The bottom turned upside down

I recently posted Was that the bottom?, an idea I have also discussed in the forums. Since then most of my bitcoin posting has been cautiously entertaining that idea further.

Recently I have come accross another perspective which supports this idea in quite a nice way I hadn’t thought of. Credit to ‘lowstrife’ on TradingView website for this idea. https://www.tradingview.com/v/ktWNOrLB/#tc146808

The idea is to turn the chart upside down and look at the bottom as a top. Like this.

This looks like the classic bubble top, is it a bubble bottom ?

Gold and Silver

Been a little since I looked at Gold and Silver on my blog, about time I had another look.

Will start with gold, as usual I am focusing on long term charts here, each candle is 1 week and chart stretches back to 2010.

Gold

Since the all time high in 2011 (nominally at least) gold has faced a bear trend. A large bearish channel has formed which is shown in dashed lines. On that channel gold has recently failed to break up into top half of channel and price fallen again. For a great many traders who aren’t interested in fundamentals this is green light to short the shit out of gold for surely it will keep falling.

There is another way of looking at the chart though. I drew in pitchfork some time ago maked in bullish green trendlines, (and never published it on my blog until now as I didn’t want to give the kiss of death.) If this pitchfork continues to prove valid I expect a rally from here and another attempt at that dashed middle line of the bear channel, maybe successful this time.

Further evidence can be seen by the bullish divergence in momentum. Despite lower lows in price the momentum is fading. This would support idea that gold is ready to turn bullish.

Silver

In very similar fashion silver can also have a fork drawn in using almost the same points in time to form the pitchfork. At the moment silver appears to be finding support on a parallel line slightly up from the bottom of the pitchfork.

Also just like in gold the momentum appears to show a pronounced bullish divergence.

Like holding a balloon deeper underwater only makes it want to pop higher up to the surface I feel the same thing may happen to precious metals eventually. Unless another countries gold is stolen (like Ukraine and Libya, not to mention all the gold which has been leased then remelted and sent east) then the suppression cannot last indefinatley no matter how many paper games are played in the Comex.

Gold / Silver Ratio

To finish heres a look at the ratio between gold and silver. This particular chart is on a very long timescale going back to the early 1990’s, each candle is 1 month.

Here we can see that there seems to be a large channel forming the trading range. When the ratio is near the top that is when silver is very cheap compared to gold. At the moment the ratio is near the top of that channel with a ratio something like 1 ounce of gold is same as 74 ounce of silver!!! Considering natural scarcity of the metals in the earth the ratio should be a lot lower. I’m expecting that the next rally of precious metals will see both silver and gold rising drastically compared to bits of paper with masonic symbols on them, ie US dollars but silver will do so quicker and more violently causing this ratio to drop again. As marked on my chart bottom of this range would be somewhere around 27 or 28.

Price pop in bitcoin

Over last couple of days bitcoin price has enjoyed a bit of a mini surge and pushed up through some resistance.

On linear chart bitcoin has pushed up through a number of these sloping trendlines now which seems, dare I say, almost a little bit bullish. So is it to the moon yet ?

Heres a look at similar chart on log scale.

Looking at this there is resistance at this price, marked with dashed line. Path to the moon looks like is not yet clear. After that price still has to break up from a large bear channel. Despite the current bullishness it appears there still a way to go before the trend is really bullish again.

As discussed in other recent posts I still hypothesise that we are in process of trend reversal but still early days and not yet validated. My thinking is that price is still likely to go down a few times before another moonshot really gets going.

You are entering the accumulation zone

Well the rally hypothesis of my last post is looking a bit less likely just now, but not to fear this may give a chance to accumulate more bitcoins on the cheap for perhaps the last time in this bearish correction. However despite bitcoin fail to maintain the upwards trend it still hasn’t yet fallen downwards again so far. With price still pressing up against that resistance, if some positive event causes price to pop up through that resistance then the ralley might still be on I suppose. Perhaps a little more likely price will capitulate and fall again, maybe back towards the levels of the last low.

Heres some charts, starting on btc-e linear price scale, 1 month candles..

I see a lot to be bullish about on this long term view of bitcoin. As mentioned in previous post the last low looks to fall on a line also corresponding to other significant low points in the last couple of years, making me speculate this might be the bottom of the huge bubble correction. Marked with purple dashed lines you also see a divergence in price with bearish momentum fading.

There is a possible slightly bullish green channel I’ve marked, I feel next strong bull wave might reach up to roughly top trendline of that near $500 but when? Maybe we need to see some large bottom forming over a few more months..

Heres similar chart but this time using log price scale.

On this chart main thing to note is resistance from the descending price channel which will need to be overcome. Pushing through that will be a strong signal market is turning bullish but we might sill have a wait for that.

Here is an update to a new view that I like very much which is bitcoin priced in gold not $US

As you can see the wedge which I was looking at when predicting my rally has broken downwards instead of upwards. On this chart I am going to pay attention to see if the price looks like is supported by the middle of the channel or if falls back to lower half of channel. Mostly this depends on how far bitcoin falls as despite the price falls in gold bitcoin is much more volitile and affects the ratio the most.

To finish with I might as well throw in my all time log view of bitcoin which shows MtGox datain hollow candles and btce most recently in solid blue and red candles

Here we see the correction of this latest bubble has fallen further than previous bubbles compared to the slope of these trendlines. From this view you may think bitcoin is either priced more cheaply now than after 2011 bubble and after 2013 bubble and therefore fantastiv bargain. Or worryingly bitcoin is entering a death spiral to keep falling and eventually be replaced (by some newer crypto I suppose).

I guess in summary I’m expecting bitcoin to drop (a little) further in the short term and start playing out some kind of bottom formation wether inverse head and shoulders or maybe more likely a double bottom. I don’t think its the end of bitcoin yet based on amount of venture capital investment. But still if you are accumulating bitcoin remember only invest what you are prepared to lose. Don’t overextend. In longer term I think all prices around these levels will be looked at as very low by the time another year or two has elapsed.

Rally to 312

For some wierd and absurd reason, and defying my own logic and reason I continue to follow sheep and look at prices of things in fiat, specifically US$ fiat. It is wierd because I consider myself to be quite enlightened about money so why do I do it? Why always look at US$ charts. Maybe because we all do and also like other humans I have sheep tendincies? I don’t know

Anyway this evening I’ve been looking at bitcoin price in gold instead of US$, heres a chart of bitcoin price in ounces of gold.

You will immediately recognise I’m sure the shape of the chart is very similar. But is it just me or are the trends much cleaner? Is this evidence that gold really truely is the ultimate form of money ? Prices of things in gold, more honest in some way. Anyway that is a thought that occurred to me.

It looks to me like bitcoin is going to rally against gold up to that upper line of the channel so that 0.26 ounces of gold will buy you a bitcoin.

If I equate that to the US$ chart I’m getting $312

Guess we’ll see ..

Testing Trendlines

I’ve written a ‘testing trendlines’ post in the past on this blog which I’m sure you can find via search if you are interested but anyway history rhymes and repeats and stuff so heres another testing trendlines post.

Incidentally after a briefly flirting with a post about stock market I’m back to bitcoin for this one you may be glad to know.

In my last bitcoin post I discussed possibility that the bottom ‘was in’ based on a trendline from btc-e on linear price scale. Nothing has changed since then up to now to change that suspicion, its still an idea I like.

Anyway for first time in a long time I’ve pumped some new fiat into the bitcoin economy by way of buying a bit more bitcoin for my stack and putting my money where my mouth is. Which sadly won’t bring my stack up to levels it has been in the past but anyway point is I’ve been watching shorter timescales than usual to try and convince myself I was right!

Heres a chart, btc-e on linear price scale

With some satisfaction I’ve seen price break up through the first trendline, meaning the one second from top, (prooving me right), at the top trendline price has ‘corrected’ downwards, but in classic fashion has then found support where previously was resistance (prooving me still right but with a bit of worry I might be wrong) and now looks to be ready to rally again and maybe push through that line this time (prooving me awesome (if it does))

One thing I do know is that after being prooved awesome (if I am?) price will then decline to a new unfathomable low which prooves I know jack shit!

But then I might buy more and if it goes up from there regain my awesomeness when I sell for 10K.

lol just kind of joking about the feelings you get as an investor but really if you buy bitcoin at 239 then one day it falls to 88 will you really kick yourself when selling for 10K ?!

Or when it crashes to less than 1$ you’ll go arrgh I should have sold when they were $239.

Wish I had a crystal ball.

Anyway one thing from this is its nice to see the price testing trendlines exactly at levels I expected.

Time to sell the S&P500

Its been a fantastic ride for those in the share market but is the end in sight?

Here is a view of S&P Index on log price scale stretching back 30 years or so. Each candle is one month.

We can make a large bullish channel from the 2 main lows. How much of this bullishness is really just the purchasing power of the dollar falling? (erm… just about all of it) But regardless, price is finding resistance and unable to get back into the top half of the channel.

Looking at RSI prices are too high. On MACD a bearish cross looks to be in progress. I’ve missed out on the stock market unfortunately but there is no chance of me entering now. The bottom of that channel is around 1000 which is a 50% price drop. That is not unreasonable to forsee.

Here is how it looks on linear price scale showing latest rally

Its a new paradigm it will go up forever!!!

(just to clarify I don’t really think that last statement)

edit:

As discussed in comments when i say time to sell the stock market, I am thinking on long term timescales. Actual collapse may still be some time away. On shorter timescale (and thanks to central planners and plunge protection) the bullish trendlines are still being strictly obeyed. (Until the time they dramatically do plunge)

Was that the bottom ?

As you can see I’m still very much thinking along the lines that bitcoin may be nearing the end of this brutal downtrend that we endured all last year. Heres an idea I’ve been toying with on btc-e with linear price scale. Was that the bottom ?

The lowest trend line has been hit by some significant bottoms in the past. Including the low point after April 2013 bubble was deflating, the silk road seizure panic sell-off and the wierd btc-e flash crash. Personally I’m getting increasingly tempted to start going long particularly if the price takes another dip. These desicsions are of course all at your own risk, there are still bearish trendlines still in force which will provide resistance to any new bullish runs.

By the way, in recent posts I had somehow reverted to Bitstamp charts again, still not sure how that happened but I’m sticking with btc-e for my charts on this site and have moved back to that now. I’ve seen too many exchanges fail to trust that Bitstamp is in the clear myself. Could be wrong. But anyway my opinion remains that any bitcoin you hold with 3rd parties is at serious risk of being lost, I know this from sad experience losing sizeable number of bitcoin with bitcoinica and mintpal more recently. Keep that in mind.

More evidence of green shoots

ON suggestion of JP in comments I’ve decided to look at some of my favorite indicators, although I initially inserted it into end of last post I’ve decided to give it a post of its own instead.

Heres a look at btc-e with some of my favourite indicators added, chart shows candles of 1 week so its quite a long timescale I’m looking at.

Starting with Momentum, as the bitcoin price has made a series of new lower lows on its way down, pink dashed line. On Momentum indicator the lows are higher. This is bullish divergence.

On MACD there is no bullish cross upwards yet, on this timescale, where each candle is a week. However bitcoin looks well oversold.

Stoch RSI already looks to be turning bullish with blue line crossing up above the red.

RSI dipped below 30 into oversold territory which I think is very rare for bitcoin.

In my view all these indicators are saying that bitcoin is oversold. This doesn’t mean there can’t be a final push lower, but it might be risky waiting for sub 100 bitcoin though ;-)

edit: I’ve just noticed these charts are saying Bitstamp, bit confusing, I thought I’d switched to BTC-E!

Green shoots

On linear charts, while bitcoin still looks to be in a down trend and is well within the red downtrending channel shown below, and price is down 4% as I write, nether-the-less it appears there are some ‘green shoots of recovery’ starting to provide hope that the bull mode may resume.

Heres a look at btc-e on linear (ie normal) price scale,

Here you can clearly see the downtrending channel we are in which is well established for over 6 months as the deflating 2013/14 bubble continues on its merry way downwards.

However there is evidence another bull trend is in play, shown with green lines which might be starting to get a little traction. If we look closer at most recent price action you see the dotted line is providing points of support on higher lows, for now at least.

It appears there might be possibility of a constraining wedge, if the green dotted line fails to provide support I’d be looking for support on the solid line below that. It will be quite interesting if bitcoin instead breaks up out of that wedge, however it won’t be plain sailing to the moon after that if it happens.

Switching to log charts shows another version of the downtrending channel which this time looks tougher to break out from, requiring prices above $366 to get above the upper red trendline.

However again, there are bullish trendlines which may come back into play at some point.

From this view it looks like bitcoin ‘could’ drop to a new lower low for this down trend somewhere about $150, unless support appears before then.

Its a tough task to conclude best course of action from this position, down trend is still in control but its beginning to feel to me like the upside potential is gradually becoming greater than the downside, might be getting close to the point where I start thinking about accumulating a little more bitcoin, for the first time in ages.