Before we go into the charts, kudos so far to the crypto community for not panicking off the NY AG announcement. The recent rally has been an impressive stand by the bulls.
That said, we see macro developments that Bitcoin (BTC) traders should be aware of.
CME Bitcoin (BTC) futures bounced off a diagonal point and are now up against horizontal resistance near the recent highs. It is not clear if Bitcoin (BTC) futures have the power to move through that resistance. Make no mistake. If that were to happen, we would be delighted.
Perhaps the best course of action is to wait on the sidelines. The CME Bitcoin (BTC) contract has a budding head and shoulders top pattern (Figure 1). While this formation has likely been over covered in the crypto Twitterverse, it is there nonetheless.
There are other macro developments worth noting.
For example, Gold (GC) is falling after hitting weekly resistance (Figure 2). That seems strange. It could be a sign that the Fed will not be as dovish as the marketplace desires.
S&P Futures (ES) have failed after a sweep of resistance of the 2018 high (Figure 3). Elliot wave structure seems to hint that a correction is possible. As a point of information, “Sell in May and Go Away” is a famous equity market saying.
Compounding the possible top in stocks is a breakout in the VIX fear index. VIX appears to have broken out above diagonal resistance and its 50-day moving average (Figure 4).
Bottom Line: Fear seems to have returned to capital markets. It is to be determined whether this affects Bitcoin (BTC). Based on how poorly Ethereum (ETH), Litecoin (LTC), and Bitcoin Cash (BCH) trade, caution may be warranted. The counterargument is that Bitcoin (BTC) can climb the “wall of worry” as shorts are slowly forced out and bulls get forced back in. As of now, the chart read is not crystal clear.