2100NEWS Crypto Market Breadth Survey
Written by Branko on August 15, 2019
MORE HEAVY Digital Assets SELLING…Digital Assets are under heavy selling pressure again. The percent of DA above their 50-days EMA is signaling a short-term oversold condition. PF charts and a breadth statistic based on Net Advancing Volume are showing market decoupling. NWST1100 bearing down on its Bollinger and last month’s low which will be an important test.
Analysis of Market Direction… acumen knowing when to “hold ’em when to fold up, when to walk away and when to run. Timing is Everything!
Breadth indicators are powerful technical analysis tools that gauge the direction of the market and help determine if it’s bullish, bearish or neutral. They offer a different perspective on the markets that can’t be seen through other indicators by analyzing the degree of participation in an advance or a decline to see whether or not an uptrend or downtrend is broad-based and therefore likely to continue. The 2100NEWS DA Factor Indexes were developed to show that different groups of Digital Assets behave differently in certain market conditions. Crypto Intermarket analysis is a branch of technical analysis that examines the correlations between four major factors: Coins, Tokens, Ehtereum based, and not Ethereum based Tokens. Chartists can use these relationships to identify the stage of the business cycle and improve their forecasting abilities. We use a combination of several methods and look for confluence and increase their odds.
The percentage of DA trading above 50 days EMA
The percentage of digital assets trading above a specific moving average is a breadth indicator that measures internal strength or weakness in the underlying index. The 50-day moving average is used for the short-medium term timeframe. The percent of DA above their 50-days EMA is best suited for overbought and oversold levels. Because of its volatility, this indicator will move to overbought and oversold levels more often than the indicators based on longer moving averages. In general, readings above 70% are deemed overbought and readings below 30% are deemed oversold.
The chart below compares the percentage of DA trading above 50 days EMA for:
- 100 Large-caps members of NWSL100 (top box)
- 1100 members of NWST1100
- 100 Ethereum Tokens members of NWSET100
- 100 Coins members of NWSCo100 (bottom box)
over the last 10 months. All four A50R lines have dipped below 30 signaling a short-term oversold condition.
Looking at the breadth charts ADVP is a breadth statistic based on Net Advancing Volume, which is the volume of advancing digital assets less the volume of declining. Because it is based on volume, the AD Volume Line measures the buying and selling pressure behind an advance or a decline. The volume behind advancing Digital Assets represents buying pressure, while the volume behind declining Digital Assets represents selling pressure. An AD Volume Line that rises and records new highs along with the underlying index shows strong buying pressure. This is bullish. An AD Volume Line that fails to keep up with the underlying index and fails to confirm new highs reflects weakness in buying pressure. Market strength is undermined when buying pressure fails to confirm an advance.
The chart above shows AD Volume Line of the Total Index (NWST1100), the most important member of the index is Bitcoin (weight 69.3%). Looking at the chart below we can see AD Volume Line of Large-caps represented by Large Cap Index (NWSL100). The market is considered weak when the AD Volume Line moves to new lows along with the underlying index. This shows strong selling pressure. A bullish divergence forms when the AD Volume Line fails to record a lower low along with the index. This means selling pressure is waning and the decline may be nearing an end.
The chart below includes two breadth indicators that work together. The area plots the McClellan Summation Index. That’s a long term measure of market breadth. [See explanation of both indicators below] The Summation Index is positive when it’s above the zero line. Drops below that zero line are negative. Crossings above the zero line are positive signals. That happened at the start of this year. The line has been dropping over the past three months. This is where the McClellan Oscillator comes into play. The histogram is the McClellan Oscillator. That’s a short-term measure of market breadth. The two lines work together. Oscillator moves below zero cause the Summation Index to drop. The Oscillator has spent most of the last six weeks below zero which caused the Summation Index to weaken. Oscillator moves above zero turn the Summation Index higher. The upturn in the McClellan Oscillator is boosting its Summation Index, and signals that the 2019 market uptrend remains intact.
FOOTNOTE… The McClellan Oscillator is based on net advances of daily stock gainers minus daily losers. It’s derived by subtracting a 39-day EMA of net advances from its 19-day EMA. It’s a short-term momentum indicator of market breadth. The McClellan Summation Index is a running cumulative total of the Oscillator. And is a longer-term measure of NWST1100 breadth. Both indicators were developed by Sherman and Marian McClellan.
- 2100NEWS Digital Assets Total Index (NWST1100)
- 2100NEWS Digital Assets 100 Large Cap Index (NWSL100)
Bitcoin chart is starting to look vulnerable. Large-cap Digital Assets represented by NWSL100 have been lagging behind Bitcoin for four months. A number of reasons have been given for their weaker performance.
Major DA indexes are falling sharply and suffering big losses. The chart shows a steep selloff, the NWST1100 bearing down on its Bollinger and last month’s low which will be an important test. If the index will survive this week’s selling and remaining above chart support at prior lows, A more likely course for the next couple of weeks may be a period of “backing and filling” between recent highs and lows. The brown PPO histogram bars falling below zero, which has also turned the PPO lines negative. That loss of upside momentum is coming at a bad time.