The rapidly soaring SPX index in the first half of 2023 seems to have outperformed Bitcoin prices.The end of the upward trend in the US dollar index (DXY) may indicate a sustained rise in traditional markets and cryptocurrencies
- The rapidly soaring SPX index in the first half of 2023 seems to have outperformed Bitcoin prices.
- The end of the upward trend in the US dollar index (DXY) may indicate a sustained rise in traditional markets and cryptocurrencies.
- The signal for the start of a bull market on the BTC/SPX chart that appeared in February 2023 remains intact.
The negative correlation between the US dollar index (DXY) and the stock prices of the largest company in the United States (SPX) may provide some clues for the cryptocurrency industry and Bitcoin (BTC). If the US dollar ends its upward trend, the stock market and cryptocurrencies may soon recover.
This possibility is particularly evident considering the long-term performance of Bitcoin relative to the S&P 500 index. In fact, the clear signal confirming the start of the bull market in February 2023 seems intact.
At present, it seems that the third quarter adjustment of traditional markets and cryptocurrency development may be coming to an end. If this situation occurs and the US dollar cools, the upward trend of earlier this year may continue in the coming months.
US dollar index correction
The weekly chart of the US dollar index (DXY) shows that the asset is in a very strong upward trend. Since reaching a bottom of 99.5 in July 2023, the US dollar index has formed 11 consecutive green bullish candles and has just closed at 12.
In addition, as early as August, the US dollar broke through the downward resistance line (black). Then, in September, it broke through the important resistance level of 105.5 (red line). Both events are bullish signals confirming an upward trend.
However, such a strong upward trend seems to be gradually weakening. 12 consecutive green candles are a very rare event, and adjustments should occur afterwards. The weekly RSI is slowly entering the overbought zone, and daily indicators have even shown bearish deviations.
In addition, with a few hours until the close, this week's candles may take on the shape of a Twilight Star or a Tombstone Cross Star. Both forms contain long overhead lines, indicating selling pressure. In addition, they often appear at the top of an upward trend, indicating an upcoming correction.
If this situation occurs, DXY's recent support level is in the 104 region, which still coincides with the overall upward trend of 0.382 Fibonacci pullback. On the other hand, the continued upward trend may lead to DXY reaching the next resistance region (red rectangle) within the range of 108 to 109.
... leading to a rebound in the S&P 500 index
The upcoming adjustment of DXY coincides with the potential rebound on the S&P 500 index chart. The index of the 500 largest companies in the United States is usually negatively correlated with the US dollar, reaching a local peak of $4607 in July 2023.
Currently approaching the long-term support/resistance level of $4200 (green line). At the same time, this is the standard correction area for the 0.382Fit retreat.
In addition, the daily RSI is on the edge of the oversold area and has just tested the long-term support line (blue circle), which has been verified multiple times.
If SPX holds onto this critical support level, it may lead to a continuation of the upward trend. Then, these cards will break through the local peak of $4607 and reach a historic high of $4818 (ATH) in January 2022.
Bitcoin lags behind the S&P 500 index
The two trends mentioned above - the ending DXY surge and potential SPX rebound - have a significant impact on the cryptocurrency market and Bitcoin. The most noteworthy thing is that despite the lack of correlation in the short term, the BTC price is still positively correlated with the SPX index.
Famous cryptocurrency market analyst @ thermalroot recently published charts for these two assets on X. It clearly indicates that since 2020, the S&P 500 index (blue) and Bitcoin (orange) seem very close.
However, in the past few months, there has been an interesting phenomenon where the two charts are clearly separated. The S&P 500 index continues to show an upward trend, only approaching its highest level of 4.5%.
On the contrary, Bitcoin did not experience a strong upward trend during this period and is currently consolidating. In addition, it is still about 60% lower than its peak in November 2021.
However, after the transition period lagging behind SPX, the volatility of BTC prices may increase. So, the last quarter of 2023 may bring better returns than traditional markets.
The bullish signal remains unchanged - the beginning of a bull market
The correlation between Bitcoin and the S&P 500 index still has a double bottom. It has been proven that historically, the performance of the largest cryptocurrency relative to the SPX index has always been a good indicator of cryptocurrency bull and bear markets.
Macroeconomists and financial cycle analysts @ HenrikZeberg have published long-term charts for BTC/SPX on X. He demonstrated how the strong upward trend period of SPX overlaps with the BTC bull market.
The difference is still the magnitude of the return (and decrease). Although SPX helped earn approximately 40% of revenue in the first two cycles, BTC generated a 45x return in 2015-2018 and a 6x return in 2019-2021.
The analyst stated that the confirmation during the bull market and "risk appetite" period is the monthly RSI indicator of the BTC/SPX currency pair crossing the signal line (green) upwards.
These are all golden zones. The opposite signal is a downward crossing marked by a red area.
The latest part of the chart shows that the last time there was an upward signal was in February 2023. Bitcoin began to generate more gains than the S&P 500 index, and the RSI of the BTC/SPX currency pair rose.
Despite minor adjustments, the RSI remains above the green line, indicating that the bull market is still intact.
The correction of this indicator and the re touching of the green line may indicate a retest of bullish sentiment. This is still consistent with the potential rebound on the SPX chart and the end of the upward trend in the US dollar.
If these signals are confirmed, the cryptocurrency market and Bitcoin may soon enter a mature bull market stage.
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