The S&P 500 is down about 5% this week while the Nasdaq Composite is down more than 5.5%. Investors fear that sharp increases in the Federal Reserve’s rate could cause an economic downturn. The yield curve between two-year and 10-year Treasuries, which analysts watch closely to forecast a recession, has inverted further since 2000.
Among all the chaos, it is encouraging to see that Bitcoin (BTC) has outperformed both major indicators and is down less than 4% in the week. Could this be a sign that a Bitcoin bottom may be near?
Daily cryptocurrency market performance. Source: Coin360
Cross-chain data shows that the supply of Bitcoin held by long-term holders in losses is around 30%, which is 2% to 5% below the level that coincided with Bitcoin’s bottom in March 2020 and December 2018. This metric indicates Until Bitcoin can have more room to fall before it goes down.
Let’s study the charts of the S&P 500, the US Dollar Index (DXY), and the major cryptocurrencies to determine if the trend will continue or if a reversal is possible.
SPX
The S&P 500 (SPX) broke below the 3900 support on September 16 and the bears successfully defended the level on retests on September 17 and 21. Hence, this becomes an important level to watch when a breakout above 3900 will be the first sign of bulls coming back.
SPX daily chart. Source: TradingView
The 20-day declining exponential moving average (EMA) (3,920) is pointing to the bears’ advantage but the oversold RSI indicates that the indicator may attempt to rebound from its strong support zone between 3715 and 3636.
A weak bounce off this area will indicate a lack of strong buying by the bulls. That could increase the possibility of a drop below its June low at 3636. If this support breaks down, the index could fall towards 3325.
On the contrary, a strong bounce off the support area may trigger a recovery to 3900. A break above this resistance could indicate a possible change in the trend in the near term.
DXY
The US Dollar Index (DXY) has been in a strong uptrend for the past few months. Each pullback is bought aggressively and the index continues to climb to new highs. The bears’ attempts to force a change of direction failed when the price bounced off the 50-day simple moving average (SMA) ($108) on September 13.
DXY daily chart. Source: TradingView
After staying in a tight range for a few days, the index broke its 52-week high on September 21. This uptrend has resumed and the index may then attempt to rise to 115.
The sharp rise in the past few days has pushed the RSI into the overbought territory, indicating the possibility of a consolidation or slight correction in the next few days.
The 20 day moving average (109) is an important support to watch on the downside as a break below it could plunge the price into the 50 day simple moving average. Bears will have to pull the price below 107 to signal a possible trend change in the near term.
BTC / USDT
Buyers were buying the dip below $18,626 in Bitcoin, but the failure to push the price above the 20-day moving average ($19,841) shows that the bears are not in the mood to give up their advantage. This increases the likelihood of a retest of the vital June low at $17,622.
BTC/USDT daily chart. Source: TradingView
A breakout and a close below $17,622 could trigger panic and the BTC/USDT pair could drop to the next major support level at $14,500.
While the regression moving averages indicate an advantage for the bears, the positive divergence on the RSI indicates that selling pressure may be reduced. This view could be strengthened if the bulls move and maintain the price above the 20-day moving average.
That might push the price towards the upper resistance zone between the 50-day SMA (21200) and $22.799. Such a move would suggest that the pair may continue bottoming out within the large range between $17,622 and $25,211 for a longer period.
ETH / USDT
Ether (ETH) has been trading within a bearish channel pattern for the past few days. In a channel, traders usually buy near support and sell near resistance.
ETH/USDT daily chart. Source: TradingView
Bears attempted to sink the price below the channel on September 21st but the bulls successfully defended the level. The bulls will try to push the price up to the 20-day moving average ($1467) where they may encounter heavy resistance from the bears.
If the price falls below the current level or the 20-day moving average, it will indicate that sentiment is still negative and that traders are selling on every slight rally. The bears will once again attempt to pull the price below the channel and challenge the psychological support at $1,000.
Conversely, if the price rises above the 20-day moving average, the pair may reach the channel resistance line. A breakout and a close above the channel may indicate a possible change in trend.
BNB / USDT
BNB has been swinging between a 20-day EMA ($276) and $258 in the past few days.
