The stock market year ends this weekend with a year-end rally that’s about to run out of fuel, with moves that are now technically overextended. The bitcoin price, meanwhile, is in a trading range, while numerous BTC pairs continue to pass the baton and make new highs.
The rally within the rally is almost over
It’s a “risk-on” year for the stock market this week, with risky financial assets topping the performance charts. Equity market indices and cryptocurrencies are posting very positive performances in 2023, against the backdrop of expectations of a Central Bank pivot in 2024 without going through the economic recession.
The end-of-year rally (or Christmas rally) is just the last leg of a bull market sequence that began at the end of last October, when inflation barometers confirmed their downward trend, but was not accompanied by stagnation in the US economy. This is what we might call the rally within the rally
This near-perfect macroeconomic “combo” helped justify new all-time highs for star tech and AI stocks, making the Nasdaq the best-performing market segment on Wall Street this year.
Ultimately, this outperformance of US tech stocks on the conventional equity market, combined with the downtrend in market interest rates and the US dollar in the final quarter of 2023, has enabled the bitcoin price to validate a 160% annual rise, and some altcoins to confirm long-term bullish reversals.
But beware of the temptation to believe that this bullish inertia will last forever. This bullish rally between Christmas and the New Year is about to come to an end, with technical indicators pointing to massive overbought conditions. As a result, we are not immune to seeing the S&P 500 index correct by 5% in the first part of January.
Chart showing Japanese candlesticks in weekly data for the S&P500 future contract
As for BTC, don’t forget that Gary Gensler will have the last word. While the entire industry expects the first spot Bitcoin ETF to be approved, the opposite scenario could be destructive. If Gary Gensler’s final word is NO, then BTC will plummet to $30,000. But let’s not talk about doom.
An opportunity on altcoins vs BTC
This week saw the altcoin ball continue to roll with the sharp rebound in the BNB/BTC pair I’ve been telling you about in previous weeks, as well as a technical target reached on BNB/USD at US$330. I believe there are still plenty of opportunities on BTC pairs, particularly on the DeFi side with, for example, AAVE/BTC building a bullish reversal base just like LINK did back in the day.
I’m also keeping a close eye on the potential pump ahead for the LTC/BTC pair, which looks set to re-enter its former low, which would be a bullish signal. A breach of the 50-day moving average would allow us to target the 200-day moving average, representing a potential rebound of 40%.
Chart showing weekly and daily Japanese candlesticks for the LTC/BTC pair
As for the bitcoin price, it’s the resolution of the trading range between $40,000 and $44,000 that will give the signal for the next directional impulse. On that note, see you in 2024! Happy New Year’s Eve to you all
