Risk assets have started the new year on a strong note. The S&P 500 (SPX) and the Nasdaq closed in the positive for the second successive week and also notched their best weekly performance since November.
Bitcoin (BTC) led the recovery in the crypto markets with a sharp 21% rally last week. That sent the Bitcoin Fear and Greed Index into the neutral territory of 52 on Jan. 15, its highest since April 5, 2022. However, the index has given back its gains and is again back into the Fear zone on Jan. 17.
The strong rally in Bitcoin has divided analysts' opinions. While some expect the rally to be a bull trap, others believe that the up-move could be the start of a new bull market. The confirmation of the same will happen during the next dip. If the cryptocurrencies form a higher low followed by a higher high, it will suggest that the downtrend could be over.
Could the S&P 500 extend its rally? What are the critical levels on BTC and the cryptocurrencies to watch out for? Let’s study the charts to find out.
The S&P 500 continued its recovery last week and has reached the downtrend line. The 20-day exponential moving average (3,904) has started to turn up and the relative strength index (RSI) is in the positive territory, indicating advantage to the buyers.
The bulls will have to thrust and sustain the price above the downtrend line to signal a potential trend change. The bears may try to stall the up-move in the 4,100 to 4,120 zone but if bulls overcome this resistance, the index could rally to 4,200 and then 4,325.
If bears want to prevent this change in trend, they will have to quickly pull the price below the moving averages. If they do that, it will suggest that higher levels are attracting sellers. The index could then slide to 3,764.
The U.S. dollar index (DXY) has been falling inside a descending broadening wedge pattern for the past few days. Buyers are trying to protect the support line of the wedge.
The relief rally could reach the 20-day EMA (103), which could act as a strong barrier. If the price turns down from this level, it will suggest that the sentiment remains negative and traders are selling on minor rallies. The bears will then try to resume the downtrend and sink the price to the psychological support at 100.
Contrarily, if buyers propel the price above the 20-day EMA, the index could march toward the resistance line of the wedge. The 50-day SMA (105) is placed close to the resistance line, hence the bears are likely to mount a strong defense at this level.
Buyers are trying to pierce the overhead resistance at $21,480 and extend the recovery in Bitcoin but the bears are in no mood to relent. The RSI remains in deeply overbought territory, indicating a possible consolidation or correction in the near term.
The immediate support on the downside is the psychological level of $20,000 and then the 38.2% Fibonacci retracement level of $19,489. If the price turns up from this zone, it will suggest that traders are viewing the dips as a buying opportunity.
Buyers will then make one more attempt to drive the price above $21,500. If they succeed, the BTC/USDT pair could start the next leg of the up-move. The pair could then rise to $22,800 and later make a dash to $25,211.
Contrarily, if the price breaks below $19,489, the pair could plummet to the breakout level of $18,388.
Ether’s (ETH) recovery met with strong resistance at $1,600 on Jan. 14 but the bulls are not ceding ground to the bears. This suggests that the bulls expect the up-move to continue after a brief pause.
If the price consolidates in a tight range near $1,600, it will enhance the prospects of a break above the overhead resistance. The ETH/USDT pair could then climb to $1,700 and later to $1,800.
Alternatively, if the price turns down and breaks below $1,516, the pair could witness profit booking. The pair could then slump to the 38.2% Fibonacci retracement level of $1,439 and thereafter to the 20-day EMA ($1,362). This zone could attract strong buying by the bulls.
BNB (BNB) reached the overhead resistance at $318 on Jan. 14. The long wick on the day’s candlestick shows that the bears are trying to protect the level.
However, the rising 20-day EMA ($276) and the RSI near the overbought zone suggest that bulls have the upper hand. If the price turns up from the current level or the 20-day EMA, the bulls will strive to drive the BNB/USDT pair to $338. A break above this resistance could signal the start of a new up-move.
On the contrary, if the price turns down sharply and breaks below the moving averages, it will suggest that the pair may stay inside the range between $220 and $320 for a few more days.
XRP (XRP) soared above the triangle and the moving averages on Jan. 11 but the bulls have failed to start a strong up-move. This shows a lack of demand at higher levels.
The long wick on the Jan. 16 candlestick shows that bears are selling near the overhead resistance at $0.42. If the price turns down and breaks below the moving averages, it will keep the pair stuck between $0.32 and $0.42 for some time.
If bulls want to keep their chances alive, they will have to aggressively buy the pullback to the 20-day EMA ($0.36). If the price rebounds off this level, the XRP/USDT pair could retest $0.42. If this level gets taken out, the pair could soar to $0.51.
Dogecoin (DOGE) jumped above the 50-day SMA ($0.08) on Jan. 13 but the bulls could not capitalize on this strength. The long wick on the Jan. 14 candlestick shows that bears are selling above $0.09.
The bears will try to pull the price back below the moving averages. If they manage to do that, it will point to a possible range-bound action in the near term.
On the other hand, if the price rebounds off the moving averages with strength, it will indicate a shift in sentiment from selling on rallies to buying on dips. The bulls will then again try to drive the price above $0.09 and catapult the DOGE/USDT pair to $0.11. This level may again act as a strong barrier.
The strong relief rally in Cardano (ADA) is facing profit-booking near $0.37. The overbought levels on the RSI point to a minor correction or consolidation in the short term.
The ADA/USDT pair could turn down and slump to the 20-day EMA ($0.30). If buyers want to continue the recovery, they will have to defend this level aggressively. If the price bounces off the 20-day EMA with strength, it will increase the likelihood of a break above $0.37. The pair could then continue its northward march toward $0.44.
This positive view could invalidate in the near term if the price turns down and plummets below the moving averages. Such a move will imply that bears are back in command.
Polygon (MATIC) touched the $1.05 overhead resistance level on Jan. 14 but the long wick on the candlestick indicates that the short-term traders may have booked profits.
Buyers again tried to overcome the obstacle on Jan. 16 but the bears thwarted their attempts as seen from the long wick on the candlestick. The sellers will try to pull the price down to the moving averages, which is an important level to watch out for.
If the price springs back from the moving averages, it will indicate that lower levels are attracting buyers. The bulls will then try to kick the price above $1.05. If they succeed, the MATIC/USDT pair could surge to $1.30.
On the contrary, if the price collapses below the moving averages, it will suggest that the pair may remain inside the $0.69 to $1.05 range for a while longer.
Polkadot (DOT) skyrocketed above the downtrend line on Jan. 14 but higher levels seem to have attracted selling as seen from the long wick on the day’s candlestick.
The DOT/USDT pair formed an inside-day candlestick pattern on Jan. 15, which resolved to the downside on Jan. 16. This suggests that the failure to sustain above the downtrend line may have tempted short-term traders to book profits.
The first support on the downside is $5.40 and below that is the 20-day EMA ($5.10). If the price rebounds off this zone, the bulls may again try to push and sustain the pair above the downtrend line. The bullish momentum could pick up above $6.50 while the bears may be back in control if the pair dives below the moving averages.
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