Altcoins Run Higher! - Where are crypto and stocks headed?

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Excited to Rally!

Yesterday, crypto ran off the back of a stock rally triggered by CPI “missing” it’s forecast! Bad news is good news for certain metrics (inflation and employment). The markets are excited at the prospect of rates coming down. I have compiled charts and bullet points to help inform you on the data behind why I am excited for a coming rally, but beginning to prepare exit strategies.

CPI Report

• CPI came in below MoM forecasts: 0.3 vs 0.4 forecasted

  • This is GOOD news, because it signals the Fed could cut sooner rather than later

  • Jerome Powell wants 3 months of inflation data, per his speech

• Last Month’s Core Retail Sales was revised down MoM

  • This is BAD news because it shows the consumer is weak

  • Consumer spending contributes 70% to the US economy

Overall, CPI won the day because it directly impacts fed’s rate decisions

TA shows a rally is here, but length in question

RSIs have “reset”, effectively giving markets more room to run up. At the same time, Stochastic RSIs have crossed, indicating a potential rally. RSIs are telling us this rally has legs in all indexes, but possibly short lived in the Nasdaq. This all could change, but only if certain criteria are met as I mention below. Individual index analysis below, but first some notes:

RSI (Relative Strength Indicator), the top indicator in charts below - A couple things to know, first the RSI measures the rate at which an asset is moving. When the RSI is making higher lows, that is bullish. When the RSI is making lower highs, this is bearish. Now, it is really common for the RSI to be in a bearish divergence, but the asset is making higher price highs. This is an indication the stock’s rally is coming to an end (as seen in the Nasdaq).

Stochastic RSI, the bottom indicator in charts below - I look at crossovers, which indicate market directions. The longer the timeframe, the more significant the move. Blue line crossing below the orange line is bearish. Blue line crossing above the orange line is bullish. The dotted lines are 20 and 80 lines.

S&P 500

SPY hit a new ATH and stochastic RSI has confirmed a cross over. The RSI is looking bullish and I’ll be watching to see if the RSI can top it’s high from a couple months ago.

Nasdaq

Nasdaq is looking toppy according to the RSI’s bearish divergence, though still has a bit of room to run to the trend line. It is possible to break the RSI trend line, but I’ll be watching close when we get near the green trend line.

Russell 2000 (Small Cap Companies)

The RSI is looking bullish, I’ll be watching to see if it can break it’s highs. Stochastic RSI has confirmed a cross over!

Bitcoin

The RSI just bounced off the bullish trend line, which is good news. I am watching for the stochastic RSI to crossover to confirm a rally, this would confirm the RSI’s bounce and be bullish for BTC.

Ethereum

The RSI looks bullish on ETH as long as it can bounce and hold it’s trend line (green). The stochastic RSI has not confirmed a cross yet, so not a confirmed rally.

Altcoins, excluding of top 10 large caps

This chart is of the total market cap of altcoins outside of top 10 large caps. Just like ETH, RSI looks bullish and looking for it to bounce off this trend line (green). The stochastic RSI has not crossed yet, waiting for confirmation before calling a rally.

Conclusion

Overall, the charts are telling us we’re running into a rally. There is some long term weakness in the Nasdaq, but otherwise RSIs are looking bullish! Tops develop over weeks & months on these longer time frames, so we have time.

The two most likely scenarios are:

• We rally hard into a blow-off top, most likely given current charts (SPX to $6,000+, BTC to $100,000+)

• A weak rally, can’t rule this out (this would be disappointing, but a possibility and RSIs will tell us if this is happening)

While the charts are telling us we have time, we must be watchful! When it comes to exit strategies, I believe it is better to be overprepared than be caught off guard. More to come soon on how I will make my exit decisions!

Appendix (background info, read if you’re worried)

It is important to note a common trend in RSIs and market tops. The RSI usually shows bearish divergence before the stock or crypto makes it’s all time high.

This means the RSI gives us a warning sign that price is topping out. Above, every index beside the Nasdaq is showing bullish divergence on the weekly’s.

S&P 500 - 2018 (Market Liquidity & Pandemic)

S&P 500 - 2008 (Great Recession)

S&P 500 - 2001 (Tech / Dot Com Crash)

S&P 500 - 1990 (Recession)

Nasdaq - 2001 (Dot Com Crash)

I included this Nasdaq chart because it was the quickest bearish RSI turn I found in recent history, but we still saw 3 months of a rally before we saw prices drop. since almost all of the major indexes have bullish RSIs above, I am comfortable holding and anticipating a rally.