We could be nearing an inflection point for both the stock market and cryptocurrencies. First, let's take a look at the stock market. The SPY (S&P 500 ETF) set a low on May 20th, down about 20% from the peak on Jan. 4th but has since bounced about 10%.
SPY Daily Chart
The stock market has been basically sideways over the past week as investors wait for the inflation data to come out on Friday morning.
Higher than expected inflation data will most likely lead to another sell-off and another leg lower. On the other hand, better-than-expected inflation data will most likely lead to a continuation of the bounce that started on May 20th.
The price of oil continues to slowly push higher, WTI is now over $121 per barrel. Obviously, this means gas prices will continue to push higher as well.
We are heading into what could end up being a long volatile summer, so much seems to be stacked against the markets right now. This is the time to be hyper-focused on protecting your capital.
It is also important to keep an eye on the markets, at some point this could lead to an incredible buying opportunity.
As far as Bitcoin and the rest of the crypto market. Bitcoin has been holding pretty strong around the $30k level for about the last month or so. The $30k level reminds me a lot of the $6k level during the 2018 bear market. The $6k level was very strong support for months until it finally failed in late 2018. That led to the ultimate bear market bottom in Dec. 2018.
Bitcoin Daily Chart
We could be witnessing a similar setup again. If the support around the $30k level fails I believe it will lead to a back-test of the 2017 high around $20k. This would also correspond to the level of the weekly 200 SMA which has shown to be a very good support during the last two bear markets. It has basically marked the bottoms of the last two bear markets.
Bitcoin Weekly Chart
Bitcoin Weekly Chart
My worst-case scenario is for this bear market to bottom with a similar percentage drop as the last two bear markets (85%). This would mean a bottom around the $10k level. I don't think the probability of this happening is very high but it is still a possibility.
Just as with the stock market, at some point, this will lead to an incredible buying opportunity!
Unless you are trading this is a boring time for crypto. But it is the best time to research new projects and make decisions on what cryptos will make up your portfolio for the next bull run. You could also start DCAing into some positions if you don't mind the possibility of more downside. Crypto winter is here! Now is the best time to prepare for the next bull market.
Until the next blog post, take care!
