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Wow, BTC sure is volatile. And here I thought it might take two days … instead, its about 6 hours.
800 Support: failed. Low at 650: failed. Next stop: 500?
[Note: its fascinating to me how "round numbers" support seems to work relatively often for BTC.]
There is a trader saying: in an uptrend, its an escalator, while in a downtrend, it's an elevator. Things go down a whole lot faster than they go up. Generally speaking.
So how do we identify a reversal?
#1 most important – you need to see a higher high, and a higher low. That may – not will, but may – act to stop the selling, and turn the "fear of losing everything" into the "greed of not wanting to miss out on the next bull move."
So far, no luck. But – wait six hours. Who knows what could happen.
This whole thing reminds me of those old high school biology "fruit fly" experiments. Everything is incredibly sped up…
So here's the thing about trading. Trading is easy and forgiving during an uptrend. The paradigm is simple: buy the (freaking) dips. New traders may start to think, "hey, its easy to make money doing this, what's the big deal?" [Gold 2009-2011 anyone?]
Once the uptrend is over, things become more complicated. If a downtrend starts, buying the dips will kill you on average – instead, you need to sell the rallies, to get out of whatever position you are in with minimal losses. (Everyone else is doing this too – that's why its a downtrend). [Gold 2013]
As we have seen in the gold (and miner) market, in a downtrend "cheap bitcoin" gets to be "even cheaper bitcoin" followed by "really, really cheap bitcoin" once a downtrend is in place. Why not wait for the market to show you that the downtrend is over before jumping back in? You may think you know what cheap bitcoin is – but the market is the thing that really knows. If you wait for the market tell you, you'll end up accumulating the most bitcoins for your money. Which is the purpose of the exercise, no?
You can also get a clue as to where things are going by the shape of the price candles. In an uptrend you'll see lots of little cup formations with breakouts, while in a downtrend you will see the cups inverted with breakdowns, forming a waterfall like pattern of lower highs and lower lows. Like we are seeing now.
To complicate matters more, sometimes the market becomes trend-less. It is range-bound. Once that becomes obvious, the strategy is buy the lows and sell the highs. Of course everyone will start doing that, so that will stop working too at some point, and the market will break out in one direction or another.
Moral of the story: know what kind of trend you are in before executing your trading strategy or else…you'll get an expensive lesson in why this is important!
800 looks to be strong support – I'd expect a bounce, perhaps back to 900-1000, followed by another move down. But 800 might not hold…depends on the level of bearish feeling. BTC market moves really fast; it could end up at 500 in a day or two if those Chinese really want out.
Its great to have that millisecond look at the market! My granularity is limited to one-minute, and I wasn't watching at the moment of the report release.
My feeling is, the jobs report was irrelevant for the bi-directional takedown. The takedown was pre-scripted, the jobs report was just the excuse – the fig-leaf.
From my observations, we haven't seen this sort of power unleashed on the gold market in a while, but in a directionless way. My opinion is, it is not the shorts trying to pound things lower, I feel it is something else.
It is possible this particular low (assuming this area is the low) will be one of those back-and-forth deals, where we chop along the bottom for a while, both long and short stops being run daily, making sure that nobody is on board before it takes off. And anyone who might be impelled to sell during tax loss season could be shaken out here, with the shares falling into the hands of the banks who (presumably) have plans to eventually buy a bunch more COMEX futures along with the miners they're accumulating.
Its a theory anyway. And if gold closes below that 1210 low, my theory will be proven wrong!
[It would be awfully nice if some friendly regulator would come along and put position limits on these guys, or better yet, tell the bankers they should stick to just making loans. They still make loans these days, don't they? If we only had friendly regulators…]
So this morning prior to market open, I saw one of the finest examples of tactical manipulation in a while. Coming into the Nonfarm Payrolls report, the low for gold was 1210.80 set a few days back.
So, right at the release at 0830, there is a massive – truly massive $25 spike down, that stops out all the new longs since 1210 low, 7500 contracts worth, a huge amount. The spike down gets bought, rebounds back, up, up, and stops out all the new shorts, making a high of 1245 not 30 minutes later. Then that high gets sold, bringing the market back to flat prior to the open. Nothing to see here. Move along.
Was there any particular excitement from the NFP report? It didn't look like it to me.
This wasn't about "setting prices" or "changing trends" it was just about stop-gunning, and more the longs than the shorts. You can tell that by the size of the volume spikes.
If I had to call this, I'd say someone was clearing out the longs prior to a move up, but also making sure the shorts didn't get too frisky as well. If someone is long, but then is stopped out, they will be forced to buy again, at higher prices, helping to fuel the move up.
I interpret this as bullish. The fact that the miners have been bid up today helps cement this opinion.
The bounce off 950 support appears to have ended at 1150. After the double top, that's a dangerous sign – its called a lower high, which is a sign of a trend change. The more likely path (IMO) is a re-test of 950 support, and a possible failure of that support. Although the spike down to 850 was bought, there weren't enough excited bulls to push BTC any higher than 2/3s of the original drop. No doubt there are a bunch of new longs that bought at or above 1150; they may be regretting their two chances to sell at 1240, and are now just looking to get out and are selling any rallies. "Oh crap, China made BTC illegal! Sell!!"
Well, China didn't make BTC illegal, but it is never the news itself that matters, its the market's reaction to it. And the reaction wasn't bullish.
Looks like the failure to move above 1240 led to a big selloff. Volume is really massive.
My guess: there are some big players out there. It would be fascinating to find out who they are.
If 950 support fails to hold, the double (triple) top pattern could lead to a further selloff…although there is likely to be support at 800, a previous high.
Looks like BTC longs treated the breakdown on Dec 1 as "BTC on sale" and have bid the price right back up to the 1245 resistance level. A breakout above 1245 selling pressure and setting new all time highs would be bullish likely would lead to more "fear of missing out" – given the uptrend in place, that's my "more likely than not" call, although that extremely heavy sell-side volume on the red candles is disturbing to me. I'd love to know exactly who is selling during those high-volume "red candles." Are they early BTC miners or … someone else?
Not recommending a BTC buy, I have no position and so I'm just an interested spectator.
No problem Jim. It astounds me you find so much "stuff" in what I write that I never put there.
We totally have a debt problem – public and private – and the eventual resolution of that debt problem may well result in a major currency problem. Our monetary system doesn't work with declining resource issues, and that won't end well. One possible outcome: a currency collapse.
But that outcome is not here today. Nor is that outcome the only outcome possible.
Jim, there is an entire group of people who are certain – they've discounted other outcomes to 0% – that the dollar is going to be trash. Some even go so far to say that the dollar is currently trash. What an absurd statement. Others here at PP know what I'm talking about. Every time I hear that, I think "how about you send me all of your trashy dollars, I'll give them a good home." This thinking is what I call the dollar-is-trash subculture.
Big Money – another subculture – doesn't feel this way, at least not today. The only problem is, Big Money has a lot more votes in the marketplace than the dollar-is-trash subculture does, and they more often than not they dictate where prices end up.
To be clear: I don't have any prediction on where the dollar will go. The US is the core economy of the world, its my belief we may well have a currency problem, but I believe it is more likely for us to have a problem after Japan and Europe. Its possible we could go first, its also possible that we all go together in some large cascade. So I watch, await the logic of events, and I plan to take action according to things as they unfold. I do not plan to be caught napping. While I have insurance against some of the particularly bad outcomes, I am not part of the dollar-is-trash subculture. I'm part of the driven-by-data subculture. Now that's a small group of people – I'm in the minority wherever I go.
The use of this term was just one facet of a post that I believe was meant to instill in the reader a Bernaysian sense of confidence in the FED and the dollar, and/or make one feel foolish for feeling otherwise. Why do I get slammed for attacking Dave's point, when he is really slamming most of the folks who frequent this site in his own special way… do most of you even understand what I am saying? Am I writing in English?
Ok, you feel put upon because you're trying to defend the honor of everyone at PP whom you think should feel offended that I'm…what am I doing again? Oh right, I'm saying the dollar hasn't crashed, which happens to challenge what you believe to be the dominant belief system here at PP. And everyone should feel offended because of this observation of mine?
From what I can see, you work overtime on stuff like this. But – and I have to say it – that is Not My Problem.
No I've remained on the sidelines with BTC – partly because I don't have all my trading tools available to me, and partly because I've been a bit distracted this holiday. I can shoot off a quick sense of what the chart is saying, but if I'm going to trade something I need to get a better feel for it before just jumping in.
I think I need to read the protocol spec so I can get a sense as to what trading information is available. Maybe some of it would make a good chart.
I realized recently that over time, bitcoins will disappear from the system. That guy losing the disk drive with 7500 of them was just one example; how many people will die with bitcoins in some random wallet sitting somewhere unknown? I just wonder what the loss rate is/will be. [Its a feature…right up until you lose your bitcoins! Just like cash though]