Do Bitcoin And Gold Still Look Vulnerable?

By the middle of August, it was clear that the sentiment towards several key markets had changed. The stock market had impressed many skeptics after four weeks of solid gains. Stock traders were not alone as BitcoinBTC
traders, after a 17% gain in July, had turned much more bullish. One Bitcoin sentiment gauge had risen from 6 on June 19^th to 46 on August 14^th.

There were technical signs that the Bitcoin rally was over as it looked ready to close the week below the monthly pivot at $22,23. This made the first downside target $19,844 which was the monthly S1 pivot support. This was why it was one of the four markets that I felt traders should be watching. A week later it had a low of $19,527 and eventually reached $18,282 on September 19^th.

The decline required a technical update and even though there had been some technical improvement I still thought it could go even lower. So far that has not been the case – so what is the current outlook?

Jerry A’s chart of the Bitcoin futures shows that the 20-week EMA has been declining since the March reversal which is why it is yellow. This is consistent with a negative trend. Bitcoin prices have been in a fairly tight range for the past three weeks despite the volatility in the other world markets.

The volume has increased over the past two weeks, but the volume analysis is still negative. The VolConfirm is below both its short- and long-term MAs with no signs yet of a bottom,

The AsprayInsight analyzes the relative performance of Bitcoin against the S&P 500. It is negative which means that Bitcoin is acting weaker than the S&P. Given the rough year for stock prices this is not a good sign for Bitcoin as most do not want to be in a market that is weaker than stocks.

There is pivot support now at $18,743 and then more important at $16,452 with the weekly starc- band at 14,342. A weekly close above the dynamic stop at $21,593 would be an encouraging sign.

Gold was another market that I focused on that has been out of favor for most of the year. In August, I focused on the Spyder Gold Trust (GLDGLD
) which closely tracks the Comex gold futures which I will focus on today.

The gold futures had just rallied back to their declining 20-week EMA in August (see arrow) and then reversed sharply to the downside. This is typical of a rally in a downtrend and favored even lower prices.

A week ago the futures had a low of 1613 but prices were strong last week gaining $47 per ounce. Gold declined 11% from the August high of 1814 to the recent low of 1613. The violation of support, line a, going back to early 2021 is not a positive development.

The volume has been strong over the past two weeks as the on-balance -volume (OBV) has just closed back above its WMA. A strong move above the downtrend, line b, is needed to turn it positive.

The Herrick Payoff Index (HPI) dropped below the zero line in May indicating negative money flow. The HPI has moved above its WMA but at -4796 is well below the zero line.

The daily OBV and HPI (not shown) did turn positive last week which means that this market bears closer attention. I will be watching the next pullback to see if there are stronger signs of a bottom. Any pullback needs to hold the support at 1673, line a.

This table shows you what happened to the markets that I focused on in my August 19^th post. My updated analysis on interest rates and the Vanguard Total Bond Fund (BNDBND
) was published on Friday.

In part three, I will focus on the stock market. The weak close on Friday generated negative momentum so the overnight action in Asia and Europe will be important. The update will be released after Monday’s morning trading.