Be cautious about your position size

The Bitcoin market pulled back during the session on Tuesday to reach the $30,000 level yet again. This is a market that I think will continue to be drawn to that level like a magnet, because there’s no real reason to think that the crypto markets are going to change quite drastically. After all, the market is likely to see a lot of FUD out there, as the rest of the crypto markets have major issues. While it is not necessarily Bitcoin itself that has the issues, Bitcoin is the first place that people either go into or out of when it comes to crypto.

At this point, it looks as if the $28,000 level is being defended, and as long as we can stay above there, it’s likely that we will continue to see that level offer support. However, if we were to break down below the $28,000 level, it opens up the possibility of a move down to the $25,000 level. After that move, Bitcoin could drop all the way down to the $20,000 region. Anything below there could be catastrophic and open up a move all the way down to the $12,000 area.

More likely than not, we will continue to see a lot of volatility more than anything else, so need to be cautious about your position size. More likely than not, it’s probably going to be a situation where we see chop, and a lot of concern. There have been a lot of fraudulent situations in the crypto markets, and this has had a bit of a “knock-on effect” over here. If we continue to see the same action, it’s more likely than not we will more or less see Brownian motion.

If we were to break above the 50 Day EMA, which is near the $32,500 level, and sloping lower. If we turn around and break out above there, then it’s likely that Bitcoin could go to the $37,500 level. There is a lot of resistance just above there that extends to the $40,000 level, so I think it’s worth paying close attention to. It’s not that we break above the $40,000 level that I think Bitcoin will have completely beaten back the selling pressure, something that is not going to happen anytime soon.

Expect a lot of chop and keep your position size small, as it is paramount in these times.

The FTSE 100 rallied again on Tuesday but looks as if it is going to have quite a challenge ahead of it. The 7500 level begins a significant resistance barrier that extends past the 7600 level, so it is likely that we will see sellers come into this market given enough time. After all, the market has bounced rather drastically from the 7200 level, but it is also worth noting that equities across the planet are all over the place. With volatility levels as high as they are, it is difficult to imagine a scenario where owning stocks will be the easy way going forward. I do believe that it is more likely than not going to be a situation where we will have a washout coming.

With that being said, the 7600 level is an area that you need to pay close attention to because it is so heavily defended. If we were to break through to a fresh, new high, then it is possible that the FTSE 100 really starts to take off. There are a lot of traders out there willing to bet that the central banks will be much looser with their monetary policy than they have been suggesting, but that is a pipe dream as inflation has gotten so out of control that it is difficult to imagine a scenario where central banks can do anything but fight it.

The lack of global growth will weigh upon the markets as well, so that is most certainly something that you need to pay close attention to, as there are major headwinds facing most developed economies around the world. The market will be noisy, to say the least, and I do think that there is still going to be a significant amount of support near the 7200 level underneath. Because of this, it is more likely than not that we will see a selloff. At the first signs of exhaustion, I am perfectly comfortable shorting this market because we have such an obvious barrier above that if we were to break it, it would more likely than not have a lot of money flowing into the market and you could probably make your losses back. Regardless, expect a lot of chop and keep your position size small, as it is paramount in these times.

At this point, I am still bearish, but I also recognize that we are in an area where we could see short-term recovery in Litecoin.

Litecoin fell a bit on Monday to pierce the $100 level. However, we have recovered a bit to form a bit of a hammer, so it is like likely that we will continue to bounce around in this area. That being said, if you remember, I had mentioned a couple of weeks ago that we kept making lower highs, and that does suggest that we could very well break down through all of the support given enough time.

Breaking down below the $95 level would open up quite a bit of negativity, and I think at that point it would more than likely go looking to the $75 level. After that, the market could go looking to get down to the $50 level. Obviously, that would be a very negative turn of events, and it would probably have something to do with the market going into “crypto winter.” In other words, crypto markets overall would continue to do very little, or perhaps even fall. We have seen this a couple of times in the past, and it certainly looks as if we are threatening to do that currently. In that scenario, smaller coins such as Litecoin would almost certainly get crushed.

On the upside, if we were to break above the $105 level, then we could make a move toward the 50-day EMA. The 50-day EMA currently sits just below the $114 level, and it is very likely that we would see a little bit of a pullback. Breaking above there would open up the possibility of a bigger move, and in that area, I would anticipate a move to the $120 level. In that scenario, we would see crypto, in general, take off to the upside, so obviously bigger coins would lead the way as per usual. Litecoin will not be able to take off to the upside unless something specific to Litecoin itself happens without others leading the way. That being said, we are most certainly in an area where there has been a lot of support in the past, so one would have to think that at the very least we might see some stabilization in this general vicinity. At this point, I am still bearish, but I also recognize that we are in an area where we could see short-term recovery in Litecoin.

The size of the candlestick is bullish as well, but short-term at best.

The British pound rallied during the trading session on Wednesday as the 1.30 level continues to be a major support level. By doing so, the market continues to show this area to be important, but it is also worth noting that every time we rally it is a situation that we have not been able to continue going higher. Signs of exhaustion will continue to be jumped upon, as this is a market that has been very negative for quite some time, so it is also worth pointing out that we have seen a lot of “lower highs” recently. In fact, you can even make an argument that this is a descending triangle that is forming.

Underneath, there is a significant amount of support that extends all the way down to the 1.28 handle, which means that if we do break down below here, it is going to be difficult to continue the momentum, and I think a lot of what we are seeing here is a market that is going to continue to show signs of buying pressure, but whether or not that can overcome all of the selling pressure is a completely different question.

The 50 Day EMA sits at the 1.32 handle and is drifting lower. Ultimately, this is a market that I think continues to see a lot of momentum chasing to the downside as well. If we did break above the 50 Day EMA, then it is possible that we could see this market go higher, but really at the end of the day, I think this is a situation where we are going to show plenty of downward pressure until we can break above the 50 Day EMA at the very least, if not the 1.32 level. At that point, you could start to make an argument for a “W pattern”, but we are a long way from making that happen, and of course, we would need to see a daily candlestick close all the way up there. I think it is probably going to be easier to simply short this market on signs of exhaustion using a short-term chart, as I would not expect big moves at this juncture, at least not without some type of fundamental or headline announcement that gets people involved. The size of the candlestick is bullish as well, but short-term at best.

There are so many problems around the world right now that is difficult to bet against the US dollar, but then again, at the same time it is difficult to bet against commodities.

The Australian dollar went back and forth on Monday, struggling with the 0.75 level yet again. This is an area that has been difficult to overcome, and as a result, it would not be a huge surprise to see a little bit of a pullback. The shape of the candlestick is somewhat neutral, but it is worth noting that we have had a significant move in both directions, meaning that there is a lot of volatility.

If we break down below the bottom of the candlestick, then I think it is possible that we go looking towards the 0.74 handle underneath. That is an area that has been resistance previously, so I do think that it could end up being support on a pullback. On the other hand, if we were to break above the top of the candlestick, we could go looking towards the 0.76 level above. At that point, I would anticipate that the Australian dollar would go much higher, as it will have been completely broken out.

We are currently at an area that has been very difficult more than once, so I think we are entering a potentially choppy part of the chart, at least until we make a bigger move. If we do get an impulsive candlestick, then it is possible that we could follow that, but until then I think we have a significant amount of noise in this area to continue causing issues.

Keep in mind that the US dollar has strengthened against many other currencies, so it does make sense that perhaps it would do so here. However, the recovery late during the day on Monday was rather impressive and should not be overlooked. Furthermore, the Australian dollar is highly levered to the commodities markets, which of course has been very strong. As long as that is the case, it is possible that we could see this market break out, but clearly, we have gotten far ahead of ourselves as of late, so at the very least a pullback could make sense. That being said, the markets have been very noisy, to say the least, and I think they will continue to be so. There are so many problems around the world right now that is difficult to bet against the US dollar, but then again, at the same time it is difficult to bet against commodities.

The DAX has initially tried to rally during the trading session on Thursday but has found the €14,500 level to be difficult to overcome. We have fallen from there and now it looks as if the market may be trying to decide whether or not it can continue to go higher as we have bounced far too quickly from the bottom. Ultimately, the market collapsed and then bounced. The market has been so out of control lately that sooner or later the momentum has to stop.

If we break down below the bottom of the candlestick for the trading session on Thursday, as likely that the market goes look towards the €14,000 level. If we break down below there, then it is likely that we go looking towards the €13,500 level after that. Longer-term, I would not be surprised at all to see this index test the lows, but obviously, anything is possible in this type of situation.

The fact that we could go nowhere after the massive and impulsive candlestick during the previous session suggests that we are struggling. The €15,000 level above would be the next target if we go higher, as it was previous support and therefore a certain amount of “market memory” comes into the picture. The downtrend was there for a reason, and those concerns in the European Union are going away anytime soon.

I think the only thing that you can count on in the DAX right now is a lot of volatility, and therefore you need to be cautious with your position size because losses can pile up rather quickly if you are not careful. The DAX of course is highly sensitive to any idea of exports, due to the fact that so many multinational conglomerates are part of the index. The rest of the world is in the process of slowing down, so it certainly makes sense that the DAX will fall right along with it. It is a situation where I am waiting for signs of exhaustion to short or break down below the lows of the session that we just printed on Thursday. Again, be cautious with your position size, which of course is something that you should do with any market in this type of environment as there is so much risk out there.