Something, something, something, technical analysis

[oda.krell]

A note on volume

Seems to be a common complaint right now: "volume is just too low", "back in 2013 the reversal had much better volume". I'm not so sure about that. Let's see...

Excluding the day of the bottom itself (I'm leaving it out because I am interested in the "post bottom" volume), we have 20 days to look at. So I'm looking at 26.02.-17.03 for the current period. Same (post bottom) period in 2013 is 06.07.-25.07. Here's a visual of the time period I'm talking about:






Now, volume data (via btccharts). I'm summing over Mtgox, Bitstamp and btc-e in 2013, and Bitstamp and btc-e in 2014. Note that I'm ignoring Chinese exchanges entirely, which contribute a lot more volume today than back then, which works against my own case. (but tbh, I simply don't trust their volume can be taken at face value).

06.07.-25.07.2013
Mtgox: 57.3M USD
Stamp: 21.3M USD
btce: 8.4M
= 87M USD

26.02.-17.03.2014
203.5M USD
114.2M USD
= 318M USD

That's volume in USD, alright. Has to be, as that's the only meaningful way to compare volume across eras with vastly difference prices.

Volume in dollar:
318M:87M = 3.7:1

So, $volume is 3.7 times higher now than it was in the same "reversal" period in 2013.

Now, to mention this as well, price now is ~640 USD, back then it was ~90:
640:90 = 7.1:1

Summary: we trade at a price around 7 times higher per coin right now than back then, and are seeing about 3.7 times as much volume in USD compared to 2013. Keep in mind that expecting the relation between volume and price to be 1:1 a constant is most likely wrong, so based on volume alone I don't see a reason to question the trend reversal.

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[Rawted]

We will most likely hover between 500-700 during March.

[oda.krell]

Money flow: 2013 vs 2014

To some (most?), the following will be stating the obvious: we are very clearly not going through a trend reversal period that could mark the end of the bear market we've seen since December 2013. Others already pointed out the large bearish triangle we're still in, but here's confirmation of the claim above by eyeballing price rate of change and money flow. It seems pretty obvious that the period we're in right now (blue ellipse in the second graph) looks nothing like the reversal period of 2013 (green ellipse), while it shares some similarities with the last leg of the 2013 bear market (red circle).

There's of course an optimistic twist to it, if you wish to see it like that: We're not quite there yet perhaps, but the current "leaking of money" the market is seeing (the deeply negative CMF) is similar to the end of the 2013 bear period, so it's possible we're going through the last leg of the downtrend right now.

To paraphrase: We can pretty conclusively say now that all signs of a trend reversal, that we maybe saw in early March 2014, are thoroughly disproven right now. Of course, if your personal risk profile allows it, and you want to make absolutely sure to not miss the bottom, you might be tempted to buy in now, but if your strategy is to wait for confirmation that the trend turned around, then now is most certainly not the time.







Volume/price ratio: 2013 vs. 2014

Here's the same calculation I did a few posts above, relating $volume and price. The idea is to compare volume and price during the 2013 reversal month compared to volume/price during the most recent 30 days.

07.07.-07.08. (32 days)
$Volume Mtgox: 80M USD
$Volume Bitstamp: 31M USD
$Volume Btce: 12M USD
$Volume Sum: 123M USD
Price range, daily median: 70-98 USD

28.02.-31.03. (32 days)
$Volume Bitstamp: 298M USD
$Volume Btce: 142M USD
$Volume Sum: 440M USD
Price range, 30d EMAdaily median: 460-670 USD

$Volume Ratio now:previous = 3.6:1

Price Ratio now:previous =  6.6:1-6.8:1

Volume ratio applied 1:1 to previous price = 252-353 USD (in contrast: current 30d EMA = 580 USD, current intraday median = 462 USD)

Conclusions: $volume on the big Western exchanges is about 3.6 times higher than it was in July 2013 (the "reversal month"), the value didn't change much since I last calculated it. Price is dropping however (duh), and is now only 6.6 to 6.8 times higher than back then.

Applying the volume ratio 1:1 to the 2013 period price, we get a target price for our current period between 252 and 353 USD.

Keep in mind what I already wrote the previous time when I made this calculation: I'm skeptical that the relation between $volume and (stable) price is as simple as 1:1, so the target value is a very crude approximation of what could be a price supported by current volume.

In addition, I completely ignore Chinese volume. I continue to believe that there's good reason to do so: zero fee exchange volume cannot be directly compared to volume on the Western exchanges with non-zero fees, and more importantly I believe Western market participants don't fully "trust" the signals from China anymore, given that there is real doubt whether China will continue to be able to trade BTC as they did so far in the future.

Here's another way to think of my decision to leave out Chinese volume: It's the price that I expect to be supported by $volume if China would drop out entirely.

Practically, I'd say there's a good chance the trend will reverse before going that low, but I do think that at those target prices I would no longer hesitate to buy in, since they should in principle be supported by current volume while maintaining a stable upwards trend (like they were in 2013).

[JustAnotherSheep]

Looks like the bear triangle (as well as inverted cup and handle?) has finally been validated. Something, something, something.. complete?

[oda.krell]

Looks like the bear triangle (as well as inverted cup and handle?) has finally been validated. Something, something, something.. complete?

Well, if there was any doubt how bearish one should be right now, today gave the answer.

I've been looking for possible low price targets for the past week or so, but I don't really see myself buying in right now at any of them. Almost scary how, with a 4-5 month delay, I start getting the feeling lucif had at the beginning of this downtrend.

[EuroTrash]

Thank you for excellent analysis work.

[JustAnotherSheep]

Well, if there was any doubt how bearish one should be right now, today gave the answer.

I've been looking for possible low price targets for the past week or so, but I don't really see myself buying in right now at any of them. Almost scary how, with a 4-5 month delay, I start getting the feeling lucif had at the beginning of this downtrend.

Haha yeah, I know how you feel. Looks like the ol' clown prophet was right all along

I've been experimenting with arbitrarily shoehorning in the fibonacci retracement tool to predict points of resistance or reversal, based on the observed tendency for price to "subconsciously" adhere to/ping at various fib levels before the 0 level has even been reached, implying that tops and bottoms may be predetermined by some mystical magic market forces, either from the very start of a crash/rally or as a result of price movements while getting to the end point. I call it the "Fibhorn".

You may call this method extremely shoddy, inconclusive and/or laughable, but so far it's given me pretty accurate results, although it's hard to distinguish which prediction will be resistance and which will indicate floor, so I'll obviously have to refine it further for it to be more useful.

Anyway, applying the fibhorn to the current price, 250-266 has come up as a solid result, which is in line with your previous post. Again, I'm not entirely sure if this is going to be the floor or just a point of resistance, but I highly expect it to be either one at any rate.

[oda.krell]

Well, if there was any doubt how bearish one should be right now, today gave the answer.

I've been looking for possible low price targets for the past week or so, but I don't really see myself buying in right now at any of them. Almost scary how, with a 4-5 month delay, I start getting the feeling lucif had at the beginning of this downtrend.

Haha yeah, I know how you feel. Looks like the ol' clown prophet was right all along

I've been experimenting with arbitrarily shoehorning in the fibonacci retracement tool to predict points of resistance or reversal, based on the observed tendency for price to "subconsciously" adhere to/ping at various fib levels before the 0 level has even been reached, implying that tops and bottoms may be predetermined by some mystical magic market forces, either from the very start of a crash/rally or as a result of price movements while getting to the end point. I call it the "Fibhorn".

You may call this method extremely shoddy, inconclusive and/or laughable, but so far it's given me pretty accurate results, although it's hard to distinguish which prediction will be resistance and which will indicate floor, so I'll obviously have to refine it further for it to be more useful.

Anyway, applying the fibhorn to the current price, 250-266 has come up as a solid result, which is in line with your previous post. Again, I'm not entirely sure if this is going to be the floor or just a point of resistance, but I highly expect it to be either one at any rate.

Oh absolutely, that method makes a lot of sense. But I guess it also has lot to do with how often you're willing to trade, and how much you value your night's sleep. What i mean is, there are two ways to go about it:

You can define "weakly" the points of possible resistance, and trade them, but then you can't be shy and must be prepared to sell again if it turns out they won't hold. I.e. you determine the bottom as you trade along. Probably the most profitable way.

Thing is, I'm kind of exhausted of this. I don't want to set price alarms at night, or to interrupt whatever I'm doing to watch the price, and since I can't predict the bottom in a "hard" way, I'll wait it out til the dust settled. Might mean I will miss the absolute bottom by some, and miss out on profit for the in between swings, but as long as I see the larger downtrend still in full swing, I think I'll simply wait... although I admit that once we get near the old ATH, I'll seriously consider buying.

[oda.krell]

Not that I want to take a piss into your beloved bowl of cryptocereals, but considering that I was sceptical during last month's breakout-slash-reversal attempt (even though I ultimately thought it had a real chance for a while), I don't see how this one gets even close to the previous one.



In case you wonder what I mean: orange rectangle is the time frame of reaching and leaving the bottom, red one the aftermath. Currently, it looks like we fail to get anywhere near the March breakout in terms of momentum, and CMF isn't picking up either, hovering in the barely positive region.

The best thing I can say is that some of my favorite short-to-mid term indicators are about to turn bullish unless there's a sharp downturn (daily MACD, Fisher), so for the coming week(s) that spells some upwards potential, but the short term view makes me think this reversal is dead before it even got started.

Opinions?


UPDATE just 3 days later, and the situation looks a lot more pleasing. 6h CMF pulled up with a bit of a delay, to somewhere between 0.4 and 0.5, the highest spike since December, and well above the CMF peak of the March false breakout. A/D also shows a bullish divergence (not pictured below).

The real test for a sustained reversal will be whether we can hold this level, and do so with a bit of volume, but in any case, it looks like this rally might have legs after all.

[oda.krell]

Welcome to another installment of our series "conversations with myself".

Looks like we're at a critical juncture during our little rally. We're fighting for the first retracement level (23%) again, just like in March. This time, it's at ~499.

Right now, we're resting slightly below it, but it's too early to declare it lost in my opinion. The following days will tell if the market feels comfortable trading above 500 or not.

re: volume. Others pointed this out already, but the volume during the recent rise from 340 to 548 didn't look so good (slightly falling volume as we went up), but at least we're currently, in the first few bars after the 548 top, seeing a bit more volume overall than during the anemic March period.

[Bitcoin_is_here_to_stay]

This rally somehow felt very fake to me, more like a pump effort. True, there is more volume now (last day or two), but it spiked when we were falling from the new lows. Right now all big three exchanges (stamp, huobi, btce) are below $500. Not that $1 or $2 will matter in terms of TA, but I think psychologically it is a bad sign. But I am not an expert and not felt like "catching a falling knife" last week, even though it would be extremely profitable

[oda.krell]

This rally somehow felt very fake to me, more like a pump effort. True, there is more volume now (last day or two), but it spiked when we were falling from the new lows. Right now all big three exchanges (stamp, huobi, btce) are below $500. Not that $1 or $2 will matter in terms of TA, but I think psychologically it is a bad sign. But I am not an expert and not felt like "catching a falling knife" last week, even though it would be extremely profitable

I'm not sure I would call it "fake." 340 felt like a fantastic deal to many out there. So did everything between 340 and 420. From there, it's only a small step to buy in successively higher tranches. That's just the momentum.

But we are again in the same situation as before: once the initial enthusiasm about having scooped up those "cheap coins" is over, is there any sustained buying support at the level where we happen to land. And I can honestly say, I'm not sure about that. And so is the market right now, it seems.

[bucktotal]

maybe zoom out a bit... longer-term volume trend (smoothed) seems right on track

[oda.krell]

maybe zoom out a bit... longer-term volume trend (smoothed) seems right on track

I think that's more an artifact of the specific parameters you selected for your volume average than an actual signal. I just tried to recreate it myself, and any other value than 12 (i.e. 12 week volume average) gives a much less clear "upwards slope" at the end.

Here's a slightly more fine-grained picture, but still rather smoothed out (3 period average over 3 day volume). One could argue we're not doing so great with volume this time when compared to 2013, where the "reversal volume" showed clear signs of going up again. But of course it can still pick up this time, once we're more clearly settled at above 500.

[bucktotal]

absolutely. the parameters shape the result and the interpretation.

12 weeks avg was shown above. Your ~1 week (or 10 day) avg is not much different than what you are showing initially.. that is, it could be noise. we don't know yet.

more smoothed values on the weekly... and they all look similar to me so far.

8 weeks


4 weeks


2 weeks

[oda.krell]

absolutely. the parameters shape the result and the interpretation.

12 weeks avg was shown above. Your ~1 week (or 10 day) avg is not much different than what you are showing initially.. that is, it could be noise. we don't know yet.

more smoothed values on the weekly... and they all look similar to me so far.

[...]

I'm trying to see it your way, but I simply can't. Your 8 weeks picture still supports your point, because it clusters the March rally and the April rally together, along with their volume. Your 4 week and 2 week picture on the other hand start resembling the view I presented above: if you treat March and April separate, then it shows that volume was higher during the March breakout attempt than during the one we've seen so far.

Which view is the correct one (cluster, or not), I can't say with certainty.

[bucktotal]

i appreciate you trying, so here's the shorter 2 week average again but outlining the bottoms. seems like its still increasing no? thats what im seeing..

i think its ok the shapes are not identical. Perhaps the impact of misplacing a few hundred thousand coins is reducing the global trading volume and thus adding some noise to the general long-term uptrend in volume.... i think we'll just have to ride it out and check back in a couple weeks, as you suggest.

[Bitcoin_is_here_to_stay]

This rally somehow felt very fake to me, more like a pump effort. True, there is more volume now (last day or two), but it spiked when we were falling from the new lows. Right now all big three exchanges (stamp, huobi, btce) are below $500. Not that $1 or $2 will matter in terms of TA, but I think psychologically it is a bad sign. But I am not an expert and not felt like "catching a falling knife" last week, even though it would be extremely profitable

I'm not sure I would call it "fake." 340 felt like a fantastic deal to many out there. So did everything between 340 and 420. From there, it's only a small step to buy in successively higher tranches. That's just the momentum.

But we are again in the same situation as before: once the initial enthusiasm about having scooped up those "cheap coins" is over, is there any sustained buying support at the level where we happen to land. And I can honestly say, I'm not sure about that. And so is the market right now, it seems.

I did not mean "fake" in the sense artificial, I meant I do not believe it was beginning of the another bull market, it seemed like it will be very transitional. Indeed, CMF was soon in the negative territory again and many other indicators exhibiting downtrend.

[Bitcoin_is_here_to_stay]

i appreciate you trying, so here's the shorter 2 week average again but outlining the bottoms. seems like its still increasing no? thats what im seeing..

i think its ok the shapes are not identical. Perhaps the impact of misplacing a few hundred thousand coins is reducing the global trading volume and thus adding some noise to the general long-term uptrend in volume.... i think we'll just have to ride it out and check back in a couple weeks, as you suggest.

Hmm, I think that the only plot looking really optimistic was the original 12 weeks one. It also shows the correction was much sharper this time - at least the pots are looking this way.


BTW, are you assuming that the blue trendline (?) cannot be broken? How it behaved in 2011? Clearly, if we are about to enter long-term bear market some trendlines have to be broken

[bucktotal]

I'm just plotting data, no assumptions. I showed the 52 week MA because thats where we touched this year. last time, we touched the ~200-250 day MA line, depending on what exchange you're looking at/trading on. fyi, this correction is certainly not sharper than previous ones. in fact, they are getting less sharp each time (2011>2013a>2013b/14).

im just playing devils advocate a bit and trying to show thats it quite ok to go below the exponential trend line for a little while longer. we swung way above it for a while in the double bubble of 2013. And to the point, Volume is a tricky metric to follow in such an illiquid and easily manipulated market. Also, since a sig % of the economy's liquid assets (coins on exchanges) have been in a bit of turmoil lately, volume might not be the most reliable metric at present. A couple things different from last year, i think there is a lot more volume happening off exchanges. Personally, i purchased sig numbers of my new coins directly from a miner during this decline instead of through exchanges. Also, I (and many others) are not trading as much (or at all) because there is no "Mt.Gox of 2012-2013" and times have changed. there are no other good options that i want to leave that kind of volume on exchanges anymore. its time for a bit of a breather and a reset of the ecosystem. No wants to get Goxxed again at btc-e and i certainly dont want to go through the new kyc/aml standards at bitstamp etc, etc. these are just points to consider as confounds to the argument.

of course, i do agree that its important to stay vigilant though, because when trend lines break, thats when our models start changing.