May I use your comment to soap box for a moment about a pet idea of mine? I believe what you and others say about the low volume reducing the impact (and perhaps: staying power) of the current uptrend is true, but at the same time, it is not really a relevant objection.

* * *

There's this idea I'm working with, that is neither particularly novel I suspect, nor is it anywhere near formalized, systematized and testable -- it's simply a mental "stepping stone" for me to make sense of market events. The idea is simply that as events unfold, I update previous probabilities (in an intuitive rather than formal sense) about which state the market is in, and which state is likely to follow.

Let me be less vague: After the double top it took until about December 15 (right before the crash) before my internal assumptions switched from "bull market" to "bear market". This didn't happen all at once, but gradually, based on a number of observations and indicator signals.

Okay, so let's start at this point, the "confirmed" downtrend on December 15. What could convince me (or you) that the correction/bear market is over? Surely some drastic event (say, a new ATH) would do the trick, right? But we're nowhere near such an event, of course, so it's probably going to be a more gradual process.

What are the pieces of evidence that are part of this gradual process of changing one's assumptions? For example, we still didn't see a "double bottom", i.e. a confirmation of the previous low of ~460. Could mean we're back in an uptrend. Or that we haven't found real support yet. Evidence in favor of an uptrend is that in the last days, we've seen a break of a major trendline going down, and that several upwards trends across time resolutions are active at the moment.

So here's one observation I'd like to add, based on a simple method I recently started applying to post peak periods. I described this method a bit more in lucif's thread, and I'm still playing around with it, and try to find a way to remove the "intuition" from it so I can properly test it on historical data -- basically, it is the observation that after a peak/bottom cycle, price (or rather: volume weighted price, as it seems to work better like that) stays close to the middle point between the peak and the low of the cycle, and that the relative amount of time above or below that median corresponds to the likelihood that price continues to go up or down. Several details are still fuzzy: What's the input? Price, average price, or volume weighted average price? Also, I'm thinking that more recent price points above/below the median should be weighted higher than older ones in determining the prediction probabilities, so maybe some EMA-type calculation should work. Like I said, it's work in progress.

Anyway. What I'm looking at right now tells me to be (cautiously) optimistic.





Note that we are still below the median of the first December cycle (peak: December 4, bottom: December 7), but recently ended up above the median of what I consider to be the second peak/bottom cycle (peak: December 10, bottom: December 18). This second median is placed at ~769 USD (mtgox), and we've been above it, with a short interruption, for about 4 days now. My assumptions is, the longer we stay above it, ideally uninterrupted, the higher the likelihood that we continue to go up.

Sounds tautological, huh? "If price goes up, we go up." Not exactly. I intend this indicator to work as a short-to-medium term predictor based on the most recent history. It's not so much tautological but more of a compliment to other short term indicators like MA based ones, with the difference that hopefully mine is more predictive rather than lagging.

Let's say for a moment we manage to stay above ~769. Then I expect the next big point of resistance to be the level of the next higher median at ~914 USD.

Now I'd like to come back to my initial remarks about how I am prepared to gradually shift my assumptions about the current market: I'm trying to take into account as many pieces of (relevant) information as possible when deciding whether I believe that the December correction will continue, and for how long.

The most important piece of evidence *in favor* of the downtrend continuing is historical precedence. The objection by bulls is, understandably, that "this time the fundamental situation is very different". And I agree, it *is* different, and this *does* have an influence, but not necessarily in such a way that the length of the correction period is greatly reduced, but it could also be that e.g. the trajectory of the correction/consolidation period looks different based on different fundamentals. As I said before, based on this historical comparison, I would expect the consolidation/correction to last until late January/early February.

On the other hand, I don't take "historical precedence" as gospel. And that's why I watch other evidence, that is specific to the current period, like the results of my experimental method above, closely. Right now, we're undeniably in a short term uptrend since about December 22. It's not clear how long it'll last, it's not sure at all if it'll even break through the 800-850 (mtgox) resistance range before we run out of steam... but the point where we are now, above the median of the 2nd peak/bottom cycle, is one small piece of evidence in favor of the correction being over, or about to end.

The following is important! Please understand what I'm saying -- I am *not* saying that "the correction is over". It's a much weaker statement: "there is some evidence the correction is over".

It'll take substantially more evidence to convince me we're back on a stable and forceful upwards trend. And right now, the first requirement is staying above 769. If that happens to be the case for a while (a week maybe), then the next step needs to be cracking through (and staying above) the point I defined above, at around 914.

If we should reach that point, and we would stay above it for, say, about a week or two, I will most likely conclude that we do have a historic first where the post-ATH correction period is substantially shorter than the duration of the uptrend that led to the ATH.

Now, to finally come back to the "volume" question: all of the above is why I'm not all that worried about the low volume. It does (in my mind) make the current uptrend somewhat less "relevant", but only in the sense that the weight of the current uptrend as evidence in favor of the hypothesis "the correction is over" is slightly reduced.

More important is the question what will come instead of the current weak uptrend: if the current trend is really that weak in volume, then it also means that a relatively weak *countering* trend could easily destroy it. But as long as no such counter trend manifests, the *existing* uptrend, no matter how weak, is the only piece of information that I need to include in my considerations. In other words, I am aware that this trend could easily turn around, but I also realize that even a weak uptrend is, after all, an uptrend, and should be taken as (possibly weak) evidence that the correction/consolidation won't last much longer.

* * *

Apologies for a very wordy post. I don't have the time to rewrite the above and condense it to a more readable version. I know that it is written in a sort of rambling style that could be greatly improved, but maybe someone will find it mildly interesting anyway.

Helpful *and* trolling at the same time

I agree with Peter R.'s "rationalization" of a super exponential function above (I agree, even though I don't really *believe* in it), but I don't agree with what you're saying. if btc adoption growing exponentially towards infinity (f) and usd degradation exponentially decreasing towards 0 (g) are independent of each other, as you stipulate, what you're looking for, price p as f over g, is
f(x)=e^x
g(x)=1/h^x
p(x)=(e^x)/(1/(h^x))=(e^x)*(h^x)=eh^x
It's late and I'm midly drunk , so by all means tell me where you think i went wrong.

Nice. Only, that's not the right composition for the scenario you described, where the numerator exponentially increases in value and the denominator exponentially decreases in value. You composition actually makes the rate at which BTC increases dependent on the rate at which USD decreases. Was that what you had in mind?

Errrm, nothing? Not super exponential growth at least, if that's what you mean.

And I honestly don't know what function would even look S like when mapped to log.


EDIT: but let me make one thing clear: I don't buy the idea that a single log trendline governs BTC price now and forever either. The whole idea is a very very crude approximation, at best.

I know, I know I participated in the previous discussion of that idea. Didn't we conclude that the well known S shaped "tech adoption" curve would still be a straight line when mapped to log. Why does BTC deserve a "super S", if I may ask?

Back to the (supposed) topic?

Is 800 suddenly point of resistance now (on mtgox)? That could put a damper on this lil' trend of ours, no?

I've said something very similar yesterday, and before that as well (okay, I said it with more snark, but that's because I prefer to act dickish myself when corresponding with people that act dickish).

A log trend line (more precisely: linear regression on log charted price history) is a nice little tool to get a feeling for where we are at any point in time compared to the historic trend, and where we're going to be, very very roughly, in a few months or a year from now.

It is very much not a method to conclude that, right now, we have to go down another 33% to match the trendline, or that price has to rise by 2.575% to fulfill our yearly growth quota.

Add to that the bragging and the unjustified arrogance, together with a big dollop of exaggeration ("several millions"), and I'm suddenly much less forgiving towards his TA failures than I am with anyone else's.

Aaand here we go...

Not sure how much staying power this one has, but it's nice to see an upward breakout like that.

Already said it a page ago, I'll say it again: don't prematurely investiculate all over the place.

Are we going to bounce off of 830 to 850 again? Not clear at all to me.

Is Bitstamp pulling along, willing to break through 800 this time. Not clear either.

Meh.

You get what I'm saying. Golden mean and shit -- don't be too bearish when things look bleak for a moment, don't shit rainbows when it's looking a bit better

you're the sorest loser I know

Oh boy, I love this thread...

TERA, rptiela, Blitz: "We're doomed! Back to 400! NOW!"

Thread: "OMGZ SELL SELL SELL"

...

Price goes up a few USD on Sunday night.

Thread: "CHOO CHOO motherfuckers!"


I wouldn't want it any different actually

Still waiting for that crash, huh guys?

Not impossible, but slightly less likely since yesterday, buying pressure appears to be increasing.

Not sure how much value you place on this kind of (order book based) observation, but I noticed that in the last 24h, the bid/ask ratios across mtgox, bitstamp and btcchina are all recovering quite significantly. For the past few days they were more or less universally in decline (despite price staying mostly stable), but this situation is turning around. I'm going from "undecided" (my sentiment yesterday) to "mildly sure the consolidation resolves upwards" because of the previous observation.

Spot on, in my opinion (except for "multi year" anything). I see one major difference between previous "growth spurts" (to take over the term by wachtwoord) - the increase of total valuation from 10B USD to 100B USD is more than just another increase by factor 10. It's the difference between "too small to be of significance for big players" (be it banks, funds or states), and "big enough to matter".

I still think the bear market will be more consolidation than bear, and won't last much longer than early next year, but 2014 will probably find ways of challenging our optimism. Doesn't matter whether it's a less enthusiastic market, government interference or another stumbling block.

All that said, another ath will probably be reached. I don't see this market capable of a year long stagnation. If anything, we're getting faster, both in the run ups to peaks (aths and intermediate peaks)  and in their corrections.

Might be wrong, but i recall reading a relatively convincing article? post? somewhere entertaining that possibility (based on some different language conventions being used -- either a group, or a single individual trying to add some confusion). Can't really say though if there's much merit to that, I admit.

Hmmm... How to answer... Oh, right:

Let's go through a number of points how this is going to resolve. First, if you don't mention time frames, your analysis fails already, so I'll crudely break this down into short and long term.

Short term (say, this weekend, plus next week) I see:
a) several relevant short-to-medium term trends are active, among them 6h EMA30 (that performs extremely well in my backtests on recent data). Price remains above that one, as well as the quicker hourly EMA150. For a slightly slower perspective, 1d EMA30, i.e. the 1 month trend line is a focal point: price hovers just above it. I don't want to claim it provides support, not enough volume for that, but we should see if it holds in the next days.
b) bid/ask ratio is going down right now across all exchanges. That's usually a bearish sign, but in combination with a stagnating price, it's less drastic in my experience.
c) by a (relatively) crude method I use, based on a mean of the volume-weighted price of the peak and low of the most recent price swing, we're *right* on top of that mean. Similarly to my point about 1d EMA30, that's leads to a rather unsatisfactory "it could swing either way, but the next days should resolve it one way or the other".

Long term perspective is generally even more difficult to predict. Based on how peak/correction cycles played out historically, I would be extremely surprised if we've already seen the end of the correction. Late January/Early February is more likely based on how previous corrections played out wrt time. Price targets are difficult because it all depends on whether the December 18 low was really the bottom, or just an intermediate step in a larger more forceful downtrend, or alternatively, a long drawn out decline. I still see the possibility that daily SMA100 was active as support on that crash, and the final capitulation will be higher than the low of December 18, but that's not a strong conviction I hold, at best an informed guess.

Yeah. That's a new low. Even for you Good job.

Heeey, look what happens when you leave the forum for an hour or two... the clown brigade comes to town.

a) If you're interested in my methods, go read masterluc's thread. I post some more detail there. Sometimes sloppy, but at least you'd learn what I work with -- short term averages mainly, some volume and order book analysis, bit of EW theory though I remain skeptical about that one.

b) Your single biggest problem: false pride. Example: earlier this year, some simplistic back-of-the-napkin calculation convinced you we would see 300k USD coins within a year. You kept harping on about that magical number until the forum ridicule for this prediction even got through to you.

Now recently it looks like you learned the basic of linear regression. Good for you, everyone should learn a bit of math. But what do you do with that new tool? You set a new (more bearish) goal and you keep harping on that one without end.

Would you possess a minimum of capacity to self reflect, you would notice that a linear regression analysis of the entire price history is a useful tool maybe, but not somehow the magical wand or crystal ball to answer all your BTC trading questions.


Short version: I don't mind your analysis. I do mind the unjustified arrogance with which you present it usually.