MCR Market Report

The Leader in Quantitative Analytics

Recent Volatility

08 December 2017 11:11 AM | MCR Market Report (Administrator)

Volatility might be an understatement.  Bitcoin had a high of $19,697 on GDAX yesterday (although their site went down amidst the flood of trading for a multitude of clients) and low of $13,500.  The 6,197 point spread translates to a 45.9%(!!) peak to valley move yesterday alone! We thought it a good time to make a quick post for subscribers with an indicator update and one concern we have.  

First off, even with the weakness today, all of our indicators remain on BUY signals with the shorter-term Quant-1 indicator the only one showing weakness.  Quant-1 is traditionally our "distant early warning" indicator that we use to lighten up positions, or go aggressively long, with our longer-term Typhoon and Gemini indicators for position trading.  

However, one scenario we wanted to bring to the attention of Inner Circle members is the possibility that we may have just witnessed a "blow off top".  Investopedia explains a blow-off top this way:  

A chart pattern that indicates a steep and rapid increase in a security’s price and trading volume followed by a steep and rapid drop in price and volume. The rapid changes indicated by a blow-off top, also called a blow-off move or exhaustion move, can be the result of actual news or pure speculation.

A blow-off top usually indicates that a security’s price is about to fall, while a blow-off bottom suggests that a security’s price is about to rise. A security also can enter a blow-off period during which its value remains inflated for weeks or months. Often times, momentum stocks experience blow-off periods during their violent upswings and downswings.

With this possibility in mind, should Bitcoin break below $13,500 either today or in the next few days, we recommend exiting speculative positions and maintaining a core long position to your level of comfort.  Note that $13,500 would still represent a gain of 72% for our trade initiated on November 16th at $7849.  That area would most likely trigger a SELL signal on Quant-1, with both Typhoon and Gemini remaining long.

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