ETHUSD Update: Consolidating into what appears to be a pennant formation just under the 306 resistance. In terms of structure this market is still bullish and the 350 area still serves as a good target to complete the broader Wave 3.
Pennant formations are just another consolidation where the trend lines converge on an angle. It is a little early to say, but this pennant looks more like a bearish one which makes sense just under this resistance zone. I do not give a lot of weight to smaller degree bearish chart formations in the face of a broad bullish trend, it is just worth mentioning.
The real bearish catalyst that I do place some weight on is the fact that BTC had a small retrace after making new highs and this market reacted to that, and as soon as BTC went back up to retest the high, this market does not react the same. I've been writing about this relative weakness, and my concern is if BTC goes into a broader Wave 4 (which I wrote about in my previous BTC report) then what's going to happen here? This makes me very cautious at the 290 to 315 area.
The key supports to continue to watch are the 279 and 263 levels. BTC aside, in terms of structure and wave count, as long as we stay above these levels, it is still reasonable to expect this market to complete one more leg up which makes the 350s a reasonable target.
A break of the 316 minor resistance is the signal to watch for, but in order to get the required follow through it needs a catalyst because the BTC highs are not enough. For me this is a tough trade to take because at this point 279 is the level I am using to define my risk. It's too high to take any meaningful position especially at the breakout point.
In summary, the current price consolidation is showing some minor bearish signs, but the major supports have not been compromised. Based on structure, this market is not weak, but in terms of relative strength, it's strength is questionable. These mixed signals make me very cautious especially just under the 306 resistance zone. There is potential for one more leg up into the 350s, it just needs a strong catalyst. I am watching the 279 and 263 levels for any retest, other wise I'm staying out.
BTC and ETH - as well as other coins seem to be mostly inversely correlated. I'm fairly happy with the resistance around the 300 USD level of ETH. The buy orders on ETH/BTC are also growing. BTC has pushed the total market cap over the previous high - I expect other coins to follow and in previous situations, the market cap hasn't fallen between previous ATH. This to me says that to an extent BTC is canibalising the market cap of other coins. Then there is the case of NEO, which I think has taken the prime spot for speculators/gamblers in Asia who are at the moment taking it easier on ETH.
All of these indices together lead me to expect (with a somewhat mild positive probability) that ETH will eventually rise, at the latest when BTC sees the first deep correction.
MarcPMarkets
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@janski, thank you for sharing your perspective. I am also long term bullish on ETH. I am very curious to see what happens to ETH when BTC retraces significantly.
Toto_
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@MarcPMarkets, BTC clearly won the "duel" of bitcoins. BCH is under 300USD so that has opend the door for more investing in to BTC, more security in the eyes of investors. But I have a felling that Vitalik knew this would happen. Investors will make money on BCH than BTC would get pumped and all in the right time for ETH to come out with Metropolis and the next stages of development. I am not saying that BTC did not "deserve" this I believe it will go even higher and be no. 1 coin for a long time, but if ETH goes out with some improvements in late August or early October it could pay off big.
MarcPMarkets
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@Toto_, any fundamental improvements in ETH will certainly provide the catalyst it needs to push higher.The technical structure is clearly in place. Thanks for your perspective.
janski
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@MarcPMarkets, As I predicted, BTC keeps mounting on ETH/BTC order book, I expect quite a crazy spike which is just starting now.
janski
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@MarcPMarkets I need to stop predicting :) Sorry to have bothered you.
Hi Marc, thanks again for your work and detailed insight. As there is a lot of speculation now about a bubble forming with BTC I would like to know your opinion on the most pro-active action you would take if this does occur.
Since ETH seems to move with BTC some of the questions I have are:
-Would you keep clear of the Crypto market altogether until the dust settles? or
-Move to Alt-coins? i.e Ripple as this appears to be close to the bottom of it's correction stage.
Any feedback would be much appreciated ;)
MarcPMarkets
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@jamesgmoore80, short term, I would stay away from anything relatively weak, like XRP. It was not making highs with BTC, and as much as people want to scream bubble, there is no long term bearish structure in place at the moment. I am very interested in the current pullback. It is healthy and required in my opinion. i would not give much weight to anything people say in the media, especially main stream media. A broad correction and a bearish market are two different things. We are not bearish yet.
All of these indices together lead me to expect (with a somewhat mild positive probability) that ETH will eventually rise, at the latest when BTC sees the first deep correction.