Critical Levels - EW analysis

[oda.krell]

Reason #1-From an EW stand point, there is no way (without forcing a disproportionate and extremely lopsided count) to count the move off the 152 low as an impulse. Indicators spiked violently in that move, kicking off the first in a long line of regular/hidden bearish divergences. These divergences have grown bigger as this current move has progressed as well as added many on multiple time frames. Now it is a waiting game, imo. Remember, I am long with about 60% of my capital since that knife to the lows. But 60% is all I'm willing to risk on this rally, at this time. Things can change my mind, but these "things" are not in any danger of being broken/invalidated/nullified/equalized/neutralized.

Reason #2 (and may be more of my own peeve)-imo, there wasn't enough of a sentiment change. We were very close to that point and things were looking pretty bad, but snapped back out of it too easily because of this rally. Was it because we got so low, so fast? Possibly. There wasn't enough time to make people think we were doomed. Now, I'm not talking about our beloved resident trolls... They are expected. I mean some of the most diehards questioning their very bullishness. Wave-1 begins with a good bounce. That, we got... But wave-1 also has a lot of uncertainty. It has grown too fast in the sense of a bullish reversal. There should be a lot of questioning whether this is just a bounce but there isn't. Everyone "Knows" this is the reversal. There should be a lot of selling pressure, but there isn't, and there really isn't a lot of buying pressure either. Wave-1 should be a slow grinding rise as early bulls fight with the still skeptical and pessimistic market. 100% gains in 8 days is not a sign of a wave-1. It shows that the market did not endure enough pain and there is still too much lingering optimism.

Reason #3- I'm not convinced that what we saw in January was a capitulation proper. In the image below, you can see a dramatic long squeeze when the price fell. This tells me that it was cascading forced liquidations rather than actual despair. Sure there was panic, all lower lows receives some panic, but capitulation isn't only extremely high volume, but also people throwing in the towel. Giving up... This isn't what was reflected in the market... In this forum... the charts (except the volume).

Great post, Ryn.

For the record, I don't completely follow your analysis, for one reason only really - the week of Jan 12 volume candle is so strong that I don't care *how* we got to that volume (margin cascade, market despair), I only care that at the end of the week, 1.5 million coins had changed hands on the big three USD exchanges alone. That reeks of capitulation to me.

That said, I tend to take your analysis serious, and your post is probably the most coherent argument in favor of the 'mid term bear case' I've read so far.

[8up]

This thread really makes me wanna sell

SELL, SELL SELL!!! 

[Afrikoin]

Some thoughts:

Several months ago Ryan and Chessnut posted EWave charts showing a final wave V decline below the 275 October low, to <some unknown but low target level>, followed by the birth of the new bull market / next leg up. 

They were correct in their counts, and the wave 5 plunge took us from the November high all the way down to the 150-160 range depending on which exchange you look at, on Jan 13.



But for some reason, they aren't bullish now, and instead looking for wave V again?  This makes no sense to me. 

The positive divergences in MACD that Ryan predicted have occurred.  MACD is on buy signals now.  The 1D MACD gave a buy signal, then the 3D MACD gave a buy signal, then the 1W MACD gave a buy signal.  3 day moving averages just crossed over into buy territory. 

The wave structure of this bear market looks complete to me.  It looks EXACTLY like Ryan was predicting all along (really great job on that prediction, seriously!) 

So why now look for another decline back to the lows?  I can understand looking for a moderate pullback here to maybe 270, tha's perfectly reasonable (but not guaranteed), but why expect low 200s again, or even lower than that?  This seems absurd to me, and contrary to both the charts and the Bbitcoin fundamentals and recent VC funding, which look stronger than ever now.

The January bottom was a much stronger bottom than the previous ones.  The massive volume we saw at the low, the crash of over 25% within hours, it was intense, and we already retested the low 200 levels in February, and have now had a rally which has lasted MUCH longer than the failed November rally.  Why remain bearish?


Is there something about Elliotwavers that makes them so bearish all the time?  I remember looking at Robert Prechter's counts of Gold in the early to mid 200s, when he just stubbornly kept looking for a wave V down to $200 an oz, even while Gold kept rising and rising. 


There seems to be this obsession with a rally off the bottom having to exactly fit your expectations, or else it doesn't have a chance of being a new Bull market.  The rallies off of crash lows like we saw in January arent always perfect looking 5 wave moves up, but they still can be the beginning of the new move up. 

Doesn't it make more sense to stick with the count that was correct, which labeled 5 waves down culminating in the January crash, and treat the price action over the past 2 months which has now turned many technical indicators bullish as being the new bull market move?

I don't mean to be overly critical, and I think your guys calls during 2014 were amazing (and they caused me to hold onto a good chunk of money which I then bought with in the 200s, instead of spending it all last year at higher prices, so thank you!)  But why still be bearish after the count was fulfilled and we should be in a new upmove?

Thanks

IMO, it is always safe to have perspective. Like not ruling out completely that $166 was a final bottom. And also not ruling out a possibility of retesting a bottom. This is why i believe EW is good for broad perspective - doesn't stop us fro trading short term oves, but keeps the longer term perspective clear.

Regarding the bottom, i recall a mention of ABC after wave V?

[bassclef]

Reason #3- I'm not convinced that what we saw in January was a capitulation proper. In the image below, you can see a dramatic long squeeze when the price fell. This tells me that it was cascading forced liquidations rather than actual despair. Sure there was panic, all lower lows receives some panic, but capitulation isn't only extremely high volume, but also people throwing in the towel. Giving up... This isn't what was reflected in the market... In this forum... the charts (except the volume).

It's not that I completely disagree with your analysis but I am skeptical of EW in general in its ability to evaluate the driving force in any market, which is volume. And we have the luxury of having accurate volume data (with a caveat to China), so why not use it? Look at a simple indicator like OBV which contains no price data whatsoever yet tracks the price in form. The relationship is very powerful.

The quality of negative sentiment should not be the measuring factor of capitulation. Rather volume is, as it is the number of coins changing hands that will give the market enough shift in supply and demand to cause a reversal. Even if the last drop was simply longs cascading--they were still bought and that is supply being removed from the market.

Sentiment is a mass psychological reaction to market conditions but should be viewed as a result and not a cause of market movement. There is no quantifiable amount of "giving up" that should be tied to capitulation--the market does not care about it. Whales and pro traders simply use sentiment to their advantage because they know mass human behavior never changes and they can fill their bags at the lowest possible price.

Look at the opposite side of the market: During buying climaxes, sentiment feels overwhelmingly positive. How amazing does it need to be in order to justify a proper market top? The answer, only high enough to fill the pros' sell orders, then supply and demand takes care of the rest as they exit the market and begin to sell short.

[Afrikoin]

Reason #3- I'm not convinced that what we saw in January was a capitulation proper. In the image below, you can see a dramatic long squeeze when the price fell. This tells me that it was cascading forced liquidations rather than actual despair. Sure there was panic, all lower lows receives some panic, but capitulation isn't only extremely high volume, but also people throwing in the towel. Giving up... This isn't what was reflected in the market... In this forum... the charts (except the volume).

Sentiment is a mass psychological reaction to market conditions but should be viewed as a result and not a cause of market movement. There is no quantifiable amount of "giving up" that should be tied to capitulation--the market does not care about it. Whales and pro traders simply use sentiment to their advantage because they know mass human behavior never changes and they can fill their bags at the lowest possible price.

Your quote above doesn't make sense.

"There is no quantifiable amount of "giving up" that should be tied to capitulation--the market does not care about it."

The whole idea of sentiment and mass psychology means the market is not a separate entity from individuals within it. What do you mean the market does not care about it? The market is equal to sentiment (aggregate).

[michaelGedi]

yeah I feel there is a problem when talking about capitulation as a psychological state and capitulation as a market event and assuming they are the same thing. I can't imagine there is a prescribed level of despair required to create the desired market state. In that the extreme of a market event doesn't have to totally correlate with the extremes of human emotion. Differing levels of a human emotion could lead to the same results.

This is something that's been phasing me a little in these kinds of discussions. I'm going to hazard a guess at 2 things: Bitcoin is more resilient than traditional markets, and bitcoin sentiment has a positive bias. Why? Because it has bubbled at least 3 times now, each higher than the last and because the demographic involved can't deny the revolutionary possibilities of this idea - the entry requirements ask at least this much understanding. (I always say I came for the greed, stayed for the technology).

If these 2 things are correct then I imagine that while the mechanics of the market will still follow familiar patterns of behaviour, there may be some strange elements that elevate the sentiment, lead to unpredictable behaviour, behaviour that is based on always prepping for the next cycle etc..


Just some ramblings...

[Afrikoin]

extreme

adjective, extremer, extremest.
1.
of a character or kind farthest removed from the ordinary or average:
extreme measures.

[Afrikoin]

yeah I feel there is a problem when talking about capitulation as a psychological state and capitulation as a market event and assuming they are the same thing. I can't imagine there is a prescribed level of despair required to create the desired market state. In that the extreme of a market event doesn't have to totally correlate with the extremes of human emotion. Differing levels of a human emotion could lead to the same results.

Just some ramblings...

I disagree. It has to correlate as long as its (at the very essence) based on a human decision. I include bots here as well because their limits are defined by human actions.
 This is why believe we see patterns in the market (like EW). Human actions, thoughts,expressions - release some form of energy. Energy can't be destroyed and it has to go somewhere right? Charts!

[BldSwtTrs]

Reason #1-From an EW stand point, there is no way (without forcing a disproportionate and extremely lopsided count) to count the move off the 152 low as an impulse. Indicators spiked violently in that move, kicking off the first in a long line of regular/hidden bearish divergences. These divergences have grown bigger as this current move has progressed as well as added many on multiple time frames. Now it is a waiting game, imo. Remember, I am long with about 60% of my capital since that knife to the lows. But 60% is all I'm willing to risk on this rally, at this time. Things can change my mind, but these "things" are not in any danger of being broken/invalidated/nullified/equalized/neutralized.

And what about the big bullish divergence on the weekly MACD?

[bassclef]

Reason #3- I'm not convinced that what we saw in January was a capitulation proper. In the image below, you can see a dramatic long squeeze when the price fell. This tells me that it was cascading forced liquidations rather than actual despair. Sure there was panic, all lower lows receives some panic, but capitulation isn't only extremely high volume, but also people throwing in the towel. Giving up... This isn't what was reflected in the market... In this forum... the charts (except the volume).

Sentiment is a mass psychological reaction to market conditions but should be viewed as a result and not a cause of market movement. There is no quantifiable amount of "giving up" that should be tied to capitulation--the market does not care about it. Whales and pro traders simply use sentiment to their advantage because they know mass human behavior never changes and they can fill their bags at the lowest possible price.

Your quote above doesn't make sense.

"There is no quantifiable amount of "giving up" that should be tied to capitulation--the market does not care about it."

The whole idea of sentiment and mass psychology means the market is not a separate entity from individuals within it. What do you mean the market does not care about it? The market is equal to sentiment (aggregate).

I could have been more clear. What I mean is that the biggest money moves the market. Their sentiment matters. They have the bankroll and volume, especially in a market like Bitcoin. On a larger scale, the sum of this money acting in harmony (and profiting together) moves the market more than the combined effort of the majority. Richard Wyckoff called this idea the "composite man," VSA calls it "smart money." Their activity can be seen in high volume bars and it pays to trade with them.

In the context of knowing this, the market is simply a game of supply and demand by the composite man to profit off of price differences. No price is too high, no price too low. He knows the fear of the majority on both sides of the market (fear of loss and fear of missing out) and uses it readily to accumulate at low prices and distribute at higher prices. This is why good news does nothing in a bear market and bad news does nothing in a bull market--the composite man simply uses news as a tool to move the market in his favor, amass a following from the herd and improve his position--it is not the effect of actual news doing the moving. Rarely is there truly organic buying by the public that significantly moves the price that is not set off or encouraged by the composite man. There is often frustration of traders who cant figure out when the market hasn't behaved like it should, or their favorite technical indicators have stopped working. They simply aren't looking at the market in the correct way.

Today, the composite man is bullish and has been since capitulation. This can be seen on the charts, as the rising bottoms during this trading range indicate that rising price levels have been supported and there's not enough supply available to push the price down. He won't fight this difference in supply and demand by trying to sell short as it would be too expensive a maneuver. Instead he propels the market upward, leaving the bottom behind, using the path of least reistance and capitalizing of the fear of missing out.

[RyNinDaCleM]

It's not that I completely disagree with your analysis but I am skeptical of EW in general in its ability to evaluate the driving force in any market, which is volume. And we have the luxury of having accurate volume data (with a caveat to China), so why not use it? Look at a simple indicator like OBV which contains no price data whatsoever yet tracks the price in form. The relationship is very powerful.

The quality of negative sentiment should not be the measuring factor of capitulation. Rather volume is, as it is the number of coins changing hands that will give the market enough shift in supply and demand to cause a reversal. Even if the last drop was simply longs cascading--they were still bought and that is supply being removed from the market.

Sentiment is a mass psychological reaction to market conditions but should be viewed as a result and not a cause of market movement. There is no quantifiable amount of "giving up" that should be tied to capitulation--the market does not care about it. Whales and pro traders simply use sentiment to their advantage because they know mass human behavior never changes and they can fill their bags at the lowest possible price.

Look at the opposite side of the market: During buying climaxes, sentiment feels overwhelmingly positive. How amazing does it need to be in order to justify a proper market top? The answer, only high enough to fill the pros' sell orders, then supply and demand takes care of the rest as they exit the market and begin to sell short.

Fair 'nuff! I can agree that my statement may be based more on experience than a concrete rule*, but this doesn't change the rest of my statement about the sentiment shifting back to bull is too fast for a wave-1. Since that flip was so quick, imo there wasn't enough despair. Look at how long it took to get a bearish bias in the market or this forum. Accumulation (A/D) continued to rise until May '14 when it finally peaked. I highly doubt the bearish sentiment would snap back to bullish in a few short weeks. This also explains the exuberance during and after the ATH. The larger sentiment doesn't just flip all at once. It takes time proportional to the amount of time spent moving in a trend.

*Capitulation means to surrender. Capitulation is accompanied by extreme volume, not that extreme volume is the measuring factor of capitulation. The choice of capitulation is set on by emotion. Not fear and not panic, just a "Fuck it" mentality.

And what about the big bullish divergence on the weekly MACD?

I made a fairly good analogy here https://bitcointalk.org/index.php?topic=830009.msg9283310#msg9283310

Divergences work in the same way as the fractals of EW. Basically, the weekly divergence is setting up for a move much further in the future. The weekly MACD is an average of the last 3 and 6 months of weekly data. A lot can happen during 6 months, before the market even acknowledges that divergence. Daily has a divergence, but it is very slight and 12 hour has no divergence at all at the low.

[michaelGedi]

yeah I feel there is a problem when talking about capitulation as a psychological state and capitulation as a market event and assuming they are the same thing. I can't imagine there is a prescribed level of despair required to create the desired market state. In that the extreme of a market event doesn't have to totally correlate with the extremes of human emotion. Differing levels of a human emotion could lead to the same results.

Just some ramblings...

I disagree. It has to correlate as long as its (at the very essence) based on a human decision. I include bots here as well because their limits are defined by human actions.
 This is why believe we see patterns in the market (like EW). Human actions, thoughts,expressions - release some form of energy. Energy can't be destroyed and it has to go somewhere right? Charts!

ok I didn't quite explain my point well enough.

Perhaps where in one market the "extreme low" in psychological terms is rated at -10x, and the market low is rated at -100p. It could be possible that in some other market that a level of psychological negativity rated at -7x could lead to a similar -100p market bottom result. Obviously the markets will be measured in their own units, for simplicity's sake the -100p is just a measurement denoting a capitulation event at it's bottom.

Where in one case a sentiment of "distraught" or "suicidal" might cause a technical bottom, merely just being "a bit upset", or "miffed", may lead to the technical bottom elsewhere.

Looking at each of the 2 markets in isolation, the -10x represents the extreme low of sentiment in one, and the -7x represents the extreme low in the other, so both are extremes in different contexts. In a broader sense these are different levels of emotional state. Perhaps in the -7 case the market participants were more just observing the rules of the market and playing the game as such, and they were less affected mentally, whereas their corresponding actions that affected the market were as affected in the -10 case.

I should point out (quite obviously) that I'm not a student of economics, finance, or other related field in the formal sense, but I do find this thread extremely interesting, thanks

[RyNinDaCleM]

yeah I feel there is a problem when talking about capitulation as a psychological state and capitulation as a market event and assuming they are the same thing. I can't imagine there is a prescribed level of despair required to create the desired market state. In that the extreme of a market event doesn't have to totally correlate with the extremes of human emotion. Differing levels of a human emotion could lead to the same results.

Just some ramblings...

I disagree. It has to correlate as long as its (at the very essence) based on a human decision. I include bots here as well because their limits are defined by human actions.
 This is why believe we see patterns in the market (like EW). Human actions, thoughts,expressions - release some form of energy. Energy can't be destroyed and it has to go somewhere right? Charts!

ok I didn't quite explain my point well enough.

Perhaps where in one market the "extreme low" in psychological terms is rated at -10x, and the market low is rated at -100p. It could be possible that in some other market that a level of psychological negativity rated at -7x could lead to a similar -100p market bottom result. Obviously the markets will be measured in their own units, for simplicity's sake the -100p is just a measurement denoting a capitulation event at it's bottom.

Where in one case a sentiment of "distraught" or "suicidal" might cause a technical bottom, merely just being "a bit upset", or "miffed", may lead to the technical bottom elsewhere.

Looking at each of the 2 markets in isolation, the -10x represents the extreme low of sentiment in one, and the -7x represents the extreme low in the other, so both are extremes in different contexts. In a broader sense these are different levels of emotional state. Perhaps in the -7 case the market participants were more just observing the rules of the market and playing the game as such, and they were less affected mentally, whereas their corresponding actions that affected the market were as affected in the -10 case.

I should point out (quite obviously) that I'm not a student of economics, finance, or other related field in the formal sense, but I do find this thread extremely interesting, thanks

That explanation works for the difference between a true downtrend and a flash crash. A flash crash doesn't hold the same weight in affecting market participants as the long downtrend. Both can reach the same levels by price, but they have drastically different emotional side effects.

[michaelGedi]

That explanation works for the difference between a true downtrend and a flash crash. A flash crash doesn't hold the same weight in affecting market participants as the long downtrend. Both can reach the same levels by price, but they have drastically different emotional side effects.

thanks..

Rynin I'm wondering what your thoughts are on the recovery after the April 2013 bubble in comparison to this years market movements.

Can we just blame manipulation and China? Do you think enough time was spent in a bear market? Does bitcoin possibly just have a resilience and a positive bias in the last 2 years or so that other markets do not?

[SmoothCurves]

I find it odd that there is calls for more despair. Anecdotally almost every single person that I personally meet asks me about Bitcoin. When will it recover? Do i think there is any hope left? One of them even confessed to selling most of his stash around $210 out of "despair. This makes me have a bias towards accepting that $160 was capitulation because not only did I see despair in those around me but we also witnessed a massive selloff that is indicative of capitulation. 

[Afrikoin]

I find it odd that there is calls for more despair. Anecdotally almost every single person that I personally meet asks me about Bitcoin. When will it recover? Do i think there is any hope left? One of them even confessed to selling most of his stash around $210 out of "despair. This makes me have a bias towards accepting that $160 was capitulation because not only did I see despair in those around me but we also witnessed a massive selloff that is indicative of capitulation. 

+1

[calme]

almost every single person that I personally meet asks me about Bitcoin.

Whoa. I've only had two ppl mention BTC to me and both have engineering degrees.

[infofront]

I find it odd that there is calls for more despair. Anecdotally almost every single person that I personally meet asks me about Bitcoin. When will it recover? Do i think there is any hope left? One of them even confessed to selling most of his stash around $210 out of "despair. This makes me have a bias towards accepting that $160 was capitulation because not only did I see despair in those around me but we also witnessed a massive selloff that is indicative of capitulation.  

FWIW, the sentiment near the bottom of the 2011-12 bear market was much, much worse. Of course, bitcoin was younger and we were all n00bs.

[coinableS]

almost every single person that I personally meet asks me about Bitcoin.

Whoa. I've only had two ppl mention BTC to me and both have engineering degrees.

I still haven't met anyone "in the wild" that has mentioned bitcoin without me being the one to bring it up. And they only "know" the typical things about bitcoin "ponzi, CEO suicide, went bankrupt".

[michaelGedi]

almost every single person that I personally meet asks me about Bitcoin.

Whoa. I've only had two ppl mention BTC to me and both have engineering degrees.

I still haven't met anyone "in the wild" that has mentioned bitcoin without me being the one to bring it up. And they only "know" the typical things about bitcoin "ponzi, CEO suicide, went bankrupt".

It's clear Afrikoin has previously introduced every single person he personally meets to the fact that he's into bitcoin