Back to Basics: Navigating Market Cycles for Clearer Investment Decisions

Whenever a market starts to play tricks on you always go back to square one. Start with the simplest analysis and build out from there.

The first step when addressing any market is figuring out the structure. Are we in a structural bull market or a structural bear market? It’s a pretty simple way to look at the market but it can save you a lot of money.

If the markets are making higher highs and higher lows, you are in a bull market. If the market is making lower highs and lower lows you are in a bear market. It’s really that simple. From there you can determine the shorter swing moves to capitalize on but that generally tells you if you should be long or short.

There seems to be a lot of confusion still on where we are at in the cycle whether it’s stocks or cryptos.

Cryptos have been in a 90 plus day consolidation period which has a lot of people second guessing this bull market. Stocks on the other hand are even more surprising given that they are in a strong uptrend making record highs last week yet the market is still in a state of fear.

There is a strong disconnect right now with the way people perceive things and the way that they actually are. The reality is that the market is in a very strong bull trend. However, people don’t quite feel it because of the effects that inflation has had on household’s bottom line.

Just last week the market hit all time highs yet consumer sentiment on the economy came in at its lowest level since December 2022. In short there is a large disconnect between the what the markets are telling us and what the everyday person will tell us.

And although the everyday citizen may still be feeling the effects of high inflation we ultimately have to respect what the markets are telling us and that is that we are still in the early stages of a huge bull market.

Below is a weekly chart of the S&P500

There isn’t much to analyze about this chart. It’s a clearly strong bull market that just made record highs last week. This week the most important economic data coming out will be some employment numbers towards the end of the week.

Nothing stands out here to me as a red flag. We have covered the seasonality and the cycles of this chart in the previous weeks (hint: they are bullish). We also don’t have any important dates this week. The next date to watch will be the 22nd of June which is a natural date being the start of summer.

That may be another buying opportunity if the market makes a small correction here.

As for cryptos lets start with ETH

First, I marked all the previous natural dates here in vertical red lines including the 22nd. As you can see it seems like they like to mark lows or come close to lows.

Now, we said last week had the potential to be the setup of the summer and it certainly tested our patience but it’s starting to look like that was the right call. Above you can the signal reversal candle that came in on Friday right at the 50% box. Additionally, we just had a 3 day reversal on top of that. So evidence is certainly mounting that we saw a low one day after our time factor.

Now, same chart but zooming out a bit.

As you can tell by the candle today, although we are likely at a low this may take a few days of patience here. I think the chances of making slight new highs (at the very least) this summer are good. However, the scenario of summer chop is still very much in play I just happen to believe it will play out at higher levels if that is the case. Something like the blue line maybe.

And if we look at BTC is not in as strong a position here.

As you can see we got neither a reversal signal candle or a 3 day green reversal on BTC.

So I think this setup will ultimately resolve to more upside for BTC and ETH however, it’s going to take some patience here. The natural date of the 22nd doesn’t come until Saturday so watch out for a slower week this week that kind of grinds. We may finally get the extended summer rally to start in the final week of this month or early July but conditions are starting to look more favorable after such bad sentiment.