The S&P 500 and Bitcoin both bounced off their nearby support levels, indicating that the bulls haven’t given up and are likely to buy the dips.
The 10-year US Treasury yield rose to its highest level since 2008. Although this type of rally is usually negative for risk assets, US stocks rose after the Wall Street Journal reported that some The Federal Reserve is concerned about the pace of interest rate increases and the risks of excessive tension.
While it is widely believed that the United States will enter a recession, there is some debate about how long it could last. On top of that, Tesla CEO Elon Musk recently said on Twitter that the recession “could probably last until spring 24”, adding that it would be nice to “go a year without a terrible global event”.
Cryptocurrency market daily performance. Source: Coin360
The price has seen a massive drop from its all-time high, but its hashrate remains strong. This raised Bitcoin’s discount relative to its hash rate in October to its highest level since the first quarter of 2020, according to Bloomberg Intelligence Senior Commodity Strategist Mike McGlone. The previous instance of the deep discount was followed by a massive rally that lasted into 2021. McGlone believes that the same thing could happen again this time and that Bitcoin will outperform most major assets.
Let’s study the charts of the S&P 500 Index (SPX), the US Dollar Index (DXY) and the major cryptocurrencies to see any reversals.
DELIVERY EVERY MONDAY
the Market Outlook newsletter
By subscribing, you agree to us
The S&P 500 index rose above the 20-day EMA ($3,702) on October 18, but the bulls were unable to build on this strength and challenge the downtrend line. This suggests that the bears have not given up and are active at higher levels.
SPX daily chart. Source: TradingView
The 20-day EMA is trying to break and the relative strength index is above 46, suggesting possible range-bound action in the short term. The buyers are likely to defend the $3,568-$3,491 zone, while the bears will try to stop the rally in the $3,762-$3,800 zone.
If the price rises above $3,800, it will break out of the pattern of lower lows and lower highs. The index could then rally to the 50-day simple moving average (SMA) ($3,885).
The bears will regain their control if they manage to sink the price below $3,491. That could start the next leg of the move down to $3,325.
The US dollar index remains in a strong uptrend as the bulls do not allow the price to fall below the 20-day EMA (112).
DXY daily chart. Source: TradingView
The bulls need to push the price above the $113.92 to $114.77 zone to resume the uptrend. Buyers tried to do so on October 21, but the long wick on the daily candle shows that the bears are aggressively defending the upside.
The sellers try to gain an advantage in the short term by pulling the price below the 20-day EMA. If they are successful, the index could sink to $110. Buyers are likely to defend this level and a bounce could keep the index between $110 and $114.77 for a while.
On the downside, a breakout and close below the uptrend line could signal a change in trend. Alternatively, a rally above $114.77 could signal the start of the next leg of the uptrend at $117.14.
Bitcoin regained the closest support at $18,843 on October 20, but the bulls could not get over the hurdle at the 20-day EMA ($19,318). This suggests that the bears want to further consolidate their dominance.
BTC/USDT daily chart. Source: TradingView
If the price breaks and holds below $18,843, the BTC/USDT pair may fall to $18,125. The bulls are expected to vigorously defend the area between $18,125 and $17,622, because if they don’t, the pair could resume its downtrend. . The next stop on the downside could be $15,750.
The long tail of the October 21 candlestick shows that buyers bought the dip below $18,843. They try to push the price above the moving averages. A break above the 50-day SMA ($19,616) could clear the way for a possible rally to $20,500. This is an important level to watch, as a break above it could signal the start of one