Bitcoin: On April 11, April CME Bitcoin futures generated a short-term sell signal and remains on an intermediate term buy signal. This is a reversal of the March 24 buy signal.
On March 28, April futures made a high of $48,475 and this was substantially below the December 27 high of 52,185. Based on Friday’s close of 39,825, Bitcoin is approximately 7,000 above the low of 32,845 made on January 24, 2022. One problem for bitcoin is its correlation to the Nasdaq 100.
The open interest action has been decidedly bearish with open interest declining on rallies and increasing on declines. The latest COT report shows that managed money is short by a considerable margin. The report released on Friday for the micro bitcoin contract shows that leverage funds are short by 17,947 contracts and long by 6,584. The large contract shows that leverage funds are short by 6,654 contracts and long by 1,374 contracts.
The problem for Bitcoin is that the NASDAQ 100 is weak due to major sector rotation out of technology. For example, in the calendar year 2021 the Nasdaq-100 ETF QQQ advanced 26.81% and XLK gained 33.73%. However, this was the worst performance for the two ETFs since calendar year 2018. It gets worse. The 1 year-to-date performance for QQQ of -1.05% and XLK of +2.33% mean that the two ETFs must rally spectacularly during the next 8 ½ months if they are to equal their 2021 performance. Notably, the formerly strong chip sector has fallen out of bed. Of the 29 stocks in the Philadelphia Semiconductor Index only seven have positive performance 1 year-to-date.
The rotation out of technology stocks is one of the big stock market stories of 2022. In summary, if bitcoin remains closely correlated to the Nasdaq-100, lower bitcoin prices are ahead.
Nasdaq 100: On April 11, the Nasdaq 100 generated short and intermediate term sell signals.
S&P 500: On April 13, the S&P 500 generated a short term sell signal and remains on an intermediate term buy signal.
To read about my analytical process for stocks, visit online booksellers, Amazon and Barnes and Noble and enter the title: How I Trade Stocks by Garry Stern.