Altcoin market continues to move higher. Major breakdown and breakout conditions ahead.
Big bear flag failing to move price lower
Last week I wrote about the altcoin market breaking out of the bear flag that it had been trading against ever since late September. On October 9th, the altcoin market shot outside of the daily bear flag to tag the daily Kijun-Sen as well as the bottom of the Kumo (Sekou Span A). The altcoin market then retreated into the bear flag and was threatening to breach that flag and show a continuation move south. Buyers stepped in and supported price on October 11th and prevented a further breakdown in price. Buyers have continued to support price through the 12th, 13th and today (October 14th, 2019). However, the overall trend remains bearish and until there is a sustained breakout above the bear flag channel, this is still an overwhelmingly bearish setup. Some factors may nullify a move south, though.
There are three oscillators below: the %B, RSI and Composite Index. The %B is one of my favorite indicators and provides an excellent measure of the probability of price continuing a move from strong resistance or support. With the %B just a hair above the 0.8 level (currently at 0.81), any strong step that would bring price above the bear flag would more than likely be a sustained drive higher. The near term probabilities of this happening can be confirmed by looking at the RSI and Composite Index. The RSI is sitting neutral territory at 50.45 with the line pointing higher and looking to cross above 50. The Composite Index shows a very bullish condition by bouncing off the slow average (yellow) and sloping higher with enough momentum that could cause it to break above the fast average (green). If the Composite Index were to point lower and dip below the slow average, then I believe we could experience the start to a continuation move lower.
One healthy condition that is absent on the daily chart is the total absence of bearish divergence. Both the RSI and Composite Index are showing shared troughs and peaks with price so there is no near term concern about a quick shift in the current condition of the market. Another stable state is the performance of the altcoin market against the total market. The altcoin market is currently outperforming the total market cap by a factor of two to one. If this can continue throughout the trading week, then we could see a large bear trap that would ripple across the entire cryptocurrency market. I am awaiting a daily close above the Kumo. That would be the most precise and definite example of a new and sustainable bull market for altcoins. If there were to be a new altcoin bull market, then it would be the first bull market in almost two years. Remember: Only Bitcoin has had a bull market since recovering from the 2018 crash. Altcoins have not had a bull market since Bitcoin’s price collapse in December of 2017.