The ETH/USD has dipped a little bit during the trading session on Wednesday but found buyers on the dip to continue to hang around the 50 Day EMA. It looks as if we are trying to form a little bit of a short-term base, and whether or not we can take off from here is still open for debate.

If we break down below the $1500 level, then it opens up more selling pressure for the Ethereum market, perhaps opening up a move all the way down to the $1200 level. The $1200 level is the top of a previous consolidation area, so there should be a little bit of “market memory” in that area. Breaking down below that level then opens up the possibility of a move down to the $900 level.

Waiting for “The Merge”

• The Ethereum market is a little bit different than some of the other crypto markets right now because we do have “The Merge” coming in the next several weeks, but it’s also worth noting that the market will continue to see a lot of questions when it comes to risk appetite in general.
• Even though Ethereum is probably going to be quite strong over the longer term, there is a lot of institutional money out there that is not willing to put a lot of risk on right now.
• Furthermore, it’s obvious that there is a bit of a ceiling in the market near the $2000 level, especially now that the 200 Day EMA is sitting in that same general vicinity.

Speaking of the $2000 level, if we were to break above there, then is very likely that we would enter a new bullish phase, sending this market much higher. In that general vicinity, I think that you would see a lot of money go flying into this market. Alternately, if we do break down from here, we could see the Ethereum drop all the way down to the $400 level. This would go in line with the Bitcoin market breaking down, which looks like it could. I recognize that we have “The Merge” coming in the next couple of weeks, but it would not be the first time that we have seen a “by the news, sell the announcement” type of trade work itself into the marketplace.

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I anticipate that we will have another move lower just waiting to happen in this messy and very negative environment.

The S&P 500 Index itself was closed Monday, but the futures markets were open for limited off-hour trading. That being said, the futures markets gave us a little in the way of direction but when you look at the S&P 500 index itself, you can start to see that the market is trying to build a base for the upcoming Non-Farm Payroll announcement on Friday. In this scenario, the market may try to rally and reach toward the 50-day EMA.

Do not be surprised at all if that happens, and quite frankly I think that opens up a nice selling opportunity. The 50-day EMA sits right around the psychologically and structurally important 4000 level, an area that will attract a lot of attention. Even if we were to break above there, I see even more resistance at the 4200 level, where we had sold off quite drastically before. In this scenario, it’s easy to simply sit on the sidelines and wait for signs of exhaustion to jump all over.

The alternate scenario is that we will turn around and break down below the 3700 level, which opens up an attack on the 3600 level, followed by 3500 level. In that scenario, we would simply be continuing the overall negativity that we have seen in the market for some time, something that makes a lot of sense. However, a lot of participants will probably be waiting to get the Friday announcement out of the way before putting more money in the market, mainly due to the fact that the Federal Reserve now has to start paying close attention to employment figures.

Inflation still runs hot, and the Fed is expected to raise interest rates by at least 100 basis points over the next couple of meetings, and furthermore, companies around the S&P 500 are going to have to start writing down estimates, as the economy slows. If that’s going to continue to be the case, there are plenty of headwinds for this market, and I do not think that we can turn around enough to break above that 4200 level. Given enough time, I anticipate that we will have another move lower just waiting to happen in this messy and very negative environment.

EOS initially fell a bit on Tuesday but found a little bit of buying pressure near the $1.30 level. The reality isn’t so much that EOS is something that is suddenly in demand, it has more to do with the fact that Bitcoin has balanced the bed. Remember, there is always a significant influence on the smaller markets when Bitcoin moves, so I think this is probably more or less EOS pretending like it’s going to build a base.

Having said that, the market has fallen so far that it would make sense to get a bit of a bounce. The market is still down for the session but at least it hasn’t made a fresh low. The $1.50 level above will more likely than not be somewhat difficult to overcome, but if we can, the market could make a move toward the 50 -dEMA. After that, then EOS has the possibility of going to the $2.00 level.

The biggest problem with this is the fact that crypto is in shambles, and the risk appetite of traders around the world has just been annihilated. It’s difficult to imagine that EOS will take off to the upside for any significant move unless of course people are willing to put a lot of money into risky assets, and EOS is pretty far out on that spectrum. More likely than not, your best case scenario is going to be that the market goes back and forth in this general area and kills a little bit of time.

If we break down below the $1.25 level, that will open up a bit of a “trapdoor” for EOS to continue falling. At that point, there is not much that’s going to stop it from dropping down to a value of $1.00 initially, and then more likely than not, much lower than that. Keep in mind that the value of the US dollar continues to climb over the longer term so that in and of itself will have a significant effect on what happens in this market, as all prices are quoted in those same US dollars. Crypto has a serious problem right now, so unless you are a longer-term investor that is trying to build up a huge position, there’s no point in buying anything.

It comes down to timeframe at this point.

Bitcoin rallied a bit on Monday, as it looks like we are trying to build enough support for a base. That being said, the market is still very much in a consolidation area, so it’ll be interesting to see if we can continue going higher. It’s probably worth noting that the market has been beaten down rather hard and for good reason. Crypto has a fraud problem that’s being exposed, and even though it’s not necessarily based around Bitcoin, it has people running from everything.

When you look at the last couple of weeks, you can see clearly that we are consolidating. However, the last time we were consolidating like this we were near the $40,000 level before the bottom fell out. That resulted in a 25% drop, so you can’t simply jump into Bitcoin and buy with both hands. At this point, I think we are about to make a pretty big move, but I don’t know the direction quite yet.

If history is any indication, it’s likely that we will go lower rather than higher. If we break down below the $28,000 level, I suspect that we are going to drop down to the $25,000 level, possibly even as low as $20,000. With all of the negativity around the crypto markets right now, it would not surprise me at all, and would probably drag the rest of the crypto markets down with it. Because of this, I would not only start shorting Bitcoin, but I would probably jump all over the smaller altcoins as well. In this environment, the best rate in crypto is to short smaller markets, as they stand no real chance.

Think of Bitcoin as the bellwether for the entire crypto market, and it’s not until we break above the 200-day EMA that you can technically say that we are in an uptrend. That is currently at $41,000. Bitcoin and the rest of crypto look miserable right now, so if you have the opportunity to take advantage of falling prices, that’s what would be the most profitable route. However, if you’re more of an investor, you could start to build up small bits and pieces of a larger position, understanding that it may be a few years before those positions pay off. It comes down to timeframe at this point.

We have a couple of levels that we can pay close attention to as guides.

The German index has done very little during trading on Wednesday as we continue to build up inertia. We are hanging around the €14,000 level, an area that has been important multiple times. Because of this, I believe we are looking at a situation where we will more likely than not build up enough inertia to make a bigger move, but we need to figure out which direction that will be. The most prudent thing I can tell you to do is let the market tell you, and then follow.

We have a couple of levels that we can pay close attention to as guides. The €14,250 level is an area that I believe will more likely than not offer resistance, as we have seen it do so recently. Furthermore, the 50 Day EMA is sitting just above it and dropping. Between those two things, I think the market will struggle to get above there without some type of good fundamental news. On the downside, we have the €13,500 level, which is an area that we have bounced from previously. If we were to break down below there it would be a very negative turn of events, opening up selling down to the €12,500 level.

On the other hand, if we were to turn around a break above the €14,250 level, and of course the previously mentioned 50 Day EMA, the market would then threaten the €14,500 level, perhaps followed by the 200 Day EMA. The market would take a move like that only if good fundamental news or the ECB coming out and loosening something monetary policy-wise is the case. The Federal Reserve could have a part to play, but the rally in the DAX would be more or less a “knock-on effect” of the central bank starting to change its tune more than anything else.

Remember, as long as there is the threat of a global slowdown, the DAX will be very sensitive as so many of the big companies that make up a majority of the index are major exporters. With that in mind, I think that you need to pay attention to the global economy much more in the DAX and you do a lot of other major indices, as it is the engine of European exports in general. Pay attention to the value of the Euro as well, because a cheaper Euro also helps export.

I do believe that given enough time, we could go back to the ₹77 level.

The US dollar initially fell against the Indian rupee during the trading session on Thursday but found support near the ₹75.50 level as we have seen multiple days in a row. Ultimately, this is a market that has been in an uptrend previously but then pulled back to show signs of exhaustion. Now we are dancing around the same region for the last several days, which suggests that we are trying to build up a bit of a base for continuation.

It is worth noting that the 50 Day EMA is slicing right through the middle of the candlestick for the Thursday session, which ended up being a hammer. The ₹76 level is at the top of a hammer, and it is an area that has been difficult to break above recently. By breaking above there, it allows the US dollar to continue going higher, with an eye on the ₹76.25 level, and then the ₹76.50 level. The market continues to favor the greenback overall, although the pullback was somewhat significant.

With interest rates rising in the United States, that does put a bit of bullish pressure on the greenback, and you see that in multiple markets, not just this one. That being said, the market is likely to see a significant amount of noise overall, as the US dollar is not only seeing higher interest rates but it is also used as a safety instrument, as emerging market currencies are considered to be further out on the risk spectrum. That is especially true with the Indian rupee, which needs global growth to really get moving.

On the other side of the trade, if we were to break down below the hammer during the trading session on a daily close for Friday, then it could be a sign that we are going to go looking to the ₹75 area, which the 200 Day EMA is racing towards. Nonetheless, things look bullish at the moment, or at the very least that we are trying to build a bit of consolidation. Because of this, the market favors a breakout soon, and I certainly would be willing to jump on that breakout when it happens. This is especially true if it is to the upside. I do believe that given enough time, we could go back to the ₹77 level.

I am leaning more towards a bounce than any type of breakdown.

The US dollar initially dipped lower to kick off the Friday session against the Canadian dollar but then turned around to show signs of life again. By doing so, it looks as if the market is trying to hang on to the 1.25 handle, an area that has been important multiple times. This is the bottom of the overall range, so it is very interesting to see that we have bounced from here. By doing so, it will be interesting to see whether or not we can continue to go higher.

Keep in mind that the crude oil market is currently testing a major uptrend line, so if it breaks down that could be reason enough for this market to go higher given enough time. The 200-day EMA sits at the 1.2636 level, and it will attract a certain amount of attention. The market has been going back and forth for quite some time, so I do think that it is probably only a matter of time before we continue the pattern. However, that assumes that the US dollar strengthens in general.

Alternately, if we were to break down below the hammer from Wednesday, it could open up a big move to the downside, as it would be a major breakdown through the support. At this point, the market will more than likely open up a bigger move lower. This could be accompanied by oil rallying, but at this point, you can also make the argument that this pair completely ignored the oil market when it was bullish.

The 50-day EMA looks as if it is ready to break down below the 200-day EMA, forming the “death cross”, but it is coming from a very sideways neutral position, so I do not read as much into it. The market could very well bounce all the way to the 1.28 handle, which is the top of this overall consolidation. The market will continue to be very noisy, but it does look as if we are running out of downward momentum. Because of this, I am leaning more towards a bounce than any type of breakdown. Expect choppy behavior, but we have a couple of clear areas to pay attention to in this pair.

At this point, the only thing you can count on is volatility.

Ethereum has rallied a bit to kick off the trading session on Wednesday, but I do not see a lot of momentum, nor do I see a lot of volume in this market. That is not a good look, and therefore it is very possible that we will see Ethereum struggle going forward. For what it is worth, we are sitting on top of a rather major support level, so it is worth paying close attention to it.

The major support level is at the $2500 level, extending down to the $2400 level. If we break down below the $2400 level, then it is likely that we go looking towards the $2000 level. The $2000 level is an area that will attract a lot of attention due to the large, round, psychological importance of that figure. That being said, I do believe that the market is likely to at least attempt to get back down there again because we continue to make “lower highs. In fact, we are currently sitting in the midst of a descending triangle, which of course is a very negative shape.

If we were to break higher, I do not know how excited I would get about going long until we get above the 50 Day EMA, and it would also have to coincide with Bitcoin rallying. I almost always use Bitcoin as a secondary indicator, because it is by far the biggest coin in the crypto markets. If the poster child for crypto is not rallying, it is difficult for other markets to do so, although admittedly Ethereum has the best chance of doing so against that backdrop.

I believe at this point in time we continue to see a lot of volatility, and quite frankly I think we need to see a large amount of time go by before we build up enough confidence. However, an impulsive candlestick to the upside of course is something that you have to pay close attention to, as it would show a complete change in attitude suddenly. That of course is something that will more than likely catch the market off guard. On the downside, if we break down below the $2000 level, the market would clearly be ready to dump much lower at this point in time. At this point, the only thing you can count on is volatility.