Global markets and cryptocurrencies have been experiencing severe declines for months. The strong correlation between Bitcoin’s price and the traditional stock market further exacerbates this trend. Dominating all of this is a parabolic rise in the US dollar index that only accelerates.
However, the global market and its major indices have now reached long-term support levels and a potential rally. Moreover, DXY is slowly reaching its own macro resistance, which could stop the US dollar from rising sharply.
In today’s analysis, BeInCrypto examines SPX and NASDAQ price action in correlation to BTC and altcoin charts. Next, we’ll take a look at the DXY chart and its rapid dominance over other global currencies. It all culminates in a bit of harmonic analysis suggesting the next bounce.
Downtrend global market
The S&P 500 (SPX) chart has been in a bearish trend since hitting an all-time high (ATH) of $4,818 on January 4, 2022. Shortly thereafter, the ongoing decline began and the index hit for the first time in almost two years. Yesterday was the lowest (665 days). SPX is back down to the $3,624 level, down almost 25% from ATH.
If SPX starts bouncing at this point, a double bottom pattern can occur. In June, the index fell to the $3,636 level, but he, previously serving as support, bounced back to the $4,325 area (red rectangle). This resistance is in the region of 0.618 Fib retracement, measured over the entire downward motion.
The NASDAQ chart is similar to SPX, but with a stronger drop from ATH and a weaker rally from the bottom. The index hit an all-time high at $16,770 on November 22, 2021. This happened less than two weeks after his ATH in Bitcoin reached his $69,000 on November 10th.
So far, this decline has seen ATH reach $11,035 on June 16, 34% below ATH. A short-term rally this summer has reached the resistance/support area at $13,727 just below the 0.5 Fib retracement, signaling an overall downward move.
Also, a double bottom pattern is possible on this chart, but NASDAQ needs to start a strong rebound. The last time such a low price was seen in an index of tech companies was in November 2020, 693 days ago.
Short macro support?not the best idea
Traditional Markets and Cryptocurrency Analyst @TrendRidersTR I tweeted four charts: SPX, NASDAQ, Bitcoin and Altcoins. For each of them, he said, it is now possible to mark areas of macro support that would help halt long-term declines.
He went on to say that “the market has reached a large risk/reward zone with distinct levels of deactivation.” Global markets will remain bearish in the long run only if the levels marked below are lost.
Another analyst tweet supporting the above argument @IncomeSharks, looking at retail investor behavior in the context of S&P 500 prices. He said there is currently “a record number of retailers shorting and buying puts, just off the main horizontal $SPX support.” anticipate a backlash.
Focus on DXY
A major determinant of ongoing price action in global markets and cryptocurrencies is the US Dollar Index (DXY). Its value affects not only the stock market and digital asset market, but also the world’s major currencies.
US Dollar Annual Charts Against Several Major Currencies Officially Released @tradingview twitter account. It shows not only an increasing parabola for the dollar, but also a negative correlation with all other currencies.
For example, the Euro fell 18.13% year-on-year and the Japanese Yen fell 23.24%. Meanwhile, the US dollar he rose 22.42%. Deviations already look very large, and the recent decline has been so steep that it’s becoming more and more likely that this trend will reverse.
In a previous analysis, BeInCrypto pointed out that DXY’s parabolic rise may not end before the historic resistance in the 119-120 range. However, this still represents an increase of about 6% from current valuations, which will undoubtedly hurt markets and currencies even more.
For now, the DXY is trying to close the monthly candlestick above the resistance at 113 (red square). If you succeed, you are more likely to reach level 120 in one step.
Harmonic patterns to the rescue
An interesting harmonic analysis of SPX and DXY was posted on Twitter by analysts and traders. @MagicInternetM1Harmonic patterns use geometry and Fibonacci numbers to determine exact turning points. Based on this, it attempts to predict future asset price movements. Gartley, Bat and Crab are one of the most popular formations in harmonic analysis.
Published analysis sees a bearish bat formation on the 3-month DXY chart. Its vertex D is in his 119-120 resistance zone mentioned earlier. An additional confluence is provided here by the long-term 0.618 Fib retracement level.
Meanwhile, SPX’s weekly chart outlines a bullish deep crab formation. Here we may have already reached the final D vertex. A potential pullback could lead to the 0.382 Fib retracement level in the $4,050-$4,100 region, which is also the Q1 2022 low. This region merges with the bullish targets found in his second section above.
Summarizing the above analysis, we can conclude that there are more and more signals suggesting an imminent end to the cycle of asset price declines and a strong US dollar. No one knows when or where the current bear market will end, but the likelihood of a rebound, at least in the medium term, is increasing.
Forbee[In]Crypto’s Latest Bitcoin (BTC) Analysis, click here.
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