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 rallied after the Wall Street Journal reported that some The Federal Reserve were concerned about the pace of rate hikes and the risks of excessive tightening.
While it is widely accepted that the US will enter a recession, there is debate about how long it could last. On that, Tesla CEO Elon Musk recently said on Twitter that the recession could last “probably until spring 24”, adding that it would be nice to go “a year without a horrible global event”.
The price of Bitcoin (BTC) has seen a massive drop from its all-time high, but its hash rate remains strong. This has increased 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 can 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 spot any reversals.
SPX
The S&P 500 index rose above the 20-day EMA ($3,702) on Oct. 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.
The 20 day EMA is trying to flatten out and the relative strength index is above 46, which suggests a 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 stall the recovery at 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.
DXY
The US Dollar Index remains in a strong uptrend as the bulls are not allowing the price to drop below the 20-day EMA (112).
The bulls will have to propel the price above the $113.92 zone to $114.77 to resume the uptrend. The buyers tried to do that on Oct 21, but the long wick on the day candle shows that the bears are aggressively defending the upside.
The sellers will try to gain an advantage in the short term by pulling the price below the 20-day EMA. If successful, the index could sink to $110. Buyers are likely to defend this level and a bounce could keep the index ranged between $110 and $114.77 for some time.
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.
BTC/USDT
Bitcoin bounced off the nearest support at $18,843 on Oct. 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.
If the price breaks down and sustains below $18,843, the BTC/USDT pair could drop to $18,125. The bulls are expected to vigorously defend the $18.125-$17.622 zone because if they fail to do so, the pair might resume its downtrend. The next stop on the downside could be $15,750.
The long tail of the candlestick on Oct. 21 shows that the buyers bought the dip below $18.843. They will try to push the price above the moving averages. A break above the 50-day SMA ($19,616) could clear the way for a potential rally to $20,500. This is an important level to watch because a break above it could signal the start of a strong recovery to $22,800 and then $25,211.
ETH/USDT
Ether (ETH) is struggling to break above the 20-day EMA ($1,313), but a minor silver lining is that the bulls have not allowed the price to sustain below the immediate support at $1,263.
If the price turns up from the current level and breaks above the 20-day EMA, the ETH/USDT pair could rally to the downtrend line of the descending channel. Buyers will have to push the price above this resistance to signal the start of a new move higher.
Conversely, if the price continues down and breaks below the $1,220-$1,190 support zone, the selling could intensify and the pair could drop to the psychological $1,000 level and then to the support line of the channel.
BNB/USDT
BNB (BNB) has been trading below the moving averages and the bears are trying to sink the price to the $258 range support.
The gradually falling 20-day EMA ($274) and the RSI in the negative territory indicate an advantage for the bears. The $258 level is likely to witness a tough battle between the bulls and the bears. If the sellers win, the BNB/USDT pair could drop to $216.
Instead, if the price turns up from the current level or the $258 support, the bulls will try to push the pair above the moving averages. If that happens, the pair could try to rally to $300. This level is likely to act as a strong barrier, but if the bulls break through it, the pair could rally to $338.
XRP/USDT
XRP (XRP) broke below the developing symmetrical triangle pattern on Oct. 20, but the long tail of the candlestick shows that the bulls are buying the dips to the 50-day SMA ($0.43). Buyers defended the 50-day SMA again on Oct. 21.
The 20-day EMA ($0.46) has started to turn down and the RSI has slipped into the negative territory, which indicates that the bears have a slight advantage. If the price turns down from the current level or the 20-day EMA, the bears will try to push the XRP/USDT pair to the breakout level of $0.41. This level is likely to attract strong buying.
On the upside, a breakout and close above the 20-day EMA will be the first sign of strength. Afterwards, the pair could rally to $0.51 and then to the resistance line. A breakout and close above the triangle could improve the prospects for a resumption of the uptrend.
ADA/USDT
Cardano (ADA) has been in a downtrend for the past few days. After a two-day relief rally, selling resumed on Oct. 18, with the bears driving the price to the support line of the wedge.
The strong selling of the past few days has sent the RSI falling deep into oversold territory. This suggests that the selling may have been overdone in the short term and a relief or consolidation rally may be just around the corner.
If the price bounces off the support line, the ADA/USDT pair will try to rally to $0.36 and then to the 20-day EMA ($0.38). A break above this level will be the first indication that the bears may be losing control.
On the downside, if the price breaks below the support line, the selling could pick up momentum and the pair could drop to $0.30.
SOL/USDT
Solana (SOL) dipped below the $29.42 support on Oct. 19, indicating further selling pressure from the bears. The selling continued and the support at $27.87 was removed on Oct. 21. This clears the way for a retest of the crucial support at $26.
The falling moving averages and the RSI in the negative territory indicate that the bears are in control. If the SOL/USDT pair does not rebound sharply from $26, the chance of a break below it increases. The pair could then drop to the next support at $22.
Contrary to this assumption, if the price rises from the current level or $26 and breaks above $30, it will be a sign of accumulation at lower levels. The bullish momentum could pick up in the short term after the pair breaks above the 50-day SMA ($32.28).
DOGE/USDT
The attempts by the bulls to push Dogecoin (DOGE) above the moving averages have been met with significant resistance from the bears. The sellers will now try to sink the price to the support near $0.06.
The 20-day EMA to the downside ($0.06) and the RSI below 45 suggest that the bears have the upper hand. If the sellers sink the price below the support, the DOGE/USDT pair could drop to the June low near $0.05. The bulls will have to defend this level with all their might because if the support breaks, the pair could start the next leg of the downtrend.
If the bulls want to avoid a breakdown, they will have to quickly push the price above the moving averages. Then, the pair could rally to $0.07, where the bears can once again mount a strong resistance.
MATIC/USDT
Polygon (MATIC) turned down from $0.88 on Oct. 19 and broke below the moving averages on Oct. 21. The failure of the bulls to defend the moving averages on the retest is a negative sign.
If the price sustains below the moving averages, the probability of a drop to the $0.71-$0.69 support zone increases.
If the price bounces off this zone, it will suggest that the MATIC/USDT pair may consolidate in a tighter range between $0.69 and $0.88 for a few days. The flat moving averages and the RSI just below the midpoint also suggest a short-term consolidation.
On the other hand, if the price quickly changes direction and breaks above $0.88, it will suggest a change in sentiment from selling on the upside to buying on the downside. The pair could then rally to $0.94 and then $1.05.
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.