IT’S A DANCE . . .
All traders (even ugly old goats) fall into the trap of asking where is the market going . . . besides no one knowing . . . it is simply irrelevant for the successful trader. It’s not where the market is going . . .but what you do when it gets there that’s important.
For example, I had no idea the market was going to drop hard from 8000+ . . . but I did not want to lose my gains . . . so I stopped out. The decision to stop out was not because I knew what the market was going to do. . . it was solely because of money management. . . when we were over 8000 I was very demanding of my position . . . I was hoping to safely navigate the death cross . . .when the market did not do what I expected I was out. . . gone . . . bye bye . . .out of there to play another day. . . when the trade failed I was gone.
And then we started down . . . really really down. . . while I caught the bitcoin up move I missed the down move entirely. . . and I was reluctant to go short because I defined the trend was up . . . mind you I defined the trend . . .but I am not the market . . . the market is the market. . . there are plenty of good traders out there who defined the trend as down. . . waited for failure of the death cross to go short . . . and did so brilliantly above 8000 with a clearly defined risk and rode that baby all the way down to 6900. . . in fact a few of my readers got short and did very well. . . and used my buy recommendation start covering. Congratulations!
How I define a trend is my bias. . . . and how you define a trend is your bias! And with bitcoin I have a very bullish bias . . . for good reason . . . and while I will go short bitcoin in trading . . . I will never go net short. . . so that is my bias . . . apart from my arbitrary definition using the 2 week high or low as the benchmark.
I had no idea that the market would go below 7350. . . none . . . but I did know what I was going to do if it got there . . . I would be a scale in buyer risking the two week low.
I had no idea the market would go below 6900 . . . none . . . but I did know if it went there I wanted to be a buyer . . . especially if we went into backwardation. (Wow! What a fantastic buy and the market gave five chances! Rare indeed, but I have found that when a major exchange gets shuts down the market like Bitmex did, it usually goes back to what was happening on the shut down.)
My point is . . . it matters not what you think the market will do . . . the only thing that matters is what are you going to do when it gets there? . . . no doubt there were some bears out there just waiting to go short over 8000 and patiently waited . . . scaling in over 8100 . . . with a clearly defined risk . . . up to and against the death cross. . . trimming and shorting all the way down . . . in the groove. . . fantastic!
On the flip side I was very bullish under 6300 when by my definition we were still in a down trend . . . but I knew that would change once we broke through the two week high at 6850 and unless you entered with buy stop you never got on board. . . I was trimming and buying all the way up . . . and rode the horse until she dropped . . . just as some bears did all the way down.
It’s a dance . . . a free style dance . . . trading is dynamic, not static.
WHY I REMAIN A BULL
We took out the 2 week low . . . which by my definition makes this a bear market . . . but the manner which it did keeps me a bull. . . here’s why.
First, the two week low is now Sunday’s low. . . and the lows were made in an exhaustion sell off with backwardation . . . which means they should hold . . . they did not . . . on Monday we took out the two week low with an outside day closing lower . . . which is a likely reversal . . . it was the last gasp for the weak bulls . . . and I was a buyer.
Second, the backwardation became apparent as we broke below 6900 . . . and we tried to penetrate the lows on 5 separate occasions . . . and rebounded fiercely every time. . . .
Third, while I am a biased bull on bitcoin, I am a biased bear on the alt coins. When Bitmex came out with their ETH/USD I started selling over over 408 beginning Aug 2nd. . . while I never go net short bitcoin . . . I had no problem net shorting ethererum averaging a price over 413. Today Bitmex had a flash crash well under $400 while spot refused to break. I trimmed my position at 401 and just sold it again at 406.
Fourth, the rally from 6200 to 8400 was primarily fueled by the Exthit (pronounced with a lisp and weak wrist). Essentially the rally was fueled by insider’s flight to the safety of bitcoin from Eth, Ripple, BCash, EOS, Stellar, Lte, and Cardano. Note, the charts below:
A RACE TO THE BOTTOM?
Those making a bearish case imply all alts are on a race to the bottom and apparently this will drag down bitcoin in a sympathetic move under 5000. I agree with a race to the bottom of the alts.
In fact, I coined the phrase (no pun intended) Exthit. (Pronounced with a lisp and a weak wrist.)
A decline under 5000 is certainly a real possibility for bitcoin, but the basis indicates we had a lot of strong hands buying Dec and Sep futures under 6900. The bottom under 6900 is not unlike the bottom above 6000. The pattern is identical and the basis indicated accumulation by strong hands as well as distribution (exhaustion selling) by weak hands.
Further, if we begin to realize a dollar crash in Ethereum this will have a tremendous impetus on bitcoin, much more than we saw in the rise from 6300 to 8400. If we are in a bull market we will take out the July highs in August. . .
I am not saying this will happen . . . I am simply saying if we are in a bull market this will happen. . . . and a collapse of the dollar price of ethereum is the catalyst that can make it happen. . . if we are in a bear market we will fizzle short of the July highs and break through the formidable barrier at 6850.
Hope this helps.