold the GPUs used by cryptocurrency miners...

Monero Breakdown

In the post on Sunday I wrote:

Monero is ugly. The next support is the psychological $100 level, the the prior basing pattern around $85, then the prior breakout/support level at $60.

It is breaking down again today. Other major coins are relatively steady near recent lows.

Decred also broke to a fresh low since Sunday, a negative sign for crypros in general since it has been a very reliable indicator.

OmiseGo is also off sharply today and below support again.

Crypto Massacre, Nasdaq Next: Bitcoin Crashes Through Support

Bitcoin has taken out a major support level. It briefly traded below $6000 in February, but that was quickly reversed. This move needs to reverse or it is a major bearish signal. Quick take: sell Decred if bearish, buy Monero if bullish on this price plunge. I remain intermediate-term bearish and expect Bitcoin will eventually trade below $5000.

Intraday and long-term chart of Bitcoin:

Decred holding up well as expected, but if Bitcoin doesn't rebound, there's a lot of room to drop.

Ethereum still well above support, but it's an 18 percent drop to support.

This bear move will escalate if Litecoin falls below $100.

Omisego

Monero is ugly. The next support is the psychological $100 level, the the prior basing pattern around $85, then the prior breakout/support level at $60.

Crypto Breakdown Looms Again

Bitcoin, Litecoin, Omisego and Decred are all near important support levels. Monero has already broken below support and remains the weakest of the group. Ethereum is farthest above support.

Bitcoin is still the most important cryptocurrency and is the engine pulling the train. Decred is the strongest of the group and is also the most "reliable" in its behavior. A break down along with Bitcoin would be an important signal.

A breakdown will have bearish implications for the stock market.