Arepo's Weekly Newsletter Discussion and Analysis

[arepo]

Arepo's Weekly Newsletter, running through 23 June 2014.

New Pricing Tiers! (as of 30 March)

0.025 BTC -- 1 issue
0.085 BTC -- 4 issues
0.25 BTC -- 12 issues

I am opening this thread as a center of discussion for my weekly publication. Please feel free to post any questions, comments, and other feedback here. Non-subscribers are welcome and encouraged. Subscribers, try to refrain from posting newsletter content in this thread. If you have a content-specific question, feel free to PM or email me.

General commentary, supplementary analysis, and alerts in the event of a mid-week update will be posted here.

I am always accepting new subscriptions, so PM me if you are interested!

Current Subscriber List:

oda.krell -- 16 issues (expires week of 23 June)
docile -- 16 issues (expires week of 23 June)
John999 -- 8 issues (expires week of 28 April)
kramerc -- 8 issues (expires week of 28 April)
iron77 -- 8 issues (expires week of 28 April)
kwest -- 4 issues (expires week of 31 March)
jlin -- 16 issues (expires week of 23 June)
CoinBurner -- 4 issues (expires week of 31 March)
Aquatic -- 16 issues (expires week of 23 June)
Blue -- 16 issues (expires week of 23 June)
Ultros -- 4 issues (expires week of 14 April)
Roger_Murdock -- 16 issues (expires week of 23 June)
rushthatspeaks -- 4 issues (expires week of 14 April)
Vectra -- 1 issue (week of 24 March)
castle -- 12 issues (expires week of 23 June)
damdam -- 4 issues (expires week of 21 April)
windjc -- 4 issues (expires week of 21 April)
CoolStoryBro -- 4 issues (expires week of 28 April)
whiz1003 -- 12 issues (expires week of 23 June)

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[arepo]

The first issue was just sent out to the following users:

oda.krell
docile
John999
kramerc
iron77
kwest
jlin
CoinBurner

Thanks for your support and happy trading!

[oda.krell]

Very happy with your first newsletter. Exactly the kind of mixture I was looking for: solid mid-term analysis, with some derived short-term recommendations.

Some (critical) remarks, if you allow:

(1) You show evidence for the 'factor 3' hypothesis, i.e. that we play out the correction at a speed 3 times as slow as that of April 2013. But in the end you don't make the obvious conclusion: that if we don't just see the local minima so far 3 times slower, but the *overall* correction will be at that speed, then we're in for another few months of bear market. Don't get me wrong, I don't believe there's a conclusive answer to this question (yet), but it's a bit strange IMO to bring up the 'factor 3' argument, but then not mentioning the possibility of a sustained downtrend.

(2) Your trendlines are a bit debatable. You go to great lengths to build them on as many points of contact as possible (i.e. you're rigorous), but then you're quite quick to declare candles that fall outside as "outliers", which is problematic in my opinion. In the end, I see more or less the same figure you describe, but I just wanted to remark on the 'points of contact' vs. 'outliers' problem (specifically, the chart on page 10)

But in the end, that's details... you did a great job, in my opinion.

[arepo]

Very happy with your first newsletter. Exactly the kind of mixture I was looking for: solid mid-term analysis, with some derived short-term recommendations.

Some (critical) remarks, if you allow:

(1) You show evidence for the 'factor 3' hypothesis, i.e. that we play out the correction at a speed 3 times as slow as that of April 2013. But in the end you don't make the obvious conclusion: that if we don't just see the local minima so far 3 times slower, but the *overall* correction will be at that speed, then we're in for another few months of bear market. Don't get me wrong, I don't believe there's a conclusive answer to this question (yet), but it's a bit strange IMO to bring up the 'factor 3' argument, but then not mentioning the possibility of a sustained downtrend.

(2) Your trendlines are a bit debatable. You go to great lengths to build them on as many points of contact as possible (i.e. you're rigorous), but then you're quite quick to declare candles that fall outside as "outliers", which is problematic in my opinion. In the end, I see more or less the same figure you describe, but I just wanted to remark on the 'points of contact' vs. 'outliers' problem (specifically, the chart on page 10)

But in the end, that's details... you did a great job, in my opinion.

thanks for the feedback

i'm not sure i quite follow your first criticism. it is true that the April bubble shows a fifth capitulation, "E"; is this what you are referring to? i'm not sure i would describe the intervening price action as a bear market, though. also, from what i can gather, you're talking about a conclusion for the mid-term, which i intentionally was not focussing on. the main reason so much of this issue handled the mid-term picture is because it's always good to be aware of the larger price environment within which these weekly actions are embedded, and the picture i conveyed is the model we're probably going to be working with for the next few issues at least. also in this case, it can inform us pretty well on the weekly scale, but if you're wondering why a conclusion about the mid-term price behavior is missing, that is the reason.

as for (2), i do see your point. i assume you take issue more with the drawn support than the resistance. remember on page 6 and 7, i demonstrate how the CCI data supports the conjecture that d2 is an outlier, so that takes care of the most recent violation. i also think that the consistency of the 'factor 3' data calls d2 into suspicion, by the principle of parsimony. further, the 'cuspiness' of the price action below this support during the two brief periods it was violated is further evidence. all that, however, is in the report, so i assume that doesn't satisfy?

--arepo

[Tzupy]

To me it seems that the 'factor of 3' is not correct. So far, the bear market (not just a correction) has been slower than that.
From 25th April to 3rd May 2013, there were 9 days to drop from the top of wave B. Now from the 6th January to the
25th February, the same drop from the top of wave B took 49 days. So it's more like 'factor of 5'. In April 2013 the corrective wave A
has been harsh, with lots of volume, and that's why it moved fast. The pace slowed in May, so this factor of 5 may need adjusting.
But it's too early to tell if the current market has completed one upward sub-sub-wave and a small correction and has begun the
second upward sub-sub-wave, that could reach 750$ if seller pressure won't be high.

[arepo]

To me it seems that the 'factor of 3' is not correct. So far, the bear market (not just a correction) has been slower than that.
From 25th April to 3rd May 2013, there were 9 days to drop from the top of wave B. Now from the 6th January to the
25th February, the same drop from the top of wave B took 49 days. So it's more like 'factor of 5'. In April 2013 the corrective wave A
has been harsh, with lots of volume, and that's why it moved fast. The pace slowed in May, so this factor of 5 may need adjusting.
But it's too early to tell if the current market has completed one upward sub-sub-wave and a small correction and has begun the
second upward sub-sub-wave, that could reach 750$ if seller pressure won't be high.

it's difficult for me to analyse your figure because i don't deal much with elliot waves. my analysis was using a different fractal model which focussed on the patterning of capitulation events. either way, i don't doubt that your data may suggest that as it is using a different model. that is, both of our interpretations are likely correct, we are just measuring different dimensions.

--arepo

[arepo]

---
6-hour scale w/ mid-term resistance from figure on page 10, and a short-term moving support


https://i.imgur.com/Qva2Y7S.png

---

So we're running out of space here, and one of these bounds will have to fail. it still doesn't seem like we have enough volume to break above the mid-term resistance. the expected strong bounce down would send us slowly towards the mid-term support i noted in the newsletter, and you can continue to use the model i presented to trade the range. a break above the mid-term resistance would falsify this model.

here's the resource you can use to reconstruct the lines. use the "/" button to the right of the "Settings | Tools" panel.

--arepo

[arepo]

---

6-hour scale


https://i.imgur.com/LPi4cYw.png

---

looking at the 6-hour scale, we see a reversal candle (first marked in blue), which we can identify by its long wicks and small body. in general you can also use volume to help confirm these candles, but since volume is relatively low right now that method is not applicable. this corresponds with a bounce off of the mid-term resistance (not drawn, see figure on page 10 of issue 10 March), confirming the model.

however, we see a second possible reversal candle, also marked in blue. this may be a micro-term reversal (meaning just a couple of periods long) where the price may attempt to retest the $645 resistance (marked in white). the model presented in the newsletter suggests that this retest, if it occurs, will fail, and we will continue to trend downwards.

---

1-week scale


https://i.imgur.com/ox43PcI.png

---

zooming out, there is a possible descending triangle forming on the 1-week scale with a moving resistance and a flat support (drawn in white) which also supports the model presented in the newsletter. this would suggest that the next price target for this trend down will be around $605, close to the known support at $600.

if we break under this support, which may happen depending on how many weak hands there are in the market right now, we may continue to trend downwards all the way to the mid-term support detailed in the newsletter (figure on page 10 of issue 10 March).

another way to understand what is going on right now is to assume that the large movement up to $710 caused the market to be extremely overbought in the short-term. a short period of consolidation followed, and then a movement down to the support at $605 (visible in the 6-hour figure above). the action since then was likely largely composed of weak hands naively reading the recent large buy as a very bullish sign. however, not many traders were convinced of a real reversal of the mid-term downtrend and so buying pressure, while steady, remained light. since trading volume is just generally low right now, there was not much selling pressure to counter it, causing us to gently trend up to the mid-term resistance around $650-$660. however, when the price failed to decisively break-out on such low volume as projected in my last post, some weak hands sold, causing the bounce. as such, depending on how much of the buying action since the $710 move was composed of similarly weak hands, we could trend all the way back to the last $605 low, or lower.

--arepo

[arepo]

This week's issue was just sent out to the following users:

oda.krell
docile
John999
kramerc
iron77
kwest
jlin
CoinBurner
Aquatic

---

i do want to take this time to share with the greater forum some feedback i received via pm regarding last week's report:

Thanks for last weeks newsletter, it is exactly what I was hoping would exist somewhere.  For me its a perfect balance of analysis and a description of the methods used to produce that analysis.  Your style of communicating has a strong educational flavor to it and its the best kind, the kind that comes completely naturally to a person.  I've been reading it this morning and I feel 100% more comfortable with my understanding of the current situation in the market than at any time over the last 4 months I've been involved in it.  What a relief!

thanks for the amazing feedback!

i am always accepting new subscriptions, so PM me if you are interested!

--arepo

[arepo]

Also, i have recently received some interest regarding a daytraders' daily report. this is in the works to launch as early as this week. it would consist of one email a day detailing a general observation and price targets, running for 4 weeks. PM me if you would be interested in this service!

--arepo

[Kramerc]

I've enjoyed this week's newsletter even more than last week's. I find it specific, educational and well detailed, a perfect mix for someone who is interested not only in what the price movement will be, but also in learning and picking up qualitative information regarding technical analysis.

Thank you for your quality work arepo. Keep'em coming, I can't wait for it to be monday again

[arepo]

I've enjoyed this week's newsletter even more than last week's. I find it specific, educational and well detailed, a perfect mix for someone who is interested not only in what the price movement will be, but also in learning and picking up qualitative information regarding technical analysis.

Thank you for your quality work arepo. Keep'em coming, I can't wait for it to be monday again

i can't wait for Monday either! i'm having a lot of fun trying to create that perfect balance.

---

TUESDAY UPDATE:

so the expected move to the support at $605 (page 11) came pretty quick. i hope the newsletter helped everyone anticipate this fully, as it was outlined pretty precisely. we can still use the Money Flow Index to help us figure out where this movement will bottom out, but we've already reached the moving support in the diagram i supplied on page 8:

---
daily scale


https://i.imgur.com/Iooo70A.png

---

see why i like oscillators so much? the data predicted the price support at $605 quite well, indeed. however, the daily smoothing is preventing us from seeing the other moving supports in the oscillator data which can help us predict the lower price supports which may soon come into play. let's increase the grain:

---
12-hour scale


https://i.imgur.com/8KCbYI4.png

---

here we can see two candidates. in blue, we see a higher moving support that i believe is associated with the next price support down, mentioned on page 11. in black we see a low, barely ascending moving support which could be associated with the bottom-most price support that still maintains the mid-term bullish outlook -- $530.

so, there is a single statement which i must correct in the issue 17 March, having misidentified the moving support in the MFI daily data. on page 12, where i said "as long as we do not break under this support, the mid-term outlook remains bullish", i should be referring to the black support in the 12-hour figure above, NOT the support detailed on the MFI on page 8. we are already resting on that one today, and there is still a lot of room for healthy downwards consolidation that does not preclude a bullish trend reversal.

--arepo

p.s. also, just a tip, if you're using the Bitstamp orderbook, it appears as though someone may be front-running similar price targets to the ones i presented. the bid side is stacked at $580 and $550, a little bit above the two supports i outlined in the report. be sure to take these orders into account if they do not move by the time these price levels come into play.

[arepo]

---
2-hour scale, Money Flow Index


https://i.imgur.com/6bCFwcU.png

---

here we have two possible moving resistances. BLUE resistance has 3 points of contact and 1 violation. GREEN resistance has 6 points of contact and 4 violations. violations of supports/resistances in oscillator data are far more common than in price data, so i do feel that GREEN is the best model in this case. we are threatening to break out of this pattern, but as long as we're trapped under this bound i would expect more downwards movement. we're not out of this hole yet...

--arepo

[arepo]

I hope the newsletter has helped everyone anticipate the price action we've been seeing. We've just touched the second bearish target from page 11 ($575), and i'm altogether pleased with the accuracy of my derived supports so far. as always, feel free to post questions and comments here in this thread.

I am also pleased to announce that my Daytraders' Daily Report will be launched this Saturday, 22 March! it will consist of a single email with a brief comment on the day's outlook as well as price targets, sent out daily between 12 am and 9 am EST. if anyone is interested in this service, please PM me for details

--arepo

[Kramerc]

so, there is a single statement which i must correct in the issue 17 March, having misidentified the moving support in the MFI daily data. on page 12, where i said "as long as we do not break under this support, the mid-term outlook remains bullish", i should be referring to the black support in the 12-hour figure above, NOT the support detailed on the MFI on page 8. we are already resting on that one today, and there is still a lot of room for healthy downwards consolidation that does not preclude a bullish trend reversal.

I think that the moving support in the MFI 12-hour data has been broken. Do you think this compromises our medium-term reversal, and do you see possible lower lows than the 3rd low target in the newsletter?

To me, the current trending down on low(er) volume suggests further price erosion even without a panic sell going on. Slowly dipping a couple tens of dollars every day, with counter-trend rallies being small and short-lived.

[arepo]

so, there is a single statement which i must correct in the issue 17 March, having misidentified the moving support in the MFI daily data. on page 12, where i said "as long as we do not break under this support, the mid-term outlook remains bullish", i should be referring to the black support in the 12-hour figure above, NOT the support detailed on the MFI on page 8. we are already resting on that one today, and there is still a lot of room for healthy downwards consolidation that does not preclude a bullish trend reversal.

I think that the moving support in the MFI 12-hour data has been broken. Do you think this compromises our medium-term reversal, and do you see possible lower lows than the 3rd low target in the newsletter?

To me, the current trending down on low(er) volume suggests further price erosion even without a panic sell going on. Slowly dipping a couple tens of dollars every day, with counter-trend rallies being small and short-lived.

yes, this compromises our mid-term reversal, for the time being. that is, it opens the possibility of another major capitulation event before we break out of the mid-term downtrend. this would correspond with the 3rd target from page 10 (but remember to take into account the $550 wall on bitstamp). further price erosion without large volume can bring us back down to the $578 low, but i doubt we will see new lows without corresponding volume highs.

in the case of hitting the 3rd target, will this support hold or will we see even lower lows? it is hard to say without analyzing the data associated with the movement. it is certainly possible that price behavior could turn very bearish very quickly, as this is the fifth consecutive red candle on the daily scale and the bid-side of the orderbook is still precariously thin. i will be sure to comment further on this possibility before the week's end.

--arepo

[arepo]

the data is in!

i apologize for not being very specific in my previous post, but it's important empirical practice not to make claims that the data doesn't support. the picture was looking a little bit fuzzy before this most recent price action. so what just happened? the not-so-rare case of speculators contributing to price volatility:

---
6-hour scale


https://i.imgur.com/LVjtXyu.png

---

my best hypothesis is that this 6-hour candle that's just about to close represents what happens when too many traders short or sell coins with the expectation of profit. since the market moves to minimize profit, when too many traders short but the market consensus is bearish, in order to minimize the excess profits which would correspond with the downtrending market, a short squeeze occurs. this is a counter-trend movement which causes the weakest hands to close their position, in this case buy back in, before moving downwards, thereby minimizing the overall profitability of the move. i hope none of you got squeezed out!

so the spike up started with a large buyer, but then was compounded by more and more traders closing their short position with a market buy. then, after enough traders were squeezed out, we moved down to the next support. so what can we deduce about future market behavior from this strange candle?

let's take a look at some indicators:

---
daily scale


https://i.imgur.com/dkkkEqy.png

---

the MFI has formed a solid flat-bottom support, which leaves some room for a downward bounce, but reduces the possibility of moving lower than the 3rd target from page 10. if we do make that lower low, but the MFI shows a bounce off of this newfound support, that would mark the end of this bearish action, as a lower low in the price corresponding to an even low in the indicator is bullish.

the Mass Index is flattening out, which is also bullish. again, its first positive-slope movement could easily be associated with another movement down, but this inflection generally marks the start of a new trend.

the CCI is pretty deep in oversold territory, which usually corresponds to peak bearish activity heralding a reversal, again consistent with the MFI and Mass Index. the steadily increasing bid depth and new disparity between the bid/ask spread (the orderbook has completely reversed since yesterday, with the bid side slope being greater than the ask for the first time since we started this downswing) also suggests that we haven't much more downside to this price action.

the only strictly bearish indicator is the MACD, which shows an immature crossover to the downside. this signal is immature, however, because the daily candle that is contributing to it has not yet closed, so that's definitely something to keep an eye on.

in conclusion, a move to the 3rd target from page 10 is still possible, but action below this support is unlikely at this point.

--arepo

edit: thanks for bearing with me (no pun intended ) while i collected enough data to make a strong case. i know that price action this week has been a bit crazy, so i hope i've been making my supplementary analysis a comprehensive play-by-play to pair with the newsletter. i received some questions via PM and in this thread, which is great -- keep 'em coming if there's any clarification needed! i launched this project specifically to help you all feel more comfortable and more informed in your trading strategies.

[oda.krell]

[...]

edit: thanks for bearing with me (no pun intended ) while i collected enough data to make a strong case. i know that price action this week has been a bit crazy, so i hope i've been making my supplementary analysis a comprehensive play-by-play to pair with the newsletter. i received some questions via PM and in this thread, which is great -- keep 'em coming if there's any clarification needed! i launched this project specifically to help you all feel more comfortable and more informed in your trading strategies.

Thanks for the update!

Perhaps I'm leaning a bit more towards a bearish scenario than you at the moment, with ~550 (EMA trend), or even 518 (fibo level) as possible targets for the coming days, mainly because I see clear signs we're gathering momentum to the downside (e.g. the daily MACD you mentioned, or looking at a Fisher transform indicator), and the divergences you see on the oscillators might not have the strength to counter that momentum.

So this is maybe one suggestion I have: your analysis is rigorous, and plausible, and it might well come true (and it'll turn out my more bearish view is wrong). But I also think to be profitable as a trader in the long run it is more important (and more likely) to be *prepared* than to be *right*... what I mean is that several options/scenarios should always be available to a trader, and he/she should pick the most likely one based on what he sees as time progresses.

So maybe you could look into the possibility of a continued (and gathering momentum) downward move, and what signs would point to that one playing out. To be clear: I'm not saying you should change your view, just that it'd be interesting to see your rigor applied to a (maybe less likely, in your eyes) scenario that diverges from the view you presented above.

[arepo]

Thanks for the update!

Perhaps I'm leaning a bit more towards a bearish scenario than you at the moment, with ~550 (EMA trend), or even 518 (fibo level) as possible targets for the coming days, mainly because I see clear signs we're gathering momentum to the downside (e.g. the daily MACD you mentioned, or looking at a Fisher transform indicator), and the divergences you see on the oscillators might not have the strength to counter that momentum.

So this is maybe one suggestion I have: your analysis is rigorous, and plausible, and it might well come true (and it'll turn out my more bearish view is wrong). But I also think to be profitable as a trader in the long run it is more important (and more likely) to be *prepared* than to be *right*... what I mean is that several options/scenarios should always be available to a trader, and he/she should pick the most likely one based on what he sees as time progresses.

So maybe you could look into the possibility of a continued (and gathering momentum) downward move, and what signs would point to that one playing out. To be clear: I'm not saying you should change your view, just that it'd be interesting to see your rigor applied to a (maybe less likely, in your eyes) scenario that diverges from the view you presented above.

you make good points. your call of $550 is plausible, and corresponds to the scenario where we move down to the 3rd target from page 10 and bounce. i have compiled some charts to further explore what a more bearish turn of events will look like.

right now we're looking at a standard triangle consolidation after the last move down that could very well be a bearish flag:

---
1-hour scale


https://i.imgur.com/vmIZl7A.png

---

we have three possible scenarios from this point:

a: we break upward -- very bullish, less likely.

b: we break downward and retest the last low or make a new low no lower than the 3rd target -- neutral, most likely.

c: we break downward and promptly break under the last low, continuing past the 3rd target -- bearish, least likely.

the data does not support a, and b will look like the bounce off of the flat support in the MFI as explored in my previous post. the scenario that you're mainly concerned with is c. what would that look like?

---
4-month daily scale


https://i.imgur.com/TDNqPfD.png

---

the Accumulation/Distribution data is trending down. this looks worrisome. however, the Chaikin Oscillator, which generally tracks the slope of the Acc/Dis line, is flattening, which suggests a weakening of downward momentum. if this figure continues to flatten, it would support the bullish case, b. if the trend changes from the increasing negative slope approaching zero to a decreasing slope, it would suggest case c.

---
4-month 12-hour scale


https://i.imgur.com/XRjAnXp.png

---

the daily scale Chaikin Money Flow shows solid support throughout the entire consolidation period after the last ATH, only briefly going negative during the largest volume capitulation events. the 12-hour scale, pictured above, tells a different story, and is another solid piece of evidence for the bearish case. we definitely need to see a peak in this data to be sure of scenario b. scenario c would see a continuation of the current trend with larger and larger negative values in this data.

the ADX is also looking bearish. we need the RED directional line to form a peak and then retrace under the past high at around 25. a continued increase in this indicator also supports c.

---
4-month daily scale
annotated with projection in red


https://i.imgur.com/CkGDhd8.png

---

for scenario b, we should see some support from the 40-line on the daily RSI. this provided serious resistance during the last set of lows, and today's immature daily candle has dipped us below. however, if we can hover around this point, this strengthens the case for scenario b. a decisive break below this low suggests scenario c.

the William's Oscillator is deep in oversold territory. a reversal here would look like the inverted head&shoulders shape as annotated. moving lower than the figure marked would suggest scenario c.

--- ---

i hope i have provided an exhaustive picture of each scenario: b, the bullish one i consider more likely, and c, the bearish one you asked me to explore.

thanks for the challenge! it's always important to stay impartial in price projections and be aware of all contingencies.

--arepo

[oda.krell]

Great analysis. Thanks, arepo. Very thorough, and convincing, as always.

I guess in the end we have a slightly different approach to trading: I'm guilty of being a bit of a "trend chaser", and you seem to be more a "predictive trader". And if I look at the larger charts picture, I can mainly see trends that slope down, be it 2 weeks, 2 months or 3 months. And all of those do so with pretty high accuracy. The only trend that falls out of this picture is a ~1 month trend. Depending on how you look at it, it is however also the least "established" one in, my view. So I tend to be skeptical that the more established downwards trends are really over, and the less established upwards trend is really the dominant one.

Based on my long-term assumptions about BTC price, I'm most of the time all-in in BTC with my trading position (except for periods that are absolutely certain to be a longer running down trend), but I freed a bit of fiat a day ago because I suspect the downtrend will continue, though I'm not sure of this. I will say that much however: if in the coming 3 days price doesn't go back into the territory where it falls back in line with the so far "frail" uptrend, by which I mean: break through 600 and stay there, I'm almost certainly going to free more fiat.

[arepo]

so far, we've been following scenario b from my last post. the daily-scale Chaikin Oscillator has continued to flatten. the 12-hour Chaikin Money Flow has peaked. the 12-hour red ADX line has peaked. and the daily William's Oscillator is tracing out the inverted head-and-shoulders.

however, the daily RSI has decisively dipped below the 40-line, and the daily MACD shows a definitive bearish crossover.

all things considered, bid support looks strong again, and price action since the $541 low has been bullish, with a micro-scale bullish breakout up to $570 after the initial consolidation. i still have confidence in scenario b, and i'm pleased at the accuracy and precision of the 3rd target from page 10 ($540!). predictions become more and more divorced from the data set from which they were derived as the week goes on, so to see corroborating price action to such precision on Saturday is very satisfying. anyway, as it is already Sunday i'm going to save all of the juicy details of our current situation for tomorrow

@oda.krell -- i see what you mean about our differing styles. both can be quite effective if done properly. because my techniques produce falsifiable models, i like to make a solid prediction, get into position, close the position with minimal loss in the case of a falsifying signal, or close the position at my leisure as the market follows through. although sometimes i front-run the market too much and there is some non-falsifying counter-prediction behavior that incurs a loss that i am forced to hold for uncomfortable periods of time before becoming profitable

trend-following is the opposite. you wait for a clear signal from the indicators instead of attempting to extrapolate, but the indicator data, as a rule, lags price and volume data. in this way, you run the risk of being too slow to get into position, and you are forced to determine whether or not you have missed the trend or if there remains profitable price action to be seen after already getting into position. in other words, you assume your position at a point of price instability by design, which is not something i'm comfortable with. by front-running the market, i usually can manage to assume my positions during periods of stability, and exit them as volatility and risk start to climb.

seeing price behavior in terms of trends is also a little problematic, IMHO. you talk about how downtrends are visible on many scales in the price data right now, but they are punctuated with periods of large price gains. the real "shape" of the price data in the past 4 months is an oscillation pattern, bounded by a support and resistance, not just a handful on interrelated downtrends. also, we're getting very close to the narrow part of this shape, which is precisely when price action historically diverges from these bounds, or "breaks trend". anyway, i tend not to focus on possible "trends" and when i notice a roughly linear increasing support, for instance, i call it a "moving support", as i'm sure you know from the newsletter. this pattern is more generalizeable than a trend as it also appears in indicator data.

---

also, Blue just signed on to the subscription service! thanks for supporting my work, and i hope others may see this thread and judge the quality and accuracy for themselves. PM me if you're interested in signing on before tomorrow's newsletter gets sent out!

--arepo

[arepo]

this week's issue was just sent out to the following users:

oda.krell
docile
John999
kramerc
iron77
kwest
jlin
CoinBurner
Aquatic
Blue
Ultros
Roger_Murdock
rushthatspeaks

enjoy!

edit: to my two new subscribers, i'd just like to remind you that if you have any questions or comments feel free to post them here in this thread. i want to make this service as comprehensive as possible, and i know that this issue contains some math and/or technicals that some may not be familiar with.

--arepo

[Ultros]

edit: to my two new subscribers, i'd just like to remind you that if you have any questions or comments feel free to post them here in this thread. i want to make this service as comprehensive as possible, and i know that this issue contains some math and/or technicals that some may not be familiar with.

In fact, that was much clearer and understandable than I first thought it would be. You keep it straight and limpid. So far so good.

I particularly liked your all-time RSI analysis. Keep up the good work!

[arepo]

edit: to my two new subscribers, i'd just like to remind you that if you have any questions or comments feel free to post them here in this thread. i want to make this service as comprehensive as possible, and i know that this issue contains some math and/or technicals that some may not be familiar with.

In fact, that was much clearer and understandable than I first thought it would be. You keep it straight and limpid. So far so good.

I particularly liked your all-time RSI analysis. Keep up the good work!

i'm glad you received it well! thanks for posting your feedback.

i'd like to announce that, since we added quite a handful of new subscribers last week, i'm going to start to republish past issues of the newsletter by request. since the publication is meant not only to provide price projections and analysis, but also generally inform your trading and analytic skills, past issues may be of value to the newer subscribers. please PM me if you did not, but would like to receive any of the following issues:

AWN -- Week of 10 March
AWN -- Week of 17 March
AWN -- Week of 24 March

the backlog will also be available to all new subscribers! simply sign up for a subscription, and you will unlock access to as many past issues of Arepo's Weekly Newsletter as you have paid in advance for. currently, there are 13 issues left, with the publication set to run up to and including the week of 23 June.

--arepo

[CoinBurner]

Thank you very much for your analysis! I enjoyed a lot the first two newsletters, especially the non-standard approach to market analysis using oscillators etc...
This last one is excellent, in particularly the RSI correction concept is just brilliant - I suppose it's an original idea of yours, since I've never seen such a methodology applied to explain the exponential adoption dynamics in a classical TA framework.
Still, I'm looking at that looming triangle in figure 1 and I can't help feeling the bear is still alive
Also it seems to me right now a consistent part of the analysts out there (especially EW people) are calling for "at least" a major retest of the lows, if not a lower low, with quite convincing technical arguments.
Could be very well a contrarian indicator of course... I guess we will see, the next few weeks are going to be exciting to say the least!!

[arepo]

Thank you very much for your analysis! I enjoyed a lot the first two newsletters, especially the non-standard approach to market analysis using oscillators etc...
This last one is excellent, in particularly the RSI correction concept is just brilliant - I suppose it's an original idea of yours, since I've never seen such a methodology applied to explain the exponential adoption dynamics in a classical TA framework.
Still, I'm looking at that looming triangle in figure 1 and I can't help feeling the bear is still alive
Also it seems to me right now a consistent part of the analysts out there (especially EW people) are calling for "at least" a major retest of the lows, if not a lower low, with quite convincing technical arguments.
Could be very well a contrarian indicator of course... I guess we will see, the next few weeks are going to be exciting to say the least!!

thanks very much for the kind words! the "bias function" derivation is original, yes, and still quite rough. i'm glad you enjoy my alternative methodologies -- my academic background is primarily in physics and mathematics, and i have relied on research, insight and empiricism, and hypothesis and test, to form the foundation of my technical knowledge and interpretations. whether or not the price action follows through as projected will be the real test of that particular hypothesis

i know i have been the odd one out in maintaining a cautious bullish stance, but there are quite a few factors that are simply inconsistent with the doom and gloom that seems to be the consensus. that said, there is some data that fully supports a retest of the established supports, but it's been difficult for me to find evidence for the kind of paradigm shift necessary to bring us to lower lows -- it simply has never occurred after the kind of pattern we've been tracing out in the past four months. in the very first issue of the newsletter, the opening argument was one which compared the shape of the present pattern to that of the price behavior after the April bubble, and the proportionality is significant. this suggests, to me, that we should not expect anything out of the ordinary, and certainly not a new-paradigm bear market.

i will be continuing to collect data, and price behavior this week will hopefully tip the balance decisively in favor of a clear model for breakout direction, which will be featured in the next issue.

--arepo

[oda.krell]

I would say there's more and more evidence now that we have to look into the larger triangle for support from now. Which would also mean, another month (approximately) of sideways/downwards movement.

[arepo]

I would say there's more and more evidence now that we have to look into the larger triangle for support from now. Which would also mean, another month (approximately) of sideways/downwards movement.

i'd mostly agree. what is most troubling is that we broke under the $530 support, and are now consolidating in a very bearish flag pattern directly below it:


https://i.imgur.com/n5Th6u4.png

while i still don't see us retesting $400, there is little price action between these two price points to help determine what kinds of supports we can expect. i have to say this took me a little by surprise. do you think that the "china ban panic" on the forums contributed to the severity of this movement?

[oda.krell]

I would say there's more and more evidence now that we have to look into the larger triangle for support from now. Which would also mean, another month (approximately) of sideways/downwards movement.

i'd mostly agree. what is most troubling is that we broke under the $530 support, and are now consolidating in a very bearish flag pattern directly below it:

[...]

while i still don't see us retesting $400, there is little price action between these two price points to help determine what kinds of supports we can expect. i have to say this took me a little by surprise. do you think that the "china ban panic" on the forums contributed to the severity of this movement?

Good observation on the smaller bearish flag.

I'd say the 'china ban' panic helped trigger what we see now, but is not the cause. I still see a severe lack of consistent buying pressure at this price level. Sure, there are short bursts when we touch the lower levels of support, but in between volume and price action is nothing that inspires confidence in this level (>500) in my opinion. Daily CMF confirms that view, I'd say, it's not comparably at all to mid July 2013 when we turned around for good last time... actually, it starts looking like June 2013, right before the final leg down.

[arepo]

while i still don't see us retesting $400, there is little price action between these two price points to help determine what kinds of supports we can expect. i have to say this took me a little by surprise. do you think that the "china ban panic" on the forums contributed to the severity of this movement?

Good observation on the smaller bearish flag.

I'd say the 'china ban' panic helped trigger what we see now, but is not the cause. I still see a severe lack of consistent buying pressure at this price level. Sure, there are short bursts when we touch the lower levels of support, but in between volume and price action is nothing that inspires confidence in this level (>500) in my opinion. Daily CMF confirms that view, I'd say, it's not comparably at all to mid July 2013 when we turned around for good last time... actually, it starts looking like June 2013, right before the final leg down.

i figured that the recent bullish action was a "bulltrap", for what it was worth, because we did not have the necessary volume to overcome the askwalls on bitstamp, and FIGURE 1 from this week's issue still showed a little bit more of consolidation space before a breakout, but to move nearly straight down from the upper resistance straight through an important month-scale support, all within 18 or so hours!

the daily-scale CMF and MACD do both look pretty grim now. i expect more downward movement from here, possibly to as low as $400. i'm not too sure about your comparison to June 2013, though, as the "factor 3" model still suggests that the final capitulation is far off, but we'll see.

--arepo

[oda.krell]

while i still don't see us retesting $400, there is little price action between these two price points to help determine what kinds of supports we can expect. i have to say this took me a little by surprise. do you think that the "china ban panic" on the forums contributed to the severity of this movement?

Good observation on the smaller bearish flag.

I'd say the 'china ban' panic helped trigger what we see now, but is not the cause. I still see a severe lack of consistent buying pressure at this price level. Sure, there are short bursts when we touch the lower levels of support, but in between volume and price action is nothing that inspires confidence in this level (>500) in my opinion. Daily CMF confirms that view, I'd say, it's not comparably at all to mid July 2013 when we turned around for good last time... actually, it starts looking like June 2013, right before the final leg down.

i figured that the recent bullish action was a "bulltrap", for what it was worth, because we did not have the necessary volume to overcome the askwalls on bitstamp, and FIGURE 1 from this week's issue still showed a little bit more of consolidation space before a breakout, but to move nearly straight down from the upper resistance straight through an important month-scale support, all within 18 or so hours!

the daily-scale CMF and MACD do both look pretty grim now. i expect more downward movement from here, possibly to as low as $400. i'm not too sure about your comparison to June 2013, though, as the "factor 3" model still suggests that the final capitulation is far off, but we'll see.

--arepo

No, sorry... I should have phrased that differently: I'm not saying we're in a similar situation to June 2013. Just that CMF resembles more June than July last year. Other than that, I don't see many similarities, even though I would now say that in my 2nd most *optimistic* scenario we have about one month of bear market left (i.e. the larger triangle).

[arepo]

The short-term bullish interpretations from page 13 of this week's issue correctly forecast the bullish movement up to the mid-term resistance, but alas, it was a bull-trap!

When we broke under the $530 support, based on FIGURE 1 from this week's newsletter, we broke out of the triangle consolidation pattern we had been tracking for most of this month, and referring to page 15, "CONTINGENCIES", this was a mid-term bearish signal, forecasting the further capitulation down to the $470 low.

so let's take a look at what's happened since:

---
2-hour scale


https://i.imgur.com/Uy8gfxt.png

---

on this scale, we see a sharp rebound and a symmetrical triangle consolidation pattern, threatening to break downside.

if we take a look at the 1-day scale of the past 5 months, we can see this pattern in the historical data, as well:


https://i.imgur.com/PuzFCKc.png

as we can see, the symmetrical triangle pattern forming at a significant height above the low (WHITE) is more bearish than the flat-topped triangle pattern in the same price environment (YELLOW).

so we have three possible scenarios:

scenario a: a bullish breakout of the current consolidation pattern, reaching the resistance at $530 -- least likely.

scenario b: a bearish breakout of the current consolidation pattern, reaching the support at $470 -- most likely.

scenario c: a bearish breakout of the current consolidation pattern, moving below the last low at $470 and reaching a new low, higher than the base support at $400 -- less likely.

scenario b corresponds to a fractal breakout into the larger flat-bottomed consolidation model on the 4-hour scale that i expect needs to be traced out before we see lower lows:

---
4-hour scale


https://i.imgur.com/VgfLTKU.png

---

the implications of FIGURE 1 being decisively falsified will be explored in depth in next week's newsletter! feel free to post more specific questions below and i will explore the short-term situation in greater detail.

--arepo

[arepo]

The downward breakout anticipated in the previous post merely broke us out into a larger symmetrical triangle, but it seems the true downward breakout is starting as i type.

again, we're most likely going to retest the support at $470. mid-term indicators are bearish, so this is an important test. if we break under this support, we could see some serious capitulation or a slow grind into a short-term downtrend.

[arepo]

drifting downwards on low volume is relatively neutral, but a downwards channel is forming that will bring us to the support at $466 if we do not reverse. again, this test is critical. a bounce (scenario b, most likely) will likely resolve into a flat-bottom consolidation pattern (detailed in the above updates). a break under this support is very bearish.

we just witnessed a bounce off of the 23.6% Fibonacci support ($473) as detailed on page 16 of this week's issue. a bounce here would likely resolve into an even larger symmetrical triangle consolidation pattern, which would actually be more bearish than a proper retest of the lower support, as this pattern in this environment is the dreaded "Bear Pennant" downtrend continuation signal. a flat-bottomed triangle that properly retests the last low has a better chance of breaking upward.

--arepo

[Kramerc]

What do you think about the huobi chart? The consolidation looks more like a symmetrical triangle rather than a flat-bottom one, in comparison to stamp.

Should we be expecting a violent downward movement today or tomorrow?

[arepo]

What do you think about the huobi chart? The consolidation looks more like a symmetrical triangle rather than a flat-bottom one, in comparison to stamp.

Should we be expecting a violent downward movement today or tomorrow?

are you referring to the fact that huobi has still not trended all the way down to the last low? this higher low could be the start of a symmetrical triangle, yes. however, stamp has already trended all the way down to the last low ($466)! either we break under this support and see some more capitulation quite soon or within the next 6 hours, or we bounce and see tandem triangles -- flat-bottomed (descending) on bitstamp and symmetrical on huobi, which will postpone the market decision for most of the day.

--arepo

edit:

scenario b, playing out on the 12-hour scale


https://i.imgur.com/VdXJzqt.png

as this 12-hour candle has 1 hour till close with pretty pathetic volume for a breakout candle so far, it's pretty much now or never for a decisive break under $466 for bitstamp. if we do not see a decision in this time frame, there is another time frame (the 6-hour i mentioned) that it is still possible, though less likely, after which, if we do not see the necessary volume, we will be trapped in the tandem triangles described above. the market is still leaning bearish but if the necessary selling volume does not materialize despite the many opportunities an upwards breakout becomes possible again after the largest triangle is traced. i will update this thread with weighted scenarios in that case, as we approach the narrow end of that pattern.

[arepo]

What do you think about the huobi chart? The consolidation looks more like a symmetrical triangle rather than a flat-bottom one, in comparison to stamp.

Should we be expecting a violent downward movement today or tomorrow?

triangles can be tricky because they have the nasty habit of breaking out into larger and more complex fractal patterns, instead of the clear textbook breakout, as the market postpones a decision. let me know if my previous post was clear enough to answer your question

--arepo

edit: BREAKOUT! right on schedule now we just need some real volume to confirm, and we could see a movement down to an estimated support of $410-$420 within 12 hours.

[Kramerc]

What do you think about the huobi chart? The consolidation looks more like a symmetrical triangle rather than a flat-bottom one, in comparison to stamp.

Should we be expecting a violent downward movement today or tomorrow?

triangles can be tricky because they have the nasty habit of breaking out into larger and more complex fractal patterns, instead of the clear textbook breakout, as the market postpones a decision. let me know if my previous post was clear enough to answer your question

--arepo

edit: BREAKOUT! right on schedule now we just need some real volume to confirm, and we could see a movement down to an estimated support of $410-$420 within 12 hours.

Yes. Your previous post made sense, and now we've broken out of the following larger triangle. Doom and gloom.

[arepo]

What do you think about the huobi chart? The consolidation looks more like a symmetrical triangle rather than a flat-bottom one, in comparison to stamp.

Should we be expecting a violent downward movement today or tomorrow?

triangles can be tricky because they have the nasty habit of breaking out into larger and more complex fractal patterns, instead of the clear textbook breakout, as the market postpones a decision. let me know if my previous post was clear enough to answer your question

--arepo

edit: BREAKOUT! right on schedule now we just need some real volume to confirm, and we could see a movement down to an estimated support of $410-$420 within 12 hours.

Yes. Your previous post made sense, and now we've broken out of the following larger triangle. Doom and gloom.

aw, it's not all that bad. you can tell i'm a trader at heart. i love bitcoin, but downtrends are just as profitable as uptrends. in fact, you can make profits denominated in BTC during price losses, so if you hate dirty fiat, that's all the better!

also, markets always swing from overbought to oversold. catch the bottom and you're looking at healthy gains in the next bull market, as well.

--arepo

[arepo]

BREAKOUT! right on schedule now we just need some real volume to confirm, and we could see a movement down to an estimated support of $410-$420 within 12 hours.

still following this pattern pretty solidly. we need to see some serious volume before this trend is terminated, and the estimated support in the above quote can be derived from the following extrapolation of the 5-month lows:


https://i.imgur.com/eUJLKeF.png

---

present price action aside, i'd like to remind the general forum that the next issue of my weekly newsletter will be sent out tomorrow morning! if you are panicked or confused because of the recent price action, you may want to consider subscribing. the publication will present a clear and accessible technically-based model for price behavior for the coming week, as well as mid-term projections for how long this bear market could last, and what might be the reason behind the paradigm shift away from the standard bullish bubble resolutions we've seen in the past.

i've updated the pricing tiers in the OP to reflect the publication's end date after the week of 23 June. however, i have not changed the BTC price from when i originally priced it at around 600 BTCUSD, so value-wise i'm offering a 30% discount!

to subscribe, please forward payment to the address in my signature and send me a PM, and i will confirm your subscription in the thread. thanks in advance for your support! remember to keep a cool head in this volatile price environment, and happy trading!

--arepo

[smoothie]

I see a spring that is coiling.


 

[arepo]

I see a spring that is coiling.

 

care to be more explicit? it does seem like we're near a market bottom, unless the price support in my previous post fails (which seems awfully unlikely given the bid support at Bitstamp). but all i've pointed out is that we haven't yet seen quite enough volume for the downtrend from $600 to terminate, based on the two previous capitulation events in the past 5 months.

in the short-term, i see an ascending triangle consolidation pattern forming that will likely terminate with a bulltrap that fails to break out above the moving resistance defining this downtrend:

---
6-hour scale


https://i.imgur.com/8jn5sjB.png

---

granted, this will be an important test, and a decision point to give the market a chance to reverse at these price levels. however, i anticipate that ask depth will steadily fill in during this consolidation and the market will be ready for another move down by the time we reach this resistance.

--arepo

[arepo]

This week's issue was just sent out to the following users:

oda.krell
docile
John999
kramerc
iron77
kwest
jlin
CoinBurner
Aquatic
Blue
Ultros
Roger_Murdock
rushthatspeaks
castle
damdam

enjoy, and happy trading!

--arepo

[windjc]

Just sent you payment for 4 subscriptions, including this last one preferably. Please confirm.

[arepo]

Just sent you payment for 4 subscriptions, including this last one preferably. Please confirm.

thanks for your support i just sent you a PM.

--arepo

[arepo]

I see a spring that is coiling.

 

care to be more explicit? it does seem like we're near a market bottom, unless the price support in my previous post fails (which seems awfully unlikely given the bid support at Bitstamp). but all i've pointed out is that we haven't yet seen quite enough volume for the downtrend from $600 to terminate, based on the two previous capitulation events in the past 5 months.

in the short-term, i see an ascending triangle consolidation pattern forming that will likely terminate with a bulltrap that fails to break out above the moving resistance defining this downtrend:

---
6-hour scale


https://i.imgur.com/8jn5sjB.png

---

granted, this will be an important test, and a decision point to give the market a chance to reverse at these price levels. however, i anticipate that ask depth will steadily fill in during this consolidation and the market will be ready for another move down by the time we reach this resistance.

--arepo

The volume was there on the way to 440ish, not sure if your triangle will break down.  The bids started coming in...
We'd need more 100+ sells into the bid to break the 440.  Looks like a bottom is in.  Temporary or not, not sure.
Small positive divergences as well.

we just witnessed an impressive upwards breakout in the last 2 hours. good catch on the small bullish divergences in the indicators, i was keeping an eye on these as well. however, the 1-hour candle just closed in a high-volume "doji" on Huobi, and a high-volume "shooting star" on Bitstamp; both of these are signs of reversal. the model you quoted can still come to pass if a subsequent correction downwards takes us under the $455 starting point of this push. the upwards breakout was a little larger than expected, but i think it was a significant short squeeze which added some volume to a movement up through a thin orderbook.

---
4-hour scale


https://i.imgur.com/0hbbNkP.png

---

on the 4-hour scale, we can see two short-term resistances here. one was the upper bound for the consolidation pattern, triggering the upwards movement once the price broke above. the other stalled the rally. the model is still intact, as long as we see a full retrace of this movement.

--arepo

[oda.krell]

Glad to see you made use of the ADX/DMI indicator in your latest newsletter. It's one of my favorites, because it is one of the few mid/long-term indicators that yield a very clear, almost binary signal. Unfortunately "clear" does not necessarily mean "reliable" however, and how reliable mid/long term signals can be is another matter, one which I shall rant on about in my...


Unexpected methodological interlude (you tend to have those yourself, arepo, so you can't complain :D)

The problem with TA indicators when applied to Bitcoin price is always the relative sparsity of data, because we can only look at 2-3 years of data. This problem becomes worse when looking at mid/long term signals, like the weekly ADX signal you presented (because it means we see a lower total number of patterns). If TA is supposed to be different from voodoo (a regular accusation on the wall thread :D), it needs to have an empirical foundation -- that foundation can reasonably only be in the form of frequencies of observation, and resulting estimations of conditional probabilities: out of m patterns observed in total, we have seen pattern X n times, and it is followed by price decline i times, etc, therefore we assume that, given the observation of pattern X, the likelihood of price decline is... etc.

In principle, this is sound methodology. The problem with slow moving indicators is that we have only seen the patterns we speak about 3, 4, maybe 5 times. In the absence of other methods, it is still our best bet to see how those patterns resolved those 3,4,5 times, and trade accordingly, but if we are honest with ourselves, we need to keep in mind that with such low numbers, our predictions don't have much statistical power. This can be slightly ameliorated by seeing how the same indicator performs and behaves in other assets (stocks, currencies), but the problem isn't really solved by that: because Bitcoin is so new, we don't really know for sure which other class of assets is the closest analogue, so conclusions drawn from another asset suffer from the same problem of uncertainty we faced before.

/methodological interlude


Let me add one or two remarks to the ADX analysis you made in the newsletter: you chose a weekly time resolution, which illustrates quite nicely your point on page 13 about the parallel increase of ADX and -DI. In my opinion this point becomes even clearer in a different time resolution however... in my (limited) experience, weekly resolution often tends to paint with too broad a stroke, while daily is often too "jittery", so I noticed that I often get the best results with a compromise: 2d or 3d resolutions:



And here it becomes crystal clear that we currently see something that was absent during the "bubble" of 2013 and the "mini bubble" of 2012: a second downtrend period (-di above +di) following the initial correction after the peak. And, as you pointed out already, this downtrend and rising -di is also coinciding with a rising ADX. So I can't really say I understand the optimism of those who seem to think it will be "business as usual", by which they mean "same deal as 2012 and 2013"... there is an important difference visible on the charts (and in fact, many others as well), and right now, I consider a continued bear market more likely than a trend reversal.

[windjc]

Arepo,

One thing I am not sure how TA can address is off-exchange transactions.

What I mean by this is that you provided a lot of great info in your newsletter about historical money flow.

However, if we were to make the assumption that larger buyers and institutional buyers are making a historically high amount of bitcoin purchases off exchange, how would we account for this in money flow?

It seems theoretically that lack of money flow could be offset by lack of bitcoin available on exchanges.

I guess we would have to measure historical ask sums to try to get a read on this?

[arepo]

Arepo,

One thing I am not sure how TA can address is off-exchange transactions.

What I mean by this is that you provided a lot of great info in your newsletter about historical money flow.

However, if we were to make the assumption that larger buyers and institutional buyers are making a historically high amount of bitcoin purchases off exchange, how would we account for this in money flow?

It seems theoretically that lack of money flow could be offset by lack of bitcoin available on exchanges.

I guess we would have to measure historical ask sums to try to get a read on this?

this is a great point. off-exchange capital inflow would definitely be absent from indicators like the Chaikin Money Flow which was the focus of that argument in the newsletter.

putting aside whether or not it is true that institutional buyers are making historically high amounts of purchases, how would be the best way to verify this?

while the CMF may not respond clearly to such "hidden" buying pressure, other data certainly would. your suggestion of looking at historical ask sums i think is the most obvious and straightforward way. these large buys would not show up as volume on the exchanges, but they would certainly affect the available supply.

also, while the CMF may not directly account for this buying pressure, many of the indicators i rely on are well-calibrated to a whole range of market environments. for instance, the CMF, like many other indicators, is a range-volume transform. The thin ask side that results from this choked supply would yield larger price gains with equivalent volume during bull markets, which would multiply the height of positive divergences and may help maintain the faithfulness of the signals in the indicator data.

--arepo

[smoothie]

I see a spring that is coiling.

 

care to be more explicit? it does seem like we're near a market bottom, unless the price support in my previous post fails (which seems awfully unlikely given the bid support at Bitstamp). but all i've pointed out is that we haven't yet seen quite enough volume for the downtrend from $600 to terminate, based on the two previous capitulation events in the past 5 months.

in the short-term, i see an ascending triangle consolidation pattern forming that will likely terminate with a bulltrap that fails to break out above the moving resistance defining this downtrend:

---
6-hour scale


https://i.imgur.com/8jn5sjB.png

---

granted, this will be an important test, and a decision point to give the market a chance to reverse at these price levels. however, i anticipate that ask depth will steadily fill in during this consolidation and the market will be ready for another move down by the time we reach this resistance.

--arepo

The spring I am referencing is much longer term than the charts you are looking at here.

Remember the last coil in July 2013? I believe it is happening again. Just a matter of time.

Let the weak hands sell then we can move up.

[windjc]

I see a spring that is coiling.

 

care to be more explicit? it does seem like we're near a market bottom, unless the price support in my previous post fails (which seems awfully unlikely given the bid support at Bitstamp). but all i've pointed out is that we haven't yet seen quite enough volume for the downtrend from $600 to terminate, based on the two previous capitulation events in the past 5 months.

in the short-term, i see an ascending triangle consolidation pattern forming that will likely terminate with a bulltrap that fails to break out above the moving resistance defining this downtrend:

---
6-hour scale


https://i.imgur.com/8jn5sjB.png

---

granted, this will be an important test, and a decision point to give the market a chance to reverse at these price levels. however, i anticipate that ask depth will steadily fill in during this consolidation and the market will be ready for another move down by the time we reach this resistance.

--arepo

The spring I am referencing is much longer term than the charts you are looking at here.

Remember the last coil in July 2013? I believe it is happening again. Just a matter of time.

Let the weak hands sell then we can move up.

I'm not so sure anymore. I think we might see the 200s again in the next couple of months. China is going to be severely handicapped so money will not flow into the markets much from there for a long time. Companies like Neo and Bee made critical mistakes (undercapitalization) and failed at bringing game changing services to places like Cyprus. The most successful bitcoin companies are ones that basically save merchants transaction fee charges by using the bitcoin platform, but do not inject money into the bitcoin exchanges or encourage businesses to hold bitcoins.

I don't think Bitcoin is dead or would even be dead if we went to double digits. I do however think that bitcoin has some SERIOUS growing up to do and we are in a process of killing off the core group of unsavvy unprofessional people who championed us this far while replacing them with more traditional business leaders. And until that process matures some more, we aren't going to see capital inflow from large hands across the world.

Bitcoin has got to take some more heavy left handed crosses to the chin before it can officially maintain high dollar heights. And because these more traditional business leaders move more carefully and diligently, it might be 2015 before we see some real recoevery. 2014 might be a dark year (ie 2011) for bitcoin price indexes.

[oda.krell]

... we are in a process of killing off the core group of unsavvy unprofessional people who championed us this far while replacing them with more traditional business leaders. ...

Smart post. Wholeheartedly agree with the gist of it. But about the quoted part...

Names! We want names! :D

[arepo]

I am altogether pleased with the accuracy of this week's report. despite a large bulltrap early in the week, the price action has followed the outline on page 25 nearly to the letter. we witnessed the projected move down to the major support level between $400-$420, reversing in the short-term around $416. then, we slowly drifted back up until reversing again at the $465 resistance, also detailed on page 25.

as always, i'd like to bump this thread with an invitation to any and all new subscribers. the publication still has 12 more issues to go!

---
1-day scale


https://i.imgur.com/9NFCoLN.png

---

here, we can see the moving resistance formed by the last two local highs on the 1-day scale coincides with the "last gasp" bulltrap from late January. this resistance also, incidentally, should coincide with the tip of what looks like a forming wedge. this price point will be extremely important, determing whether we reverse at these price levels and move up to the "bullish correction" targets, also from page 25, or retest the last low and possibly continue the downtrend.

--arepo

[damdam]

I wanted to know if you already sent this week's newsletter ?

We're already monday afternoon (in my part of the world), I have some money waiting to be spent on bitstamp, but I didn't received your newsletter. I'd like to read your opinion before buying.

Thank you.

[whiz1003]

Just sent payment for a subscription.  Can't get PM to send (keeps giving me an error), so I sent you an email instead, hopefully that's OK.  Thanks, very much a lurker but enjoy your work.

[infofront]

I see a spring that is coiling.

 

care to be more explicit? it does seem like we're near a market bottom, unless the price support in my previous post fails (which seems awfully unlikely given the bid support at Bitstamp). but all i've pointed out is that we haven't yet seen quite enough volume for the downtrend from $600 to terminate, based on the two previous capitulation events in the past 5 months.

in the short-term, i see an ascending triangle consolidation pattern forming that will likely terminate with a bulltrap that fails to break out above the moving resistance defining this downtrend:

---
6-hour scale


https://i.imgur.com/8jn5sjB.png

---

granted, this will be an important test, and a decision point to give the market a chance to reverse at these price levels. however, i anticipate that ask depth will steadily fill in during this consolidation and the market will be ready for another move down by the time we reach this resistance.

--arepo

The spring I am referencing is much longer term than the charts you are looking at here.

Remember the last coil in July 2013? I believe it is happening again. Just a matter of time.

Let the weak hands sell then we can move up.

I'm not so sure anymore. I think we might see the 200s again in the next couple of months. China is going to be severely handicapped so money will not flow into the markets much from there for a long time. Companies like Neo and Bee made critical mistakes (undercapitalization) and failed at bringing game changing services to places like Cyprus. The most successful bitcoin companies are ones that basically save merchants transaction fee charges by using the bitcoin platform, but do not inject money into the bitcoin exchanges or encourage businesses to hold bitcoins.

I don't think Bitcoin is dead or would even be dead if we went to double digits. I do however think that bitcoin has some SERIOUS growing up to do and we are in a process of killing off the core group of unsavvy unprofessional people who championed us this far while replacing them with more traditional business leaders. And until that process matures some more, we aren't going to see capital inflow from large hands across the world.

Bitcoin has got to take some more heavy left handed crosses to the chin before it can officially maintain high dollar heights. And because these more traditional business leaders move more carefully and diligently, it might be 2015 before we see some real recoevery. 2014 might be a dark year (ie 2011) for bitcoin price indexes.

I'm with oda.krell. Smart post. It's nice to see a dose of realism here too.

[arepo]

this week's issue was just sent out to the following users:

oda.krell
docile
John999
kramerc
iron77
jlin
Aquatic
Blue
Ultros
Roger_Murdock
rushthatspeaks
castle
damdam
windjc
CoolStoryBro
whiz1003

enjoy! and happy trading.

--arepo

edit: friendly reminder to all subscribers, new and old, if you have not received any issues in the series and would like to, let me know via PM or email. i want to re-release some older issues for the sake of the accountability as well as for the longer-term projections that i have included in them, specifically the mid-term projections and price targets i included in the last issue, 31 March. subscribers are entitled to a backlog of as many issues as they have paid for.

[arepo]

i'm sure many of you have heard of the Heartbleed bug by now. i hope no one has suffered any losses, as there was a lot of black hat activity in the early hours after the announcement.

in reaction to the news, many bitcoin-related services closed or otherwise restricted user activity and exchange volume has visibly suffered. this may have a limited effect on the projections in this week's issue, and we may see consolidation in the $465-$440 range for most of this week, scenario b. it is unclear whether or not the sluggish price action today is a direct result of the community's reaction to the bug, or is a natural result of a market in further consolidation. in the case of the latter, i would now rate scenario b as equally likely as scenario a.

further updates to come.

--arepo

[arepo]

---



at $410 we are resting delicately atop the mid-term support.

here we see a playout of scenario c, making new lows. this comes as a bit of a surprise, but the figures in the newsletter began to show bearish divergence earlier today, so we could have expected scenario b, at least.

-the daily UO data (figure 2) bounced off of the upper support

-while the 50-line showed a little support in the daily Stochastic RSI (figure 4), today's price action broke below it

http://bitcoincharts.com/charts/bitstampUSD#rg150zigDailyztgSzm1g10zm2g25zxzi3gStochRSIzi4gUOzvzl

-the 50-line in the 6-hour RSI (figure 5) completely rejected the bullish suggestion

-the moving support in the 6-hour MFI (figure 5) was broken as well

http://bitcoincharts.com/charts/bitstampUSD#rg30zig6-hourztgSzm1g10zm2g25zxzi1gRSIzi2gMFIzvzl

-the bullish divergence in the 6-hour Rate of Change Oscillator (figure 6) reversed

-and the 6-hour ADX shows a coupled momentum and negative directional line.

http://bitcoincharts.com/charts/bitstampUSD#rg30zig6-hourztgSzm1g10zm2g25zxzi3gROCzi4gADXzvzl

---

For the short term, this support should be a particularly strong one, so i do not think that a sudden crash from here is necessarily likely. If we see a snap-back that produces a long wick on the 12-hour scale, it could suggest a larger consolidation pattern before a market decision. If we remain at these levels for most of that period, this would be extremely bearish. Each other time we tested this bottom-most resistance, there was a quick snap-back in the price on the 12-hour scale that was followed by a large bulltrap, but we are in the midst of an unprecedented downtrend* (*reference issue 31 March). If price breaks below this price point, then we will have broken out of the larger triangle and could see a mid-term capitulation to the targets in issue 31 March, page 25, second paragraph.

edit: I have just re-issued report 31 March to those of you who have not already received it.

--arepo

[oda.krell]

For the short term, this support should be a particularly strong one, so i do not think that a sudden crash from here is necessarily likely. If we see a snap-back that produces a long wick on the 12-hour scale, it could suggest a larger consolidation pattern before a market decision. If we remain at these levels for most of that period, this would be extremely bearish. Each other time we tested this bottom-most resistance, there was a quick snap-back in the price on the 12-hour scale that was followed by a large bulltrap, but we are in the midst of an unprecedented downtrend* (*reference issue 31 March). If price breaks below this price point, then we will have broken out of the larger triangle and could see a mid-term capitulation to the targets in issue 31 March, page 25, second paragraph.

edit: I have just re-issued report 31 March to those of you who have not already received it.

--arepo

Good work, as always, arepo. It's interesting that you put in more technical terms something that I thought about in more intuitive ones: I think the most remarkable observation right now is how "normal" 400 suddenly looks.

A month, or two, ago, 400 had everyone salivating. Right now, we're creeping closer to it on pretty low volume. Will I buy at 400? Maybe, a bit. But nowhere near the enthusiasm I had for it myself back then.

Right now, 400 is protected somewhat by (in comparison to the total order book and average volume) some impressive buy orders around 400. But time works against the barrier, right now: we are in the process of feeling 400 is "normal", and if buying pressure doesn't majorly pick up until then, we will probably keep on testing it, and might eventually break it.

[arepo]

the violent snapback we witnessed in the past 24 hours appeared to me as a chain-reaction of closing shorts. while its impressive volume and long wicked candle formation looks like it marks the short-term bottom, the mid-term downtrend still looms.

---
short-term moving resistance



---

we are just now breaking above a robust short-term moving resistance i discovered with 5 points of contact and 1 major violation. this is definitely a bull signal and we could see a recovery up to the mid-term trendline in Figure 1, issue 7 April (most likely). however, low weekend volume may impede this and we could see consolidation in the $450-$380 range (more likely). a break below the $380 long-term support would suggest a double bottom, (less likely), or an abrupt continuation of the downtrend (least likely).

this particular formation (v-bottom) is relatively unique and has occurred far fewer times than the more robust patterns i have a better statistical understanding of. honestly, some of the ridiculous volatility we saw in the last couple of days took me by surprise, but then again, this is only the second real bear market that bitcoin has ever seen. i think many market participants are having trouble trading this environment, as this kind of snapback occurs in relatively inefficient markets. the ticker price suddenly moves below an important support, but the bid depth is too thin to prevent significant slippage, even though the buying pressure below this price point is significant enough such that if the buyers and sellers were more coordinated, the price volatility would be far less.

anyway, i hope you all caught the bearish divergence earlier in the week and were at least prepared for the large dip. with great volatility comes great profitability, so i hope you were on the right side of those powerful waves. i took only a slight loss, but did not make any gains as the constellation of patterns i was following in the indicators revealed themselves as lagging, instead of leading patterns. more on this in the next report.

--arepo

[windjc]

When will next newsletter be out?

[arepo]

Hello subscribers and other traders. This week I'm going to do something a little different. We have seen some seriously crazy price action this past week, and it's given me a lot of data to process. For this week's report, I wanted to fully explore some of the errors in last week's projections for reasons of both accountability and rigor. I'm currently testing a hypothesis about leading versus lagging patterns in the indicator data, and the game theory involved in the snapback we just saw. I also want to leverage some python scripts that I've been putting together to get a more solid picture of the data, as the price function has been seriously testing my methods lately. I suspect that there are a few hidden assumptions that hold mainly during bullish price action that do not hold during bear markets, as most of the data I have collected I did so during upwards trends.

Since my reports are generally a combination of general analysis and short-term projections, I will be posting below a projection for the next week that leverages the models I have already published in previous reports so that you all will have something to work with for the next 24 hours. This will save space in the full publication which will be largely devoted to re-analysis of the the same indicator data sets that I explored last week to form a more complete model for Bitcoin price behavior during bear markets, and more specific price-targets to complement the projection below. This full report will be released via email in pdf form tomorrow evening (EST).

---

all graphs are 3-day scale

A, linear scale

https://i.imgur.com/9fJskBL.png

B, log scale

https://i.imgur.com/9jhivU6.png

C, linear scale with exponential moving resistance

https://i.imgur.com/4SOWpsD.png

---

A shows one possible mid-term resistance modeled as a line defined by the last ATH and the third local maximum at around $700 (these are the points upon which the drawn line was constructed). its multiple points of contact in recent price data and lack of major violations make it relatively robust.

B shows a line constructed from the same two points, but projected onto a log-scale graph. it, too, is relatively robust with multiple points of contact and only one minor violation.

C is a composite graph on a linear scale with the log-scale line appropriately transformed into an exponential decay curve. you can see that they are built on the same two points as that is where they intersect. there is a significant amount of evidence to suggest that most linear phenomenon, like the moving support/resistance that defines triangles, are actually better modeled with exponential decay curves, but the linear models work well on most scales.

i created this chart to visualise the two competing mid-term resistances. one of them overlaps with the linear short-term resistance that drove the price slowly downward during March (FIGURE A), and the other one is better modeled on the log-scale chart and is significantly higher.

---

why are we bothering with locating the resistance? because the same fractal model i detailed on page 17, Week of 31 March*, can be applied to the current price environment (please refer to the bolded page for the diagram i am annotating.):

in the first two iterations of the pattern, the c-phase is associated with a long-wicked "reversal" candle. in these iterations, this phase is also terminated when a new high is made above the high associated with the long-wicked candle. once this price point is reached, the a-phase begins, a bullish resolution.

in the third iteration of the pattern, the c-phase fails to exhibit a strong recovery in prices, and shows a bearish resolution as the price makes a new low. of course, this is also apparent in the C-phase, in the largest fractal.

---

in conclusion, the 3-day-scale price data shown above has met the criteria for an "auxiliary c-phase" with a bullish resolution. we have made a new high above the high associated with the long-wicked reversal candle. the next a-phase should roughly correspond with a strong bullish correction up to the mid-term resistance, as in the two similar iterations.

in effect, over the course of next week i expect a strong movement up to at least the linear resistance followed by a short bullish consolidation, and then a final move up to the decay-curve resistance.

---

6-hour scale

https://i.imgur.com/KVsTRmn.png

---

at this very moment we are forming a symmetrical triangle consolidation pattern which, in this price environment, tends to also be a continuation pattern, meaning it will break out in the same direction as the trend. this formation is micro-term bullish

---

further analysis to be included in this week's report. it has really been a great joy publishing my work and i appreciate you all bearing with my sometimes hectic schedule.


--arepo

*please ignore the barely visible black-type "A", it was an error

[Blue]

arepo,

 where are you and where is this weeks news letter ? 

[oda.krell]

Can we get an update please on what's going on, arepo?

[oda.krell]

Any news from Arepo?

Nothing. I really hope he comes back with a good explanation.

[justanickname]

how does he send the newsletters? email? PM?

[Blue]

how does he send the newsletters? email? PM?

by email

however, something seems not right - he is offline since April 15.

[justanickname]

how does he send the newsletters? email? PM?

by email

however, something seems not right - he is offline since April 15.

Did you (or anyone) email him in the past week?

[oda.krell]

Wrote him an email, no response at all.

[justanickname]

Wrote him an email, no response at all.

same here

[Kramerc]

I have tried to contact him around 10 days ago, but the same answer. He doesn't seem the scamming type but he could and should inform us about what's going on.

[lebing]

Honestly seems like a health problem or a family emergency or something. Its not like he ran off with a huge amount of coins or something.

[oda.krell]

Honestly seems like a health problem or a family emergency or something. Its not like he ran off with a huge amount of coins or something.

Agreed, but you will also notice that no one in here started shouting 'scam' yet.

Still, it's a service I and several others paid for, and we're not receiving said service right now, and neither are we informed why that is. So some level of disgruntlement is to be expected.

[wachtwoord]

Honestly seems like a health problem or a family emergency or something. Its not like he ran off with a huge amount of coins or something.

Agreed, but you will also notice that no one in here started shouting 'scam' yet.

Still, it's a service I and several others paid for, and we're not receiving said service right now, and neither are we informed why that is. So some level of disgruntlement is to be expected.

Yeah, notifying people here of a personal emergency takes 5 seconds.

[justanickname]

Honestly seems like a health problem or a family emergency or something. Its not like he ran off with a huge amount of coins or something.

Agreed, but you will also notice that no one in here started shouting 'scam' yet.

Still, it's a service I and several others paid for, and we're not receiving said service right now, and neither are we informed why that is. So some level of disgruntlement is to be expected.

Yeah, notifying people here of a personal emergency takes 5 seconds.

I agree, and I think arepo would agree with you as well and that's why I am so worried!

[italeffect]

Historically he has disappeared from the forums for weeks/months at a time

[oda.krell]

It's now about a month ago that arepo stopped sending his newsletter. Still not a single word from him about the reason, not in the forum, not via email.

Unless he is seriously ill, or otherwise physically incapable of letting us know what is going on, I am now at the point where I have to assume he has been scamming the subscribers, that is: us.

By his own list of subscribers (and the corresponding price model -- old and new), he took in approximately 3 BTC according to my calculations, with a USD value at the time of around 1,500 USD (monthly exp average). Not a huge sum, but not entirely trivial either.

At this point, nothing short of a refund (full one, if he's serious about it, partial, as a fraction of the remaining newsletters if he just wants to save some face) for all subscribers who ask for it is appropriate.

[justanickname]

It's now about a month ago that arepo stopped sending his newsletter. Still not a single word from him about the reason, not in the forum, not via email.

Unless he is seriously ill, or otherwise physically incapable of letting us know what is going on, I am now at the point where I have to assume he has been scamming the subscribers, that is: us.

By his own list of subscribers (and the corresponding price model -- old and new), he took in approximately 3 BTC according to my calculations, with a USD value at the time of around 1,500 USD (monthly exp average). Not a huge sum, but not entirely trivial either.

At this point, nothing short of a refund (full one, if he's serious about it, partial, as a fraction of the remaining newsletters if he just wants to save some face) for all subscribers who ask for it is appropriate.

Actually, He took at least 5 BTC more from me as a loan, which he suppose to repay in 5 weeks:
https://bitcointalk.org/index.php?topic=509886.0

I can't call him a scammer because he still got time but I am worried!

[Ultros]

I find it very weird for such a good contributor to burn his identity on a forum just for the purpose of scamming 3 BTC when he could have grabbed at least tree times that number before doing such a move. He had new subscribers every weeks.

I'm afraid he met with some serious accident.

[justanickname]

I find it very weird for such a good contributor to burn his identity on a forum just for the purpose of scamming 3 BTC when he could have grabbed at least tree times that number before doing such a move. He had new subscribers every weeks.

I'm afraid he met with some serious accident.

That would be my guess as well.