The market continues to be an oversold condition, but the longer we go sideways, the more viable another breakdown is.

The S&P 500 has gone back and forth during the trading session on Thursday to show signs of hesitation, and therefore it’s likely that the 3800 level is going to continue to offer short-term assistance. Quite frankly, the market looks as if it is trying to consolidate in this area, and therefore we may not get the massive relief rally that was possible. After all, we don’t necessarily need to balance, sometimes you can go sideways in order to work off excess fraud.

If that’s going to be the case, if the market were to break down below the 3650 level, then it’s likely that the market is much lower. In that scenario, the S&P 500 is more likely than not is going to go down to the 3500 level, as a futures market certainly looks very negative. However, it’s also just as possible that we turn around and show signs of life, and if we can break above the 3850 level, then the futures market may climb to the 4000 level.

The 4000 level is an area that not only is a large, round, psychologically significant figure but is also where the 50 Day EMA is racing toward right now. That would be a nice little rally and could get sellers coming back into the market. It’s difficult to see this as a market that should be rallying anytime soon because quite frankly the fundamentals are still very weak, and it’s likely that the monetary policy coming out of the Federal Reserve is going to continue to be tight as well. As long as monetary policy continues to be very tight, the idea is that we will see stock suffer as a result.

If the market were to break down below the 3600 level, I think that will bring in fresh selling, and therefore kick off more of a bearish move. On the other hand, it would be easier to short on signs of exhaustion after a rally, because it gives you more “runway” to work with. The market is not bullish until we break above the 4200 level, on the daily chart at the very least. If that were to happen, then obviously the momentum in the market would be to the upside. The market continues to be an oversold condition, but the longer we go sideways, the more viable another breakdown is.

This is yet another time that crypto has gotten hammered as we try to figure out exactly what function it will serve.

The Bitcoin market did almost nothing on Tuesday as we continue to look at the $30,000 level as difficult to overcome with any type of confidence. Bitcoin and the rest of the crypto market continue to struggle at the hands of risk appetite. You could also make a bit of an argument that we are forming a descending triangle, which is also a very bearish sign.

It’s worth noting that the hammer from last week suggests that there is a certain amount of support underneath, and a lot of interest will be had near the $25,000 level. That being said, the $25,000 level will more than likely get broken through, due to the fact that it was a minor area of interest in the past. Breaking through there allows Bitcoin to go looking toward the $20,000 level underneath, which had previously been both support and resistance. The $20,000 level could be an area where you would see value hunters coming back, but at this point anything is possible.

When you look at the chart, rallies could happen, but there are plenty of areas above that could cause problems. The 50-day EMA sits near the $35,000 level, and I believe that it is only a matter of time before sellers will jump in. In fact, the market will more likely than not continue to see resistance above there all the way to the $40,000 level. Either way, I have no interest in buying Bitcoin anytime soon, because the risk appetite simply does not allow it.

The downward trajectory has been brutal, but at this point, I think it is only a matter of time before it continues. The action over the last couple of weeks has simply been the market trying to work off some of the fraud from the downward momentum, but as the US dollar continues to strengthen and central banks around the world continue to look at tightening monetary policy, it is obvious that Bitcoin is not an inflationary hedge. In fact, it seems to be very highly correlated with the NASDAQ. In other words, it needs more of a “risk-on environment” to pick up a bit of a bid. This is yet another time that crypto has gotten hammered as we try to figure out exactly what function it will serve.