Welcome to this week’s publication of the Market’s Compass Crypto Sweet Sixteen Study #231. 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. As always, paid subscribers will receive this week’s unabridged Market’s Compass Crypto Sweet Sixteen Study sent to their registered email Sundays. 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.
Last week the SSTTR fell -7.89% to 198.5 from 215.5, which was a 38.59% rise from the previous week’s reading. Before last week’s slight drop, the SSTTR had risen three weeks in a row after a reading of 84.5 five weeks ago, which was the lowest oversold reading in 3 1/2 years.
Last week eight TRs rose, three were unchanged and five fell. The week before, fourteen TRs rose, one was unchanged and one fell. Last week the average Sweet Sixteen TR loss was -1.06, reversing a portion of the previous week’s average TR gain of +3.75. At the end of last week there were eleven TRs in the “red zone” (TRs between 0 and 15) and five were in the “blue zone” (TRs between 15.5 and 34.5) three of which rose out of the “red zone”. For the twelfth week in a row there have been zero TRs in the “green zone” (TRs between 35 and 50).
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.
As quickly as Cosmos (ATOM) had risen into the Leading Quadrant three weeks ago it fell into Weaking Quadrant with accelerating downside Relative Strength Momentum into the end of last week (note the distance between the daily “nodes”. Polygon (POL) rolled over in the Leading Quadrant also losing Relative Strength Momentum last week but nonetheless it had the best Relative Strength Ratio vs. the CCi30 Index (see the Tabulation Table below). Polkadot (DOT) had been rising quietly in the Improving Quadrant two weeks ago, until it “rocketed” into the Leading Quadrant displaying strong Relative Strength Momentum. Solana (SOL) rose into the Improving Quadrant and out of the Lagging Quadrant with a good measure of Relative Strength Momentum, but that momentum has stalled.
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 two preceding weeks. If there has been an improvement in either the Relative Strength Ratio or the Relative Strength Momentum reading since 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 February 20th to Friday February 27th
Last week three of the Sweet Sixteen marked absolute gains and thirteen lost absolute ground. The previous week, the opposite occurred with thirteen of the Crypto Currencies we track in the Study gaining ground on an absolute basis and three losing absolute ground. After leading the “pack” higher by rising +11.16% two weeks ago Cosmos (ATOM) fell -21.51% last week. Last week the average absolute percentage loss was -1.63% vs. the week before when the average absolute gain was +1.78%. Both weekly average moves exclude the two Indexes.
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 slightly last week to 83.93% or 94 out of a possible 112. That was the third week in a row that DMTCF rose from 0 out of a possible 112 five weeks ago. That “zero” reading was the first time that the Daily Momentum Factor ever reached that extreme of an oversold condition since I began tracking the Technical Condition Factors in September 2022.
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. Last week only one of the TCFs moved higher, and seven TCFs fell.
*The “TSSTCF” Oscillator tallies the eight objective Technical Condition Factors into one overbought / oversold indicator that ranges between 0 and 8.
The only slightly positive technical feature that speaks to the price action of the CCi30 Index is that on a weekly closing basis price support afforded by the January 2024 and August 2024 intra-week lows at 11,200.00 has held. Other than that, the 8-Week Stochastic Momentum Index continues to track lower under its signal line and the Total Sweet Sixteen Technical Condition Factor Oscillator remains mired under the 21-Week Moving Average in oversold territory. Repeating my opinion from last week, “I would need to see it climb back above the longer-term Moving Average in a definitive way and overtake the January highs in the oscillator in concert with prices rallying above first price resistance at the 12,380 to declare that the index is out of the woods”.
The Daily Chart of CCi30 Index further demonstrates the tight sideways trading range that the index has been in for the better part of three weeks since it rose from the 9,305.38 level. The Kijun Plot (green line) continues to cap any rally attempts since the middle of January. MACD continues to track higher above its signal line but remains in negative territory and the shorter-term Stochastic Momentum Index has turned higher from a higher low through its signal line but at the end of last week it appears to be stalling. There is one positive technical feature and that’s the Sweet Sixteen Daily Momentum /Breadth. It pulled back mid-week but held support at the rising 45-Day Exponential Moving Average (blue). My technical opinion remains unchanged, “only a rally back above the Kijun Plot and price resistance at 12,180.00 would allow me to say that price action over the past two weeks is consolidation and not distribution”.
*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 an in-depth comprehensive lesson on Pitchforks is available on my website…
Charts are courtesy of Optuma whose charting software allows the Technical Rankings to be calculated and back tested.
To receive a 30-day trial of Optuma charting software go to…
Charts are courtesy of Optuma whose charting software allows the Technical Rankings to be calculated and back tested.
To receive a 30-day trial of Optuma charting software go to…
