The Penalyst: Market Overview & Outlook - February 27, 2023

The concept of “higher-for-longer” sets in for markets regarding interest rates, geopolitical tensions rise as China gets involved in the Russia-Ukraine war, and short-term metrics take a hit for risk assets. Longer-term metrics still hold bullish, so is this a case of buying the dip or selling the top?

Last week showed some pullbacks, in both price valuations as well as on-chain metrics. And although the more novice investor would look at such developments negatively, The Penalyst isn’t too worried.

For weeks I’ve talked about a longer-term positive outlook, but with short to medium-term caution. This last week sort of proves my point. We do not yet have a full-fledged raging bull market. The sentiment is fragile and with the above-mentioned tensions still going on in the world, sentiment shifts can happen fast.

However the long-term metrics still hold bullish so for the more long-term investor, the recent developments could just prove a decent opportunity for more cost-effective accumulation.

BITCOIN (BTCUSD)#

Short-term holders in profit remain heavily in the majority, and we are seeing key long-term metrics such as the future funding rate as well as long-term moving averages hold positive.On the upside, we are still struggling to take over the resistance (highlighted weeks ago) just north of 25k.However at the time of writing, we are looking to be bouncing off the short-term moving average, so I wouldn’t be surprised if the week would offer another run at resistance.To the upside, a break of said resistance would open up the way into a major liquidity zone between 32400 and 28200.To the downside, a clear break of the short-term moving average direct targets resistance turned support at 21547. A break there would open up the way for the long-term moving average to be tested, and I would believe this is the big line in the sand right now for long-term direction.However with this said, it would suggest the path of least resistance remains to the upside, indicating that statistically, we are more prone to move higher than lower.

US DOLLAR INDEX#

The US dollar index's last daily candle was a very strong one. We need to see a quite significant negative candle in the following days to validate this being a reversion point, and so far we are not getting it. That means the USD is likely to head higher, potentially pushing crypto lower.

We do have some minor resistance at 105.30 in close proximity, and a breach of that would provide the way for a test of the long-term moving average.

On the downside, we have a similar picture as with BTC, although reversed, with a couple of previously highlighted supports needing to be taken out for a full test of the major liquidity zone.Unlike BTC the path of least resistance seems to be to the upside for the USD, which does not align with the BTC projection.

It is important to point out that the USD index is derived from the value of the USD paired towards a basket of currencies, with the euro being the most weighted one. As such, the USD index movement doesn’t necessarily have to be connected to the USD being strong, but rather other currencies being weak, and as such, we can sometimes see a break in the correlation between a weak dollar giving a strong BTC and vice versa.

NASDAQ100#

The Nasdaq has pulled back slightly, just as other risk assets, and as mentioned before in previous updates, this could be in line with a larger consolidation pattern forming.

On the upside, we have some minor resistances at 12883 and 13712, with the first one acting as the recent point of rejection. And to the downside we are sitting right at the long-term moving average, rejecting it for now.If this 200-day moving average gives way, that would be quite worrisome for overall risk sentiment, and could easily drag other risk assets such as crypto with it lower. So if you are in the market, this is quite an important one to keep an eye on.

CLOSING COMMENTS

We don’t have a huge week in terms of data releases, so I wouldn’t be surprised if we get a slow and sideways-moving week. If so, I recommend keeping an eye on headlines as they will be more influential than usual in moving markets.

- The Penalyst

*Disclaimer: This article is not financial or investment advice, nor should it be perceived as such. Penning Group and the author (Timothy Hellberg) shall not be held accountable for any misinterpreted information by the reader. If you are interested in learning more about investing in the CeDeFi space, please get in touch with us.