The Market’s Compass Crypto Sweet Sixteen StudyWeek #556 / A Bonafide Breakout of the Sideways Trading Range!
Welcome to this week’s publication of the Market’s Compass Crypto Sweet Sixteen Study #556. The Study tracks the technical condition of sixteen of the larger market cap cryptocurrencies. Every week the Studies will highlight the technical changes of the 16 cryptocurrencies that I track as well as highlights on noteworthy moves in individual Cryptocurrencies and Indexes. Past publications including the Weekly ETF Studies can be accessed by paid subscribers via The Market’s Compass Substack Blog. An explanation of my objective Individual Technical Rankings and Sweet Sixteen Total Technical Ranking go to www.themarketscompass.com. Then go to the MC’s Technical Indicators and select “crypto sweet 16”. What follows is a Cliff Notes version* of the full explanation… *The technical ranking system is a quantitative approach that utilizes multiple technical considerations that include but are not limited to trend, momentum, measurements of accumulation/distribution and relative strength. The TR of each individual Cryptocurrency can range from 0 to 50. The Sweet Sixteen Total Technical Ranking or “SSTTR” is the sum of the sixteen individual TRs and can be viewed as an overbought / oversold indicator as well as a confirmation / non-confirmation indicator with a potential range of 1 to 800.
The Sweet Sixteen Total Technical Ranking moved sharply higher to the best level since September of last year, up +80.44% (the biggest move to the upside in recent memory) to 572 last week from 317 at the end of the previous week.
All sixteen crypto registered an explosive increase in their TRs last week, twelve of which made double-digit gains. Eleven TRs ended the week in the “green zone” (TRs between 35 and 50) and five were in closed the week in the “blue zone” (TRs between 15.5 and 34.5). That was vs. the previous week when two of the Crypto Currency TRs ended the week in the “green zone” (TRs between 35 and 50), nine ended the week in the “blue zone” (TRs between 15.5 and 34.5) and five finished in the “red zone” (TRs between 0 and 15). Last week was the first time since the week ending April 17th that there was none of the Sweet Sixteen in the “red zone”. The average TR gain on the week was a “whopping” +15.94 (pardon the non-technical term), vs. the previous week’s average TR loss of -0.59. The 13-Week Simple Moving Averages* of the Sweet Sixteen Objective Technical Rankings Since January 1st*The 13-Week Simple Moving Average (SMA) lines smooths what can be “choppy” Objective Technical Rankings and better defines the trend in the TRs. Changes in the SMA trends with follow-through are signals worthy of technical note.
Only two of the Sweet Sixteen 13-Week TR SMA of its Technical Rankings failed to turn higher at the end of last week after the broad advance in all the Technical Rankings, one was Tron’s (TRX) 13-Week TR SMA of its Technical Ranking, which has continued to track lower but it nevertheless remains at a level that is above the rest of the Sweet Sixteen TR SMAs and the other was Dogecoin’s (DOGE) 13-Week TR SMA. Relative Strength and Weakness in the Sweet Sixteen vs. The CCi30 Index* utilizing a Relative Rotation GraphThe Relative Rotation Graph, commonly referred to as RRGs, was developed in 2004-2005 by Julius de Kempenaer. These charts are a unique visualization tool for relative strength analysis. Chartists can use RRGs to analyze the relative strength trends of several securities against a common benchmark, (in this case the CCi30 Index*) and against each other over any given period (in the case below, daily) over the past two weeks. The power of RRG is its ability to plot relative performance on one graph and show true rotation. All RRGs charts use four quadrants to define the four phases of a relative trend. The Optuma RRG charts rotates from Leading (in green) to Weakening (in yellow) to Lagging (in pink) to Improving (in blue) and back to Leading (in green). True rotations can be seen as securities move from one quadrant to the other over time. This is only a brief explanation of how to interpret RRG charts. To learn more, see the postscripts and links at the end of this Blog. *The CCi30 Index is a registered trademark and was created and is maintained by an independent team of mathematicians, quants and fund managers lead by Igor Rivin. It is a rules-based index designed to objectively measure the overall growth, daily and long-term movement of the blockchain sector. It does so by indexing the 30 largest cryptocurrencies by market capitalization, excluding stable coins (more details can be found at CCi30.com). The chart below has two weeks, or 14 days, of relative data points vs. the benchmark, deliniated by the dots or nodes. Not all of the Sweet Sixteen are plotted in this RRG Chart. I have done this for clarity purposes. Those which I believe are of higher technical interest remain.
ChainLink (LINK) rose out of the Weakening Quadrant two weeks ago into the Leading Quadrant and at the end of last week it registered the highest Relative Strength Ratio at 108.87 of the Sweet Sixteen despite a slowing of Relative Strength Momentum. Cosmos (ATOM) began to roll over in the Leading Quadrant a week ago, last Thursday and is tracking lower and is only a day or two away from entering the Lagging Quadrant vs. the benchmark CCi30 Index. A poor showing considering the Strength in my Sweet Sixteen over the past week. Uniswap (UNI) has been losing Relative Strength Momentum for the past two weeks and last week it dropped into the Lagging Quadrant (also not the “place to be vs. the broader index”) over the past two weeks as it registered the lowest Relative Strength and Relative Strength Momentum reading last week (see the Tabulation Table below). Relative Strength and Relative Strength Momentum “Tabulation Table”The “Tabulation Table” below marks the Relative Strength and Relative Strength Momentum readings of the Sweet Sixteen vs. the CCi30 Index at the end of last week and the end of the two preceding weeks. If there has been an improvement in either the Relative Strength Ratio or the Relative Strength Momentum reading since the end of the preceding week, I have highlighted it in green. If there has been a contraction in either it is highlighted in red and an unchanged reading in either will remain black. The color-coding system has served as a heat map over the past three weeks highlighting either the continued improvement, deterioration, or stasis vs. the benchmark CCi30 Index. The crypto currencies that are in the comments below the RRG chart are highlighted in blue.
Seven Day Absolute % Price Change*
*Friday August 14th to Friday August 21st Over the past seven days all the Sweet Sixteen gained absolute ground with all but two marking double-digit gains and eight registering gains of more than 25% it what appeared to be fueled by short squeezes. That was vs. the week before when seven of the Sweet Sixteen gained absolute ground and nine traded lower. Last week the average absolute historic percentage gain was +24.61% vs the previous week when the average absolute gain was +1.35%. Both weekly average gains exclude the two Indexes. Year to Date Absolute % Price Change
The Average YTD Absolute % Price Change of The Sweet Sixteen at the end of last week was -17.94% with Stellar (XLM) joining Tron (TRX) by being up on the year. That was vs. the week before when the Average YTD % Price Change was -33.37%. The Technical Condition FactorsThe Technical Condition Factors or TCFs are utilized in the calculation of the Individual Crypto Currencies Technical Rankings. What is shown in the excel panel below is the total TCFs of all sixteen TRs. A few TCFs carry more weight than the others, such as the Weekly Trend Factor and the Weekly Momentum Factor in compiling each individual TR of each of the 16 Cryptocurrencies. Because of that, the excel sheet below calculates each factor’s weekly reading as a percentage of the possible total. A full explanation of my Technical Condition Factors go to www.themarketscompass.com. Then go to the MC’s Technical Indicators and select Crypto Sweet 16.
The Daily Momentum Technical Condition Factor or “DMTCF” rose last week to a to an overbought level to 98.21% or 110 out of a possible 112 from 46.43% or 52 out of a possible 112 the previous week. As a confirmation tool, if all eight TCFs improve on a week over week basis, more of the 16 Cryptocurrencies are improving internally on a technical basis, confirming a broader market move higher (think of an advance/decline calculation). Conversely, if more of the TCFs fall on a week over week basis, more of the “Cryptos” are deteriorating on a technical basis confirming the broader market move lower. At the end of last week all of the eight TCFs registered increases confirming the broader market move higher. The Weekly CCi30 Index and The Weekly Stochastic Momentum Index, MACD, and The Total Sweet Sixteen Technical Condition Factor or“TSSTCF” Oscillator**The “TSSTCF” Oscillator tallies the eight objective Technical Condition Factors into one overbought / oversold indicator that ranges between 0 and 8.
Last week, the question as to whether the ten-week trading range was a bottoming price pattern or distribution prior to new lows was definitively answered with the sharp rally above the Upper Parallel (solid gold line) of the longer-term Standard Pitchfork (gold P1 through P3) followed by a break above the upper confines of the basing price pattern at 10,200, in concert with a a break above the shorter-term Schiff Pitchfork (violet P1 through P3) Upper Parallel (solid violet line) and close above the Kijun Plot (solid green line). Both momentum oscillators confirmed the impulsive price rally as did the Total Technical Condition Crypto Factor Oscillator (bottom panel) not seen since September of last year with the shorter-term 5-Week EMA (red line and the longer-term 45-Week SMA (blue line) both tracking higher. These technical factors led me to subtitle this week’s Study “A Bonafide Break Out of The Sideways Trading Range”. The CCi30 Index Daily Candlestick Chart with Momentum Oscillators
The Daily Candlestick Chart of the CCi30 Index further confirms the impulsive price rally in the Index last week which overtook the confines of the Cloud for the first time since last May. On Wednesday the large cap index “barreled” through the Upper Warning Line (violet dashed line marked UWL) of the longer-term Schiff Modified Pitchfork (violet P1 through P3) and the Median Line (gold dashed line) of the shorter-term Schiff Pitchfork (gold P1 through P3). The following day the index “cut through” the Upper Parallel (solid gold line) and on Friday the index penetrated the Upper Warning Line (gold dashed line marked UWL) before closing just below it. As with the Weekly chart, all three oscillators confirmed the price rally. Needless to say, some “backing and filling” is in order but there is little question that the index has reached its nadir. For readers who are unfamiliar with the technical terms or tools referred to in the comments on the technical condition of the CCi30 Index can avail themselves of a brief tutorial titled, Tools of Technical Analysis and the three part Andrews Pitchfork Series available on my website.Charts are courtesy of Optuma whose charting software allows the Technical Rankings to be calculated and back tested. You're currently a free subscriber to The Market's Compass Technical View. For the full experience, upgrade your subscription.
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