Welcome to this week’s publication of the Market’s Compass Crypto Sweet Sixteen Study #246. 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.
After falling for four weeks in a row, down 60.9% from 457.5 on May 8th to 179 two weeks ago (which marked the lowest level since March 27th reading of 158), the Sweet Sixteen Total Technical Ranking rebounded +18.16% last week to 211.5.
Last week twelve of the Sweet Sixteen TRs gained ground, one was unchanged, and three TRs fell. None of the Crypto Currency TRs ended the week in the “green zone” (TRs between 35 and 50), five ended the week in the “blue zone” (TRs between 15.5 and 34.5), and eleven were in the “red zone” (TRs between 0 and 15). The previous week when there was only one TR in the “green zone”, one was in the “blue zone” and fourteen were in “red zone”. The average TR gain on the week was +2.03 vs. the previous week’s average TR loss of 4.13.
*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 consideration.
Although Tron’s (TRX) 13-Week SMA of its Technical Ranking trend higher has begun to slow it nonetheless continues to far outpace the rest of the Sweet Sixteen TR SMAs. Last week Cosmos’s (ATOM), Dogecoin’s (DOGE), and Stellar’s (XLM) 13-Week SMAs edged higher while the balance of the 13-Week SMAs have remained static or drifted lower.
The 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.
After briefly entering the Lagging Quadrant Cosmos (ATOM) hooked higher and mounted a recovery through the Weakening Quadrant, ending late last week back in the Leading Quadrant exhibiting strong Relative Strength Momentum. Polygon (POL) rolled over early last week after rising into the Leading Quadrant two weeks ago and has now fallen into the Weakening Quadrant. Although Cardano’s (ADA) Relative Strength Momentum in the Lagging Quadrant has begun to slow and appears to be turning, it nevertheless sports the lowest Relative Strength Ratio of the Sweet Sixteen vs. the benchmark CCi30 Index last Friday at 88.05 (see the Tabulation Table below). Uniswap (UNI) rose sharply last week in the Lagging Quadrant and entered the Improving Quadrant.
I have left Stellar (XLM), which is literally “off the chart”, off the RRG chart. As can be seen on the Tabulation Table it still far outpaces the other Crypto Currencies on a Relative Strength basis vs. the CCi30 Index with a 122.36 RS Ratio That said, it has declined from the historic high of 131.56 the previous week.
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.
*Friday June 5th to Friday June 12th
Over the past seven days ten of the Sweet Sixteen gained absolute ground with six of the cryptos trading lower vs. the previous week when all sixteen cryptos I track in these pages traded sharply lower with all but one marking double-digit absolute price losses. Last week the average absolute percentage gain was +3.21% vs. the previous week when the average absolute loss was -18.73%. Both weekly average losses and gains exclude the two Indexes.
The Average YTD Absolute % Price Change of The Sweet Sixteen at the end of last week was -22.14%. A vast improvement from the end of the week before when the Average YTD % Price Change was -33.56%.
The 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 38.39% or 43 out of a possible 112 after it fell to a deeply oversold reading of 4.46% or 5 out of a possible 112 two weeks ago.
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 three of the TCFs registered decreases, three logged increases, and two were unchanged.
The “TSSTCF” Oscillator tallies the eight objective Technical Condition Factors into one overbought / oversold indicator that ranges between 0 and 8.
Two weeks ago, I added a new short-term Schiff Pitchfork (light green P1 through P3), but I did not extend it backwards to avoid “overforking” the chart. Nonetheless, at the end of the week the Median Line (green dotted line) did offer a measure of support again as did the February 6th price pivot low at 9,295.00 but it would be a stretch to declare last week’s rally as a “game changer” as it failed to retake the ground above broken price support at the 10,200 level. The 8-Week Stochastic Momentum Index continues to track lower below its signal line. Although MACD has avoided a violation of its signal line, it has started to roll over and remains in negative territory. The Total Sweet Sixteen Technical Condition Factor or “TSSTCF”rebounded slightly last week and although it signals an oversold condition the shorter term 5-Week Moving Average (red line) continues to track lower and is teetering on support at the again falling 21-Week moving average (blue line) and with it the TSSTCF is in danger of falling to a lower low.
Last week’s sideways price recovery on the Daily price chart looks to me more like a Elliott Wave 4th wave rebound prior to a 5th Wave final downdraft than a sustainable bottom. That said, the 8-Day Stochastic Momentum Index has exited oversold territory and than my Sweet Sixteen Daily Momentum / Breadth Oscillator retaken the ground above the 5-Day SMA (red line) and the 45-Day EMA (blue line). Only if key first resistance at the 10,210.00 can be overtaken will my technical thesis that the lows in the CCi30 Index are not “IN” will be brought into question. As I wrote last week, “I expect a short-term oversold rally but there is nothing to suggest 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.
