Bitcoin: Where's The Squeeze?

23 Eki 2022

The stock market (S&P) put in a dramatic bullish reversal on Friday (it does NOT matter why). Bitcoin is generally correlated to the S&P, and while it has tried to follow (tested 18,600 area low, then produced bullish pin bar), it's performance is subpar. Where is the squeeze? Where is the short covering? This lack of participation can be interpreted as RELATIVE WEAKNESS. Why does this matter?

For those who are consumed with "why?", you need to realize that "why?" does not matter. Markets are driven by irrational forces, so instead of trying to point to a reason that a market moved, instead just accept the move. Trying connect logic will NOT help you anticipate moves like this in the future. Learn to trust PRICE.

So lets accept the fact that markets reversed. All markets: forex, stocks, bond market. This move appears to be a function of the U.S. Dollar retrace (obviously a reaction to news). Before you accept financial entertainment at face value, REALIZE that NOTHING has changed in terms of the broader trends or price structures. While the Dollar is showing 1 bearish candle, it has yet to take out a multitude of support levels BEFORE any economic arguments can be made for sustainable rallies across other markets. One bullish candle does NOT signal a market bottom.

So what does all this mean for Bitcoin? Relative to the magnitude of the reversal, Bitcoin should have at least pushed into a notable resistance like 19,500 or 20,500. Instead it can't even get out of its own way, stuck in the low 19K area. This lack of performance is likely to be a sign that no one is covering shorts, and any buying is being absorbed. IF this is true, and Dollar rallies and S&P pulls back again, Bitcoin is likely to pull back FASTER. This is the concept of relative strength or in this case weakness.

And for shorts, this is a good sign. In fact, I shared a short swing trade idea recently which became active at 18,850. The trade is red at the moment, but nowhere near its stop. Based on this relative weakness, it is within reason to continue to give this trade a chance. IF a bearish catalyst comes along, it is still possible for Bitcoin to test the 17Ks or lower, especially if the S&P works its way back toward the lows. Until the broader context changes, I will continue to maintain the outlook that any rallies are not sustainable.

For those who trade on hope or opinions and think this is the bottom of t he market: understand that a market bottom is not an event, it is a process. Trying to buy "the bottom" is EXTREMELY expensive. By the time the actual bottom is confirmed, price is often much higher. Being on the right side of the structure is more effective than buying at the best prices. And right now, as long as rates continues to rise, the bottom has yet to begin its process.

Thank you for considering my analysis and perspective. I hope you find it helpful.