OVERVIEW
Crypto Is Flying

Yesterday's trading session proved to be a watershed moment for the cryptocurrency market, as both Bitcoin (BTC) and Ethereum (ETH) experienced substantial gains, surging by over +7% each. This surge not only underscored a significant increase in value for these cryptocurrency giants but also reverberated throughout the entire cryptocurrency niche. As Bitcoin and Ethereum spearheaded this bullish rally with their impressive performance, investors across the market witnessed a surge in confidence, driving up the prices of various other cryptocurrencies and related stocks.

Furthermore, we have been closely monitoring the large volatility contraction pattern (VCP) of both BTC and ETH for a while now, and we have finally observed significant range expansion in both assets.

Since the outset of 2024, a noticeable positive correlation has emerged between the movements of the S&P 500 and Bitcoin. During periods of downturn and pullbacks in major indices, Bitcoin and Etherium have mirrored this trend by entering their own distribution phases. Moreover, as we recently observed the S&P 500 and Nasdaq breaking higher, both Bitcoin and Etherium have followed suit, indicating a synchronised upward momentum across these asset classes.

Given this positive correlation, it reinforces the bullish thesis that the equities market remains robust, with several macroeconomic trends pointing towards sustainable growth. With bonds declining and cryptocurrencies ascending, coupled with the equities market responding positively to recent inflation data and broadening breadth in the market-wide rally, this is an opportune time to be bullish..

Nasdaq

The Nasdaq continues its upward trajectory, reaching new highs after breaking out of a short-term consolidation phase and surging to $455. The visible range volume profile (VRVP) indicates strong buying demand at these new highs, with minimal selling pressure observed at these price levels.

The QQQ, mirroring the Nasdaq's performance, shows no signs of slowing down. With minimal overhead resistance, particularly given its all-time highs, it's challenging to predict where the Nasdaq will choose to pause, possibly around psychological levels. The daily and weekly exponential moving averages (EMA) are currently displaying signs of health, with no significant extensions far above levels that would typically indicate a need for a corrective test.

Furthermore, the anticipation surrounding Nvidia's earnings report tomorrow is likely adding fuel to the Nasdaq's momentum. The market's confidence in the QQQ's ascent may be partly attributed to expectations of Nvidia's strong performance, contributing to the index's current bullish sentiment.

S&P Midcap 400

The midcaps are currently forming a bullish pennant, resembling a VCP (Volatility Contraction Pattern), at these recent highs, with price contracting over the last several sessions. Notably, the $550 VRVP volume cluster is providing support, acting as a zone for demand to hold, with buying aggression leading the charge towards a sharper move to the rising 10-EMA.

Given the momentum in the Nasdaq and the prevailing speculative sentiment, we anticipate a breakout above this descending level of resistance in the upcoming sessions. We deem it more likely to witness a sustained move to the upside rather than a degradation of this rally.

Russell 2000

The small caps are indeed showing a similar pattern to the MDY, albeit with greater volatility and unfortunately, a slightly more bearish undertone.

Despite this, the index has maintained its resilience following the breakout rally. However, there has been a noticeable increase in distribution at these recent highs, indicating more aggressive selling and intensifying the battle between supply and demand, thus leading to heightened volatility. It's crucial for the IWM to hold above $207.50; otherwise, there's a likelihood of a move down to the rising daily 10-EMA. Notably, this coincides with a lapse in volume at the price range between $207.50 and $205.

This heightened volatility isn't entirely unexpected. After a corrective period, it's typical for higher market cap stocks to lead, instilling investor confidence. Subsequently, the influx of capital gradually shifts towards more speculative names, as represented by the Russell 2000.

DAILY FOCUS
Holding Strong

The market's strength continues to grow, particularly with recent developments in BTC and ETH. These developments further reinforce our bullish thesis, indicating an increase in speculative activity entering the market. Consequently, we remain confident in maintaining our long exposure in the equities market and will actively seek opportunities to add to our positions.

Currently, we hold exposure in several crypto-related names, among others, and anticipate improved performance from these positions in the coming weeks. Our intention is to hold onto these positions as we believe the rally still has room to develop.

However, should we observe a shift in momentum, we will promptly communicate this to our readers. Such a signal would prompt us to consider reducing our exposure accordingly.

WATCHLIST
We Want These

COIN: Coinbase Global, Inc

• COIN broke higher in yesterday’s session with a significant surge of buying pressure near the end of the day.

• Given Coinbase's close ties to the cryptocurrency market, it's unsurprising that the stock is pushing higher. Moreover, other crypto-related stocks are also seeing gains.

• This breakout was marked by very high volume, surpassing a multi-month descending level of resistance in a characteristic Volatility Contraction Pattern (VCP).

• We currently hold a full position in COIN and will consider increasing our position size, assuming the rally continues.

Note:

• This isn’t the only cryptocurrency related stock that has broken higher. Others include: CLSK and MARA which we also have long exposure in.

ZDGE: Zedge, Inc

• Zedge, Inc. creates digital marketplaces and competitive games for self-expression.

• Recently broke above key daily moving averages and is forming a VCP.

• Considering a long position if it breaks above $3, but due to small market cap (~$40M), position will be small.

• Despite size, sees value in accumulating ZDGE, as small companies can see significant short-term gains.

• Company's revenue exceeds half its market cap, suggesting undervaluation.