BTC has been quietly downtrending for two months now.
מעודכן
In a previous post I drew attention to the large monthly engulfing candle on BTC and made the observation that historically this has 100% success rate in marking BTC highs.
In this post I want to take a more technical look at the formation of this big candle. We have what may be the early formations of Elliot waves (Marked in the OP). With our drops coming in three mains legs and our corrections coming in a couple big spikes.
I have old posts on the structure of bear market Elliot if you're unfamiliar with it.
Stealth Trend
You may have seen me pointing out the SPX "Stealth trend" shortly before the big bear break. We have a similar setup in BTC now.
A "Stealth trend" is when it appears the market is not all that weak. It looks more range bound than anything else, however, it is observably making lower highs and lower lows.
(Note - this can be inverted for higher highs and higher lows if trading an upside reversal).
Stealth trends are something I see before most big breaks in a reversal. Trading reversals (Both bullish and bearish) has been something I've done fairly well with over the years and when trading reversals many times it's preceded by a stealth trend.
When people think of major reversals they usually have the first chart in mind. Realistically, many reversals end up looking more like the second one.
Sharp reversals do happen, but it's more common to have a "Long goodbye" type of reversal.
BTC Action and Bearish Topping Norms
Before even the first top in 2021, I wrote up my golden rules for bearish reversals. Here they are:
Let's go through them.
- Top was made on positive news. ETF and all that jazz.
- Top was made with an aggressive move up and then some follow through spikes.
- It was not comfortable being a bear at the top.
- We went into the top very fast but then slowed down and made a more range like move.
- Bulls were arrogant at the high. Look at my previous posts comments if you need context.
- After the 60K break, became popular to be a bear. Big bounce came.
- There have been (And will continue to be) strong rallies even though lower lows are made.
Now granted, you can also get these conditions in a bull move that's consolidating. It's not as if every time you see this collection of things the market has to fall. All I am wanting to show you here is although many people proclaim the action we see to be stuff you only see in bull moves, a well prepped bear may also be looking for these very conditions.
The Bouncing Ball Effect
A bouncing ball will return to almost the height it was on the previous upswing a few times after being bounced.
Each time the bounce up is a little less because some more kinetic energy is lost. It can never bounce higher than the previous bounce. The first bounce comes up almost as much as the last high. From there we gradually see the bouncing lessen. Until all the kinetic energy runs out and then the ball stops bouncing.
Now, with the bouncing ball when this happens it just goes flat. Maybe rolls a little. However, when we're applying this same general concept to markets when the "Energy" runs out, we see a crash event. The market sells off from the high. Gets back to almost the high. Next time a little lower. Next time a little lower. Little lower. And suddenly, yank! Down she goes.
The Crash Event
The stealth trend / bouncing ball thing produces a crash if it works. And it is reasonable to expect it to be a "Crash like" event. Here's why.
Previously I covered a few different outcomes I seen as possible for BTC. See post below:
Clearly, the most applicable setup out of these three is now the Elliot break. The Elliot break would imply a crash like move.
If we take this perspective, then we'd have recently went into wave 3. Wave 3 we'd expect to continue until around 45K. Some chop there and then the final wave 5 spike down to around 40K.
We'd have just completed the break to start wave 3 and we'd be currently completing the final retest before wave 3 goes into all its glory. Wave 3 is a progressive leg so the trend should get stronger and stronger as it develops. Although this is just simple trend development rules - when it happens on this timeframe we call it a "Crash".
Do or Die Time for Bulls
If buyers can not breakout of the lower lows and lower highs structure, the chances of a crash event are significantly high. No major supports for a bounce before 40K and even then we'd be looking at that maybe retesting 50K or so. Not getting back to the levels we're at now if there was to be another follow through leg.
A lot of people showed up on my previous posts to tell me about the bull flag.
You can find similar things in many previous highs.
Bull flag like patterns are far from infallible. I did a study of bull flags at indices highs and found that almost without exception a bull flag like false signal appeared at the top.
-As it's bound to if we advance quickly to a top and enter a range.
-As it's bound to if we enter into a stealth trend that imitates a range for a long time.
-As it's bound to if we enter into a choppy Elliot wave 2 before a break.
-As it's bound to in the "Bouncing ball" analogy.
If you accept these are norms in a top, then you have to see it's almost certain we'd have a false signal from a bull flag like setup before the break came if these norms appeared.
The bull flag pattern failed (By classic rules). We're now retesting the failure of that bull flag.
BTC buyers need to pull off something impressive now to break the lower highs structure.
If they can't then the odds of a crash are increasingly improving.
In this post I want to take a more technical look at the formation of this big candle. We have what may be the early formations of Elliot waves (Marked in the OP). With our drops coming in three mains legs and our corrections coming in a couple big spikes.
I have old posts on the structure of bear market Elliot if you're unfamiliar with it.
Stealth Trend
You may have seen me pointing out the SPX "Stealth trend" shortly before the big bear break. We have a similar setup in BTC now.
A "Stealth trend" is when it appears the market is not all that weak. It looks more range bound than anything else, however, it is observably making lower highs and lower lows.
(Note - this can be inverted for higher highs and higher lows if trading an upside reversal).
Stealth trends are something I see before most big breaks in a reversal. Trading reversals (Both bullish and bearish) has been something I've done fairly well with over the years and when trading reversals many times it's preceded by a stealth trend.
When people think of major reversals they usually have the first chart in mind. Realistically, many reversals end up looking more like the second one.
Sharp reversals do happen, but it's more common to have a "Long goodbye" type of reversal.
BTC Action and Bearish Topping Norms
Before even the first top in 2021, I wrote up my golden rules for bearish reversals. Here they are:
Let's go through them.
- Top was made on positive news. ETF and all that jazz.
- Top was made with an aggressive move up and then some follow through spikes.
- It was not comfortable being a bear at the top.
- We went into the top very fast but then slowed down and made a more range like move.
- Bulls were arrogant at the high. Look at my previous posts comments if you need context.
- After the 60K break, became popular to be a bear. Big bounce came.
- There have been (And will continue to be) strong rallies even though lower lows are made.
Now granted, you can also get these conditions in a bull move that's consolidating. It's not as if every time you see this collection of things the market has to fall. All I am wanting to show you here is although many people proclaim the action we see to be stuff you only see in bull moves, a well prepped bear may also be looking for these very conditions.
The Bouncing Ball Effect
A bouncing ball will return to almost the height it was on the previous upswing a few times after being bounced.
Each time the bounce up is a little less because some more kinetic energy is lost. It can never bounce higher than the previous bounce. The first bounce comes up almost as much as the last high. From there we gradually see the bouncing lessen. Until all the kinetic energy runs out and then the ball stops bouncing.
Now, with the bouncing ball when this happens it just goes flat. Maybe rolls a little. However, when we're applying this same general concept to markets when the "Energy" runs out, we see a crash event. The market sells off from the high. Gets back to almost the high. Next time a little lower. Next time a little lower. Little lower. And suddenly, yank! Down she goes.
The Crash Event
The stealth trend / bouncing ball thing produces a crash if it works. And it is reasonable to expect it to be a "Crash like" event. Here's why.
Previously I covered a few different outcomes I seen as possible for BTC. See post below:
Clearly, the most applicable setup out of these three is now the Elliot break. The Elliot break would imply a crash like move.
If we take this perspective, then we'd have recently went into wave 3. Wave 3 we'd expect to continue until around 45K. Some chop there and then the final wave 5 spike down to around 40K.
We'd have just completed the break to start wave 3 and we'd be currently completing the final retest before wave 3 goes into all its glory. Wave 3 is a progressive leg so the trend should get stronger and stronger as it develops. Although this is just simple trend development rules - when it happens on this timeframe we call it a "Crash".
Do or Die Time for Bulls
If buyers can not breakout of the lower lows and lower highs structure, the chances of a crash event are significantly high. No major supports for a bounce before 40K and even then we'd be looking at that maybe retesting 50K or so. Not getting back to the levels we're at now if there was to be another follow through leg.
A lot of people showed up on my previous posts to tell me about the bull flag.
You can find similar things in many previous highs.
Bull flag like patterns are far from infallible. I did a study of bull flags at indices highs and found that almost without exception a bull flag like false signal appeared at the top.
-As it's bound to if we advance quickly to a top and enter a range.
-As it's bound to if we enter into a stealth trend that imitates a range for a long time.
-As it's bound to if we enter into a choppy Elliot wave 2 before a break.
-As it's bound to in the "Bouncing ball" analogy.
If you accept these are norms in a top, then you have to see it's almost certain we'd have a false signal from a bull flag like setup before the break came if these norms appeared.
The bull flag pattern failed (By classic rules). We're now retesting the failure of that bull flag.
BTC buyers need to pull off something impressive now to break the lower highs structure.
If they can't then the odds of a crash are increasingly improving.
הערה
And most other crypto stuff is observing classic bull trap formation. The 76 reversal is the classic bull trap (In my experience).
Here's ETH post in real time on that:
Here's ETH now.
Can do this with other things like SOL also.
These currently observe textbook bearish reversal norms.
הערה
Here's an extrapolation of how a full completion of the bull trap here usually would look. 
הערה
Might be wave C complete. Parabolic. "W" at top. All the traits.
If so, the next downtrend leg has begun.
הערה
If the ABC thesis is correct we should now have wave 1 of the new trend legs complete and this should be wave 2. Upon the failure of the wave 2 rally we should see strong selling. To comply with trend rules, a new low should be made.
Very often we'll see some sort of bounce after the breakout but if and when this happens it's another shorting op.
הערה
Big road map estimate would be something like this. If and when 40K hits I'd be a lot more cautious as a bear. I think trading under 55K would represent a bear break. 40K hitting I'd consider to be very bearish.
However, I'd consider the risk of some sort of tactical bounce there to be very likely. A bear market rally move to 50K would be totally fair game.
A 10K swing would be something I'd want to avoid the drawdown of shorts on. I'll prefer to trail stops and then aim to short into the next rally.
הערה
In the crash scenario, this is what I'd expect to be the final bull trap. Two legs. False breakout in the second leg. Huge yank upon a rebreak. Similar to the action here
הערה
Most of the time when I've used TA to forecast market breaks on a weekly time frame the move has been news driven. I don't make any guesses on what the news will be. All I am saying is the size and scope of the moves forecast on this break and particularly on the 50K (ish) rejection trade are big strong moves. For weekly charts to move that much, there's usually news.
הערה
I think the warnings from the broader crypto market may be important. Here's a few things I think more attention should be paid to;
Crypto, broadly, topped in 2021. Only BTC and ETH made spike outs of the high. In the 2024 rally only BTC made a new high.
The "Altcoin season" thing failed in 2024. Alts promptly crashed 40% once entering it.
The bear signals in things like ETH are as classic bull trap signals as you can get.
Here's ETH has topped on the 76. Dead cat on the 61. Chop 50 - 61. Clear signs it's respecting these fibs levels.
I find when this sequence of things happens once the 50 is broken the 38 is skipped as support and it's hard down to the 23 fib.
Representing a drop of over 30% in ETH.
While with BTC itself I'd say the fair way to term the chance of a big bear break as "Extremely possible", with things like ETH and SOL I'd have to term them as "Highly probable".
And I think these are all tied ships. If we see these types of declines in things like ETH, SOL etc - I suspect BTC will follow.
BTC has always been a little more stubborn in the highs, but it did always go down just the same as the others when a broad drop happened.
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