Do Bitcoin and Gold Still Look Vulnerable?

By mid-August, it was clear that sentiment towards several key markets had changed. The stock market had impressed many skeptics after four weeks of solid growth. Stock traders were not alone like BitcoinBTC
Traders, after a 17% gain in July, had become much more bullish. One Bitcoin sentiment gauge had risen from 6 on June 19^th to 46 on 14 August^th.

There were technical signs that the Bitcoin rally was over as it looked to end the week below the $22.23 monthly pivot. This made the first downside target $19,844 which was the monthly S1 pivot support. This is why it was one of the four markets I felt traders should be watching. A week later, it hit a low of $19,527 and finally reached $18,282 on September 19^th.

The decline required a technical update, and although there had been some technical improvements, I still thought it could go even lower. So far that hasn’t been the case – so what are the prospects now?

Jerry A’s chart of Bitcoin futures shows that the 20-week EMA has declined since the March reversal, which is why it is yellow. This corresponds to a negative trend. Bitcoin prices have been in a fairly tight range for the past three weeks despite the volatility in the rest of the world markets.

Volume has increased over the past two weeks, but the volume analysis is still negative. VolConfirm is below both short- and long-term MAs with no sign of a bottom yet,

AsprayInsight analyzes the relative performance of Bitcoin against the S&P 500. It is negative, meaning that Bitcoin is underperforming the S&P. Given the tough year for stock prices, this is not a good sign for Bitcoin as most people don’t want to be in a market that is weaker than stocks.

There is pivot support now at $18,743 and then more importantly at $16,452 with the weekly starc band at 14,342. A weekly close above the $21,593 dynamic stop would be an encouraging sign.

Gold was another market that I focused on that has been out of favor for most of the year. In August I focused on Spyder Gold Trust (GLDGLD
) which follows the Comex gold futures closely which I will focus on today.

Gold futures had just rallied back to their descending 20-week EMA in August (see arrow) and then turned sharply to the downside. This is typical of a rally in a downtrend and favored even lower prices.

A week ago, futures hit a low of 1,613, but prices were strong last week, rising $47 an ounce. Gold fell 11% from the August high of 1814 to the last low of 1613. Breach of support, line a, back to early 2021 is not a positive development.

Volume has been strong over the past two weeks as the balance volume (OBV) has just closed back above the WMA. A strong move above the downtrend, line b, is needed to make it positive.

The Herrick Payoff Index (HPI) fell below the zero line in May, indicating negative cash flow. The HPI has moved above its WMA, but at -4796 is well below the zero line.

The daily OBV and HPI (not shown) turned positive last week, which means that this market has more attention. I will be watching the next pullback to see if there is a stronger sign of a bottom. Any withdrawal must hold support at 1673, line a.

This table shows you what happened to the markets I focused on in my August 19^th mail. My updated analysis of interest rates and the Vanguard Total Bond Fund (BNDBND
) was published on Friday.

In part three, I will focus on the stock market. The weak close on Friday generated negative momentum, so the overnight action in Asia and Europe will be important. The update will be released after Monday morning trading.