Trading legend Nik, also known as @cointradernik on Twitter, joins us for our inaugural weekly Market Outlook at Ostium Research. We'll be taking a look at the week ahead in markets, focusing specifically on price action, positioning and event risk for Bitcoin, Ethereum, Gold, the Dollar Index & concluding with an overview of the altcoin market via the "others" section. Please note none of this is financial advice.
Firstly, let's take a look at the calendar:
We have three key events this week that will be driving the macroeconomic narrative moving ahead: now that we are beyond inflation prints being the focal point, growth and labour market data is of the utmost significance, so the two ISM prints + the NFP print are what we should be focusing on, as this is what policy-makers will look towards to ensure the business cycle is ticking along...
TUESDAY: ISM MANUFACTURING PMI (CONSENSUS: 47.5 VS PREVIOUS 46.8)
THURSDAY: ISM SERVICES PMI (CONSENSUS: 51.1 VS PREVIOUS 51.4)
FRIDAY: NON-FARM PAYROLLS (CONSENSUS: 165K VS PREVIOUS 114K)
One thing we often need to be more concerned with than the data prints themselves – at least for the implications on price-action – is market positioning going into these prints. And that is something we can look at with more granularity (for cryptoassets, in particular) as we delve into the charts below, but for now it's important to be aware of the fact that all three prints could be suggestive of weak growth and labour market instability and assets could still rally post-release if the market is heavily positioned for significant downside surprises already going into the events (or vice-versa).
This is something we will be looking at in greater depth in its own long-form post soon, but for now be aware that it is often misunderstanding of market positioning that can cause traders to be caught offside short-term, even if they have an accurate view of the macro.
Now, let's dig into asset-specific price-action for the week ahead, looking firstly at Bitcoin as we begin this new month:
Bitcoin
Price: $58,777
Thoughts: Firstly, let's take a look at these three charts published below, highlighting the monthly, weekly and daily view for BTC, before looking at a couple of hourly charts which depict potential trajectories for the week based on market positioning (for which we have also included a couple of visuals further down).
Monthly:
Beginning with the monthly view, we can see that despite August closing marginally below the $59k area above which the previous 5 months had held, we formed something of a deep swing failure, taking out every low since March into $49k, where price found demand and pushed higher to close out the month at $58.9k. That's precisely the sort of move you would want to see to provide fuel for higher prices, trapping breakdown shorts and liquidating over $1bn in long positions – it is almost reminiscent of the March 2020 candle, not in depth of retracement of course but rather in the pattern of prior monthly candles grinding lower and just barely taking out previous monthly lows before the Covid crash took out almost a year's worth of monthly lows in one fell swoop, leading to the reversal. Bulls want to see September now hold above the August close, as any close below $58.9k would invalidate this move and open up a wick fill, below which there is air back into the 2024 open at $42.3k. Hold above $58.9k in September, however, and one would expect this pattern to resolve upwards in October, buoyed by seasonal strength into a fresh march at $74k (and beyond), where there are multiple unswept monthly highs.
Weekly:
Next, looking at the weekly view, we can see that Bitcoin has been consolidating below the March all-time high at $73.6k for ~175 days now, coincidentally identical to the period of consolidation following the June 2019 top before a bottom was found at $6.5k, lending some support to the 'echo bubble' idea for the primarily ETF-driven rally into March 2024. Fractals can be useful if placed in context, and we will be looking more closely at the liquidity & business cycle contexts in a separate post. For now, we can see that since March we have been chopping lower, with bearish structure in the form of marginally lower-lows and lower-highs but no real strong trend, with price breaking and closing below range support at $58.6k in July before reclaiming the range to test trendline resistance from the March highs. Again, price failed to turn structure bullish and then came the flash crash of the first week of August, wicking deeply through all the prior weekly lows into resistance turned support at $49k and bouncing, closing the weekly back inside the range. This was the first higher weekly low in the consolidation, as per the close, but we continue to chop around with no meaningful momentum for that higher-high. Price rejected once again below $65k and last week retraced the prior weekly rally. Looking at this, bulls want to see a weekly close firmly through $65.5k to turn structure bullish, which would also confirm a trendline breakout. For the bears, any weekly close below $54.1k would resume that bearish structure with a fresh lower-low and likely take out the wick at $49k towards the yearly open.
Daily:
Lastly, looking at the daily, we have marked out the unswept highs since March, above which there are likely to be shorts stops which can cause liquidation cascade if price is able to accept above $65.5k. For now, however, we have another lower high below that level that led to an instant retracement back into $59k, with price now chopping around the September open. Given the monthly timeframe being constructive, one would expect to see an aggressive September low form early this month, taking out the lows below $57.3k into $56.4k as support before any meaningful reversal; and if that level can hold and price reclaims the September open at $59k as support subsequently, we can then look for further upside to retest $65.5k once again. If, however, we see price close the daily below $56.4k for the first time during this consolidation – and likely then lose the 360-day moving average acting as support – we have a much deeper correction likely underway back towards that 2024 open, as mentioned. Until that level gives way, however, the balance of probability would suggest strength from $56.4k higher.
Now that we have our big picture view on price-action, here's what the trajectory of the week might look like if we have aggressive long positioning into headline risk followed by weaker than anticipated data:
And here's what it might look like if we have derisking and short positioning into these data prints & supportive data:
And here's a look at the current market positioning across CoinGlass and Velo:
Above, we have highlighted what you would want to see if you were looking for signs of aggressive short positioning and long liquidations going into these data releases, which would then provide significant fuel for reversals assuming the data does not disappoint to a greater extent than the market is already positioned for:
In short, you would be looking for price to move lower leading into Thursday, liquidating early longs but with open interest climbing and funding turning negative, suggesting net short positioning is rising as price moves lower. If this is coupled with a spot premium, all the better for the probabilities that shorts are going to be caught offside post-event risk. If we saw the inverse of this (price chopping higher into headline risk, with shorts being liquidated and open interest climbing alongside funding, signifying aggressive long positioning, as spot premium dissipates), that would be supportive of lower prices post-event risk, particularly so if the data prints are even weaker than anticipated.
This is because the market in either scenario described is too aggressively positioned for the anticipated outcome of these key prints, so one can expect an unwind of this positioning post-event risk before either continuation of the trend or the formation of a new trend.
Ethereum
Price: $2504
Thoughts: Let's begin by looking at the monthly, weekly and daily timeframes for the Dollar pair before moving onto ETH/BTC.
ETH/USD
Monthly
Looking firstly at the monthly, we can see that August was a very weak month for Ethereum, breaking below multiple monthly lows to retrace into the long-term trendline support from the 2022 lows. Price wicked below the 2024 open at $2281 and found support at $2160, bouncing to close August at $2512. In some sense, this looks a little like a broader version of the rally and retracement in summer 2023 into the trendline, and whilst both trendline support and the yearly open are holding firm it would appear to just be a brutal move within the larger uptrend. However, if September closed below $2281, that would open up another 35% of downside back towards the 2018 highs as the subsequent major support, assuming $2281 was not immediately reclaimed post- breakdown. Whilst we remain above this cluster of support, bulls need to show some signs of life, with a monthly close back above $2830 being key for resumption of the uptrend in Q4; no doubt, however, if Bitcoin can summon some strength into the September close, ETH will follow suit.
Weekly:
Next, looking at the weekly, we can see that price retraced 48% from the yearly high at $4093 into the August lows below $2160, with the 200wMA also acting as confluence for trend support. We do have bearish market structure here following the weekly close below $2830, turning support into resistance, and price is now just chopping between that cluster of support below and this new resistance level. Until either gives way, we will see more chop, with no meaningful momentum exhaustion to suggest an imminent reversal. If we see the weekly close below $2280, bulls would need to step in immediately for the reclaim and use the breakdown as fuel for a reversal with trapped shorts; if this does not occur, and we accept below that level, it is a long way down to the next minor support at $1750. If, however, this support cluster continues to hold and the trend persists, we should see $2830 reclaimed as support in the next few weeks, which would be confirmation of a move back to yearly highs and likely beyond.
Daily:
Finally, looking at the daily, we have marked out the more bullish trajectory here for clarity, assuming the 2024 open and trendline support hold. In that scenario, we should see the September low form in the next week or so below $2400, sweeping that double bottom and then reversing higher back above $2500, turning it back into support, from which point the pair would likely retest the 360dMA as resistance near $2720. Above that is the key pivot: accept above $2850 and it is game on for the next leg higher and continuation of the trend; deviate above the high and reject and we have a setup for a short back to yearly lows...
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ETH/BTC
Monthly:
Beginning with the monthly for ETH/BTC, we can see that this is a very clean long-term downtrend from the 2021 highs, with price just continuing to bleed lower, most recently breaking and closing below the 2022 lows at 0.049 into resistance turned support at 0.0417. We are now, however, at this major support level, and given the breakdown below multi-year support in August, it could be the catalyst for capitulation. If we see September wick below the August low and then find demand, closing back above the 2022 lows at 0.049, that would be a really clear signal that a bottom is in, at least mid-term. From there, one might expect the cluster of highs above 0.055 to be tested as resistance, with acceptance above that leading to a move into the top of the range at 0.0824. The more bearish scenario here is that there simply is no respite for ETH bulls following this move into major support, with 0.049 acting as resistance on any test and September closing below 0.0416. This would at least lead to another 10% lower – but with no major support below 0.0365 all the way into 0.023, ETH bulls would need to muster quite the show of force if that level is tested.
Weekly:
Moving onto the weekly, we can see that there was a period of diverging momentum and trend exhaustion, as the pair made lower lows into Q2 and RSI made higher-highs. This trend exhaustion played out with a strong rally into trendline resistance above 0.055, but ultimately failed, leading to this latest leg lower. We are starting to see a little bit of exhaustion here again but nothing suggestive of much strength. Truly, ETH bulls just need to reclaim that 2022 low before things look even remotely bullish again, with acceptance above the trendline that has capped prices since mid- 2022 being the all-clear signal for a sustained reversal. As mentioned before, acceptance below 0.0416 will lead to at least 0.0365 being tested, with nothing really holding it up below that.
Daily:
Concluding with the daily, we do have much cleaner momentum exhaustion present on this timeframe, with the move below 0.0416 last week forming a higher-low on RSI, but this alone is not enough to be suggestive of strength here; rather, it is only suggestive of some seller exhaustion.
If price can hold above 0.0416 this week and reclaim 0.0445 as support, that would go some way towards showing a path forward for bulls, with 0.0463 being the key level above that to reclaim. That latter level was the open price of the impulse candle that then failed, and is also the last swing- high that led to this move below 0.0416 – turn that back into support and 0.049 will likely be retested swiftly. If, however, we push up from here through 0.0445 but reject below 0.046, we would expect to see another leg lower begin through 0.0416, where sellers would once again need to show more exhaustion in order for this not to capitulate lower into that 0.0365 level.
Gold
Price: $2499
Thoughts:
Monthly:
If we look firstly at the monthly view, Gold has had a very constructive year thus far, continuing to climb higher in August and closing at fresh all-time highs ~$2500. Volume continues to climb and all momentum indicators on this timeframe point to continuation of the trend into year-end at present. Above $2560, the next major level of interest is that huge $3000 level, where there is confluence of the 300% extension of the multi-year range from which it emerged this year. Dips below $2380 would be buying opportunities for the longer-term trend. Not much else to add for this timeframe – onwards and upwards...
Weekly:
Turning now to the weekly timeframe for Gold, we can see the steepening rally we find with parabolic trends, with price flipping resistance at $2440 into support and pushing into $2530/ We do have the beginnings of momentum exhaustion on this timeframe, but often in strong trends these can be invalidated. For those eager to jump in front of this with shorts, you would be wise to await a clean break back below $2440 to confirm further downside before looking for entries, but to be honest the risk/reward seems unfavourable given the support directly below into $2280 and the trendline. The higher probability shorts would be below $2280 back into the range highs at $2075, but that would likely be months away yet if that opportunity arrives. For now, the trend is pointing higher, and if we sweep $2440 into $2350 and bounce, that would look constructive for another leg higher towards that $3000 area.
Daily:
And finally, looking at the daily, we can see that price has been chopping around between $2485 and $2530 for a couple of weeks now, with some more momentum exhaustion on this timeframe appearing. If we break and close below $2485, that would open up that retracement into $2430 and potentially lower as a dip-buying opportunity. Close above $2530 and its price discovery all over again, invalidating this lower timeframe trend exhaustion. Very clean price-action all around on Gold...
Dollar Index: DXY
Price: 101.41
Thoughts:
Monthly:
Beginning with the monthly for the Dollar Index, we can see that the Dollar has been in a broad range since 2023, capped by 105.5 and supported by 100 for most of that period, wicking briefly below and breaking above twice only to reject on both occasions and trade back to range lows. More recently, we saw DXY turn 103.7 back into resistance at the August open and sell off for most of the month into 100, closing marginally above it. From here, it is likely that 103.7 caps Dollar strength – and without acceptance above that August high we can expect the bottom of the range to be taken out going into year-end, with the next major support at 93.
Weekly:
Looking now at the weekly, where we can find greater clarity, we are now sat on the 200wMA, which is acting as support, with much of the derisking having occurred going into Jackson Hole. It is likely that we see further relief from here short-term in September but momentum is pointing to further downside. A weekly close below 100 would be the catalyst for a much larger move lower following the multi-year range breakdown, but again there is no major support on this timeframe back into 93.1. If we see the 2023 low at 99 swept and then the Dollar reclaim the 2024 open at 101, that would be a much stronger show of support from which we could expect a meaningful reversal back towards the top of the range, but nothing at present is suggestive of multi-month strength.
Daily:
Concluding with the daily view, here we can see that despite the incessant selling of the Dollar though August we formed no meaningful trend exhaustion, with each successive low being met with lower-lows on momentum indicators. We have since bounced off 100 and DXY will likely push towards prior support turned resistance from here at 102.1, with that more significant cluster of resistance beyond that at 103.7, which we expect to cap any rally in September. Unlike the weekly and monthly timeframe, we can see more support here below the range should we break down below the 2023 low at 99, in which case we would expect to see that cluster between 96.8 and 97.5 act as the next support, from where Dollar bears would need to reassess in case of signs of exhaustion and demand.
OTHERS
Market Cap: $187bn / 3.19mn BTC
Thoughts:
OTHERS/USD
Monthly:
Looking at the monthly for OTHERS/USD, we can see the general structure of the two previous altcoin cycles here, with both the 2017 cycle and the 2021 cycle having been nearly identical in their timing (~550 days from the halving to the cycle top & ~335 days from BTC breaking its previous all-time high to the cycle top). Now, given that Bitcoin made a new all-time high for the first time before the halving this cycle, it is unlikely we see precisely the same dynamics occur, but we'd be looking at February 2025 if the ~335 days from a fresh all-time high fractal persisted, or October 2025 if the halving to top duration persisted.
More importantly, let's look at the price-action. Altcoins bottomed in December 2022 and rallied through 2023 into March 2024, peaking 25% below the prior cycle highs, and retracing since, back towards major support at $130bn, above which the market is currently sat. Once again, this does look quite similar to that 2019 echo bubble, only with greater strength, evidenced by the closer proximity to prior cycle highs. Momentum here has reset back towards 50 RSI, which is about where the bottom formed in 2019 also. What has persisted from cycle to cycle is the period of consolidation and grinding chop that occurs subsequent to the halving (and we will be looking more deeply at the why in a future post). with 2020 also having such a period despite its echo bubble in the prior year. For all intents and purposes, we currently look not too dissimilar to Q3/Q4 2016. As long as that $130bn area holds, we can expect the second half of the cycle to be constructive for alts, leading to a retest of the all-time highs in 2025, where we would be looking for a monthly close through that $490bn for a more euphoric but likely short-lived period of price-discovery.
Weekly:
Turning to the weekly, we can see that the 2019 echo bubble saw a 60% drawdown from the June high into the December lows before recovery, excluding the Covid black swan; and since March 2024 altcoins have retraced 58% from $367bn to $154bn, bouncing right at the curve of the parabola from the bottom and closing back above resistance turned support at $165bn. Since that move in August, altcoins have been chopping around the 200wMA, still holding bearish structure with no higher high and capped by trendline resistance from the March highs. There could still be a few weeks of chop, but one would expect to see a move beyond this range fairly soon, with a weekly close below $165bn and below the parabola support likely leading to another 25% decline before any meaningful demand steps in. If, however, this support holds around $165bn, and alts test the trendline again, we would expect a breakout, again buoyed by Q4 seasonality. For those waiting for greater confirmation of a sustained reversal in alts, a weekly close above $237bn would turn weekly structure bullish – above there, it becomes highly probably the gap gets filled back to yearly highs and likely beyond.
Daily:
Now, looking at the daily, there is not a huge amount to add on this timeframe, but we can see that the 360-day moving average which acted as support in July then acted as resistance in August; flip this at $220bn and daily structure turns bullish, likely leading to further upside into that trendline and through into $237bn, where the real test lies. Below $176bn, we likely move to retest that August low, and if demand steps in above it to form a higher-low that would be constructive for the coming weeks and months...
OTHERS/BTC
Monthly:
For OTHERS/BTC, which is simply the altcoin market excluding the Top 10 priced in BTC, we have marked out something a little different: the cheat code to the classic altcoin cycle. Okay, it's not precisely a cheat code, but there is a rhythm to ALT/BTC cycles that tends to persist for a multitude of reasons, both psychological and market-driven. We'll be publishing a deep dive on this in due course...
For now, looking at the monthly, we can see that the post-halving sell-off has been brutal this cycle, with alts retracing all of their gains from the bottom vs BTC into a ~3mn BTC valuation. It is possible we wick below this level to induce capitulation, but it is likely an area from which alts outperform vs BTC into Q4. Now, if we were to close September firmly below 3mn BTC and accept that level as new resistance, then this time may well truly be different, with no support below that for the altcoin market all the way back into the December 2020 lows above 1.15mn BTC. If, however, this area does act as support this month, and we see September close green, it is likely the bottom is in and the Q4/Q1 period has historically been favourable for altcoins post-election – also known as 'easy mode', which would likely top out in late Q1 if the pattern of the cycles persists.
Weekly:
Turning to the weekly, we can see that there is no strong trend exhaustion just yet, but likely if we do take out the August low momentum indicators will form that divergence. The rallies have also been capped by trendline resistance since March, so a strong weekly close above ~3.5mn BTC would be a very clear signal for near-term outperformance, with 4.4mn BTC the next resistance overhead, followed by fresh yearly highs into 5.4mn BTC. Close the weekly below 3mn BTC with no subsequent reclaim following momentum divergence and we have even more blood ahead, with no real support at all below that for a long way down. Nothing much else to add here...
Daily:
Finally, looking at the daily, we can see that momentum is marginally starting to kick in to the upside but nothing meaningful just yet. That being said, it is highly probable that some divergence will form if we move a little lower from here early in September, and bulls will need to step in to validate that. If altcoins can flip 3.3mn BTC as support, that would also confirm a trendline breakout after 6 months of capped rallies, which opens up a much larger move to the upside going into year-end, with major resistance up near that 4.36mn BTC area...
And that concludes this inaugural Market Outlook – and well done for making it this far... We hope we've provided some value here; good luck with the week ahead!
