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Bubble Burst Update

Bubble Burst Update: Stocks and Crypto Market have recovered for much longer than we had expected. Last week all stock indexes and Cryptos have retraced exactly 50% to 61.8% of the drop since November 2021. Only currencies (namely USD, CHF and GOLD) have slowly risen and are still due to reach the extreme levels we have seen 7th of March:

EURUSD 1.0800
EURCHF 1.0000
GOLD 2000

We still expect those levels to be challenged and broken, although gold to a much lesser extent as prices tend to historically slow down when the FED actually raises rates, which they started this month.

We always maintain that the bear market is still well in place and from a technical perspective the 50% recovery of prices has unfolded perfectly according to Fibonacci retracement percentages and a “ABC” wave pattern. We expect prices to TOP at current levels and then resume the downtrend with a classic 5 wave move that will challenge and break early March lows. Timing might coincide with the usual portfolio adjustments that professionals operate before the summer, a cyclical event that traders have named “Sell in May and Go Away”. This would let April to develop the top before the reversal. Translated in numbers the Top levels are :

1) Between 14,800 (61.8%) 14,400 (50%) for DAX
2) Between 15,248 (61%) 14,807 (50%) for Nasdaq
3) 35,200 & 34,600 for the DOW
4) 28,400 & 27,600 for the Nikkey

For Cryptos numbers are slightly different, still Fibonacci retracement levels, as for the 2 most capitalised BTC and ETH they reached respectively:

BTC 38% at 46,800
ETH 50% at 3,500

These levels also match the classic 200 Simple Moving Average on a Daily chart. Given the higher volatility of Cryptos and lower retracement rates we could see some attempts to push towards 4000 for ETH and 50,000 for BTC but only to drop much faster at the turnaround. Our BTC target remains firmly below 20,000.
And since we mentioned targets let me outline our conservative forecasts for the Bear Market of stock Indexes:

a) 11,400 for DAX
b) 10,700 for NASDAQ
c) 25,300 for Dow J
d) 21,700 for Nikkey
e) 1,567 for Turkish ISE

Beside the technical picture and levels. Let me try to list some random economical fundamentals that we have seen in the news since March formidable “V shape recovery”of all stock and Crypto markets. And accordingly whether this rise in prices is justified (besides commodity prices):

a) World GDP growth reviewed to the downside
b) World inflation reviewed upwards
c) World Trade numbers weakening rapidly
d) African Countries facing record food and oil inflation. West Africa worst food crisis ever.
e) US and EU consumer purchases weakening, hit by inflation
f) BoE head forecasting an energy crisis comparable to 1970’s
g) China facing new Covid Lockdown and setting its growth forecast to historical lows.
d) Fed ended quantitative easing
e) US created more jobs and growth is strong. Many believe that USA is much better equipped to weather a crisis than in 2008. Still, some are starting to voice fears of recession.

We do not see enough,if any, positive messages to sustain a rally. Maybe all through April we could see some attempts to break March highs, but only while building the intermediate top we mentioned above.
Our objective? Increase hedges and adding to speculative shorts according to the risk appetite of our portfolios.

Sail Safe

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