Equity markets have extended their decline, but Bitcoin and some altcoins have not given up much ground, leading some traders to believe that a bottom has been reached.
US stock markets have been under firm bearish control for much of the year. The S&P 500 and the Nasdaq Composite have both fallen for three straight quarters for the first time since 2009. There was no respite in September selling and the Dow Jones Industrial Average is on track for its worst September since 2002. These numbers describe the kind of carnage that exists in the stock market.
Compared to these disappointing figures, Bitcoin (BTC) and selected altcoins have not lost much ground in September. This is the first sign that the selling could be faltering at lower levels and that long-term investors may have started fishing on the bottom.
In the last quarter of the year, investors will continue to focus on the inflation data. Any hint that inflation is outperforming could spark a strong rally in risk assets, but if inflation remains stubbornly high, a round of sell-offs could follow.
Let’s study the charts of the S&P 500 Index, the US Dollar Index (DXY), and major cryptocurrencies to determine if a rally is on the cards.
SPX
The S&P 500 Index (SPX) has been under intense selling pressure for the past few days, but the bulls have held their ground. This indicates that the bulls are buying the dips near 3.636.
The first resistance on the upside is 3.737. If the bulls push the price above this level, the index could rally to the 20-day exponential moving average (3.818). In a downtrend, this is the important level to watch because a break and close above it will suggest that the bears may be losing control.
Sharp declines are often followed by sharp rallies. That could take the index to the downtrend line and then to the 50-day simple moving average (4,012).
The bears are likely to have other plans. They will try to extend the downtrend by plunging and holding the price below 3,636. If they manage to do that, the index could plummet to 3,500 and then 3,325.
DXY
The US Dollar Index rose to 114.77 on September 28, pushing the RSI into deeply overbought territory. This may have attracted profit booking by short-term traders who pushed the price closer to the 20-day EMA (111).
The bears will have to pull the price below the 20 day EMA to suggest that the upside momentum might be weakening. That could clear the way for a possible drop to the 50-day SMA (108).
The zone between the 50-day SMA and the uptrend line is likely to see aggressive buying by the bulls because if they fail to defend the zone, it will indicate that the index may have topped.
On the other hand, if the price turns up from the current level or bounces off the 20-day EMA, it will indicate that the bulls continue to buy the dips. The buyers will again try to push the price above 114.77 and resume the uptrend. The next target on the upside is 118.
BTC/USDT
Bitcoin bounced off the strong support at $18,626 on Sept. 28, indicating that the bulls continue to fiercely defend this level. The long tail of the last two days candlestick shows that the bulls are buying the intraday dips.
The bulls pushed the price above the 20-day EMA ($19,602) on Sept. 30, but are struggling to sustain the higher levels. This shows that the bears are selling near the 50-day SMA ($20.621).
If the bulls do not allow the price to drop below the 20-day EMA, the probability of a rally towards the downtrend line increases. The bears are expected to mount a strong resistance at this level, but if the bulls overcome this hurdle, the BTC/USDT pair could signal a short-term trend change. The pair could then rally to $22,799.
Contrary to this assumption, if the price turns down from the current level or the 50-day SMA ($20,625), the pair could drop back to the $18,626-$17,622 support zone.
ETH/USDT
Ether (ETH) has been declining in a descending channel pattern for the past few days. In the short term, the price has stalled between $1,250 and $1,410, indicating demand at lower levels but selling near resistance.
Price action within the range is usually random and volatile. Therefore, it is difficult to predict with certainty the direction of the breakout.
If the price breaks above $1,410, it will suggest that the bulls have absorbed the supply. That could push the price to the resistance line of the channel. The bulls will have to overcome this barrier to suggest a possible change in trend.
On the other hand, if the price turns down and falls below $1,250, the bears will try to consolidate their advantage by pulling the ETH/USDT pair below the channel. If they are successful, the pair could drop to $1,000.
BNB/USDT
Binance Coin (BNB) rallied sharply from $266 and broke above the 20-day EMA ($278) on Sept. 28. This indicates that the lower levels are attracting heavy buying by the bulls.
The bulls pushed the price above the resistance line of the descending channel on Sep. 29, but are facing resistance at the 50-day SMA ($288). If the bulls do not allow the price to break below the 20-day EMA again, the prospects for a break above the 50-day SMA will improve. The BNB/USDT pair could rally to $300 and then $338.
Conversely, if the price turns down and breaks below the 20-day EMA, it will suggest that the bears are continuing to sell higher. The pair could then drop to the strong support at $258.
XRP/USDT
XRP rebounded from the 20-day EMA ($0.43) on Sept. 28, signaling a shift in sentiment from selling on rallies to buying on dips. However, the bears are unlikely to give up as they will try to stall the recovery in the $0.52-$0.56 zone.
If the buyers do not give up much ground from the current level, the possibility of a break above the upper zone increases. A break above $0.56 will signal a resumption of the uptrend. The XRP/USDT pair could rally to $0.66.
Conversely, if the price continues to drop, the pair could drop to the breakout level of $0.41. The bulls are likely to defend this level vigorously. If the price bounces off this level, the pair may enter some range-bound action for a few days.
ADA/USDT
The long tail on the Cardano (ADA) candle on Sep 28-29 shows that the bulls bought at lower levels in an attempt to defend the uptrend line. Although the price rose above the uptrend line on September 29, the buyers were unable to sustain the rally.
The price fell below the uptrend line again on September 30. The falling moving averages and the RSI in negative territory suggest that the path of least resistance is to the downside. If the price breaks below $0.42, the ADA/USDT pair could drop to the crucial support at $0.40. The bulls are expected to defend this level vigorously.
Conversely, if the price breaks up from the current level and closes above the uptrend line, it will suggest strong buying at lower levels. The bulls will again try to push the price above the 20-day EMA ($0.45) and challenge the resistance at the 50-day SMA ($0.47).
SOL/USDT
Buyers are attempting to form a higher low in Solana (SOL). The price rebounded from $31.65 on Sept. 28 and reached the 50-day SMA ($34.70) on Sept. 30.
The 20-day EMA ($33.30) is trying to turn up and the RSI is just above the midpoint, which suggests that the bulls are trying to turn back. If the price breaks out and sustains above the 50-day SMA, the bullish momentum could pick up and the SOL/USDT pair could rally to $39. The bears are expected to mount strong resistance at this level.
Alternatively, if the price turns down from the 50-day SMA, the pair could drop to $31.65. A break below this support could sink the pair to $30.
DOGE/USDT
Dogecoin (DOGE) dipped below the 20-day EMA ($0.06) on Sept. 25, and the bears thwarted the bulls’ attempts to resume the rally on Sept. 27.
The 20-day EMA is flat and the RSI is just below the midpoint, indicating a balance between supply and demand. This balance could tip in favor of the bears if they sink the price below the support near $0.06. The price could then drop to $0.05.
The bulls will win the game if they push and sustain the price above the 50-day SMA ($0.06). The DOGE/USDT pair could then attempt a rally to $0.07, where the bears can once again mount a strong resistance.
DOT/USDT
Polkadot (DOT) has been trading in a tight range between $6 and $6.64 for the past few days. This indicates a tough battle between the bulls and the bears.
The gradually sloping moving averages and the RSI in the negative territory suggest that the bears have a slight advantage. If the price drops below $6, the DOT/USDT pair could start the next leg of the downtrend. The pair could then slide to $4.
To invalidate this negative bias, the bulls will have to push and sustain the price above the 20-day EMA ($6.64). If they do, it will suggest that the consolidation near support may have been an accumulation phase. The pair could then rally to the 50-day SMA ($7.26) and then $8.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should do your own research when making a decision.
Market data is provided by the exchange HitBTC .