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"▶ The rapidly rising SPX index in the first half of 2023 appears to outperform Bitcoin's price.
▶ The end of the upward trend in the US Dollar Index (DXY) may indicate continued growth for both traditional markets and cryptocurrencies.
▶ The signal for the bull market that began in February 2023, based on the BTC/SPX chart, remains intact.
The negative correlation between the US Dollar Index (DXY) and the stock prices of the largest US companies (SPX) may provide clues for the cryptocurrency industry and Bitcoin (BTC). If the US dollar ends its uptrend, both stock markets and cryptocurrencies may quickly recover.
Considering Bitcoin's long-term performance relative to the S&P 500 index, this possibility is particularly evident. In fact, the clear signal confirming the bull market that started in February 2023 seems to be intact.
Currently, it appears that the third-quarter adjustments in traditional markets and cryptocurrencies may be coming to an end. If this happens and the US dollar cools down, the next few months may continue the upward trends seen earlier this year.
US Dollar Index Correction...
The weekly chart of the US Dollar Index (DXY) shows that the asset is in a very strong upward trend. Since bottoming at 99.5 in July 2023, the US Dollar Index has consecutively formed 11 green bullish candles and just closed with its 12th.
Furthermore, back in August, the US Dollar Index broke through the descending resistance line (in black). Then, in September, it broke through the important resistance level of 105.5 (in red). Both of these events are bullish signals confirming the upward trend.
However, such a strong upward trend appears to be slowly weakening. Eleven consecutive green candles are a very rare event and suggest that a correction should follow. The weekly RSI is slowly entering the overbought zone, and daily indicators have already shown a bearish divergence.
Additionally, with a few hours left until closing, the candles for this week may form a shooting star or a gravestone doji. Both of these patterns include long upper shadows, indicating selling pressure. Furthermore, they often appear at the top of an uptrend, signaling an upcoming correction.
If this happens, the recent support level for DXY is in the 104 area, where this region converges with the 0.382 Fibonacci retracement of the entire uptrend. On the other hand, the continuation of the uptrend may lead DXY to the next resistance area in the 108-109 range (in red rectangles).
...Leading to a S&P 500 Index Rebound
The upcoming correction in the DXY coincides with a potential rebound on the chart of the S&P 500 index. The index of the 500 largest US companies is typically negatively correlated with the US dollar and reached a local peak of $4,607 in July 2023.
It is currently approaching the long-term support/resistance level around $4,200 (in green line). This is also the standard correction area at the 0.382 Fib retracement.
In addition, the daily RSI is on the edge of the oversold zone and has just tested the long-term support line (in blue circle) that has been validated multiple times. If the SPX holds this key support, it could lead to a continuation of the upward trend.
Then, these levels may break the local peak of $4,607 and rise to the historical record high (ATH) of $4,818 reached in January 2022.
Bitcoin Lags Behind the S&P 500 Index
The two trends mentioned above – the end of the soaring DXY and a potential SPX rebound – have a significant impact on the cryptocurrency market and Bitcoin. What is noteworthy is that, despite a lack of short-term correlation, the price of BTC is still positively correlated with the SPX index.
A well-known cryptocurrency market analyst, @therationalroot, recently posted charts of both assets on X. It clearly shows that the S&P 500 index (in blue) and Bitcoin (in orange) have been very close since 2020.
However, an interesting phenomenon has occurred in the past few months as the two charts have started to diverge. The S&P 500 index continues its uptrend, coming close to its all-time high by only about 4.5%.
In contrast, Bitcoin has not experienced a strong uptrend during this period and is currently consolidating. Moreover, it is still about 60% lower than its peak in November 2021.
However, after this period of lagging behind the SPX, the volatility of BTC's price may increase. So, the last quarter of 2023 has the potential to bring better returns for the cryptocurrency market than the traditional market.
Bullish Signals Remain Unchanged - The Beginning of a Bull Market
The correlation between Bitcoin and the S&P 500 index remains in place. Historically, the performance of the largest cryptocurrency relative to the SPX index has been a good indicator of cryptocurrency bull markets and bear markets.
Macro economist and financial cycle analyst @HenrikZeberg posted a long-term chart of BTC/SPX on X. He shows how the strong upward trend of the SPX coincides with cryptocurrency bull markets.
The difference is still the magnitude of returns (and declines). Although SPX helped earn about 40% returns in the first two cycles, Bitcoin generated a return of 45x from 2015-2018 and 6x from 2019-2021.
The analyst says that the confirmation of a bull market and ""risk-on"" periods is when the monthly RSI indicator of the BTC/SPX currency pair crosses above the signal line (in green).
These are the golden zones. The opposite signal is a down cross marked in the red area.
The latest part of the chart shows that the last uptrend signal occurred in February 2023. Bitcoin started to produce more gains than" |
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Post time 13-10-2023 23:23:35