The Market’s Compass Crypto Sweet Sixteen Study

Welcome to this week’s publication of the Market’s Compass Crypto Sweet Sixteen Study. The Study tracks the technical condition of sixteen of the larger market cap cryptocurrencies. I have compiled the historic quantitative objective technical ranking data and secondary technical indicators including the Sweet Sixteen Total Technical Rankings and Weekly Average Technical Ranking back to October of 2021. Every week the Studies will highlight the technical changes of the 16 cryptocurrencies that I track as well as individual highlights on noteworthy moves in certain cryptocurrencies and Indexes.

The Excel spreadsheet below indicates the weekly change in the objective Technical Ranking (“TR”) of each individual Cryptocurrency. The technical ranking or scoring system is an entirely quantitative approach that utilizes multiple technical considerations that include but are not limited to trend, momentum, measurements of accumulation/distribution and relative strength. If an individual Cryptocurrency’s technical condition improves the Technical Ranking (“TR”) rises, and conversely, if the technical condition continues to deteriorate, the TR falls. The TR of each individual Cryptocurrency can range from 0 to 50. The spreadsheet below also acts as a “heat map” in that, cryptocurrencies with a TR in the range of 1 to 15 are highlighted in red, 15.5 to 34.5 are noted in blue and TRs in the range of 35 to 50 are in green. The primary take-away from this spread sheet should be the trend of the individual TRs, either the continued improvement or deterioration, as well as a change in direction. A sustained trend change needs to unfold in the individual TRs for it to be actionable. Secondarily a very low ranking can signal an oversold condition and conversely a continued very high number can be viewed as an overbought condition but, as we know, over sold conditions can continue at apace and overbought securities that have exhibited extraordinary momentum can easily become more overbought. Thirdly, the weekly TRs are a valuable relative strength/weakness indicator vs. each other, in addition when the Sweet Sixteen Total Technical Ranking (“SSTTR”), that has a range of 0 to 800, is near the bottom of its range and an individual cryptocurrency has a TR that remains elevated it speaks to relative strength. Conversely if the SSTTR is near the top of its recent range and an individual cryptocurrency has a TR that remains mired at low levels it speaks to relative weakness. Lastly I view the objective Technical Rankings as a starting point in my analysis and it is not the entire “end game”.

This Week’s and 10 Week Trailing Technical Rankings of the 16 Individual Cryptocurrencies*

*Rankings are calculated up to the week ending Friday September 1st

The SSTTR fell to 167 from the previous weeks 200 reading. Last week’s reading in the SSTTR was the lowest reading since the week ending June 16th at 157.5.

On a week over week basis six cryptocurrencies registered gains in their Technical Rankings one was unchanged and nine fell. The average Technical Ranking loss was -2.06. Three of the Sweet Sixteen ended the week in the “blue zone” (TRs between 15.5 and 34.5) and thirteen ended the week in the “red zone” (TRs between 1 and 15). The previous week there were four of the Sweet Sixteen in the “blue zone” and twelve were in the “red zone”. Tron (TRX) and Steller (XLM) dropped the most “handles” (-10 and -8 respectively) but both remained in the “blue zone”.

Relative Strength and Weakness in the Sweet Sixteen vs. The CCi30 Index* utilizing a Relative Rotation Graph

*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 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 Relative Rotation Graph, commonly referred to as RRGs were 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 time period (in the case below, daily since the end of the previous week). 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 uses, 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 post scripts and links at the end of this Blog.

In last week’s Crypto Sweet Sixteen Study (#100) I brought attention to TRON (TRX) which was tracking higher in the Leading Quadrant. It has since “rolled over” and is tracking lower and is entering the Weakening Quadrant. Stellar (XLM) also has also rolled over before reaching Leading Quadrant. I am closely watching Litecoin (LTC) and Ripple (XRP). Both are in what I like to refer to as the Improving Quadrant “sweet spot”, but the relative strength momentum is slowing (they are starting to track sideways) and that is causeing me to temper my enthusiasm. Dogecoin (DOGE) is starting to show signs of life as it tracks higher in the Improving Quadrant.

Seven Day Absolute % Price Change*

*Friday August 25th to Friday September 1st

Twelve of the Sweet Sixteen underperformed the CCi30 Index. The average 7-day absolute loss was -3.15%

The Technical Condition Factor changes for the week ending August 18th and trailing ten weeks.

There are eight Technical Condition Factors (“TCFs”) that determine individual TR scores (0-50). Each of these 8, ask objective technical questions (see the spreadsheet posted above). If a technical question is positive an additional point is added to the individual TR. Conversely if the technical question is negative, it receives a “0”. 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 above calculates each factor’s weekly reading as a percent of the possible total. For example, there are 7 considerations (or questions) in the Daily Momentum Technical Condition Factor (“DMTCF”) of the 16 Cryptocurrencies ETFs (or 7 X 16) for a possible range of 0-112 if all 16 had fulfilled the DMTCF criteria the reading would be 112 or 100%. A DMTCF reading at 85% and above suggests a short-term overbought condition is developing and a reading of 15% and below suggests a short-term oversold condition.

Three weeks ago the DMTCF fell to an oversold extreme of 0.00%. I have never seen as deep an oversold condition as that reading (couldn’t get any lower). At the end of last week the DMTCF rose to 37.50% or 42 out of a possible 112. That was a improvement over the prior week’s reading of 27.68%.

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 six TCFs fell and only two TCFs rose exemplifying the current malaise that has beset the broader cryptocurrency market.

The CCi30 Index with This Week’s Sweet Sixteen Total Technical Ranking “SSTTR” Overlaid

The Sweet Sixteen Total Technical Ranking (“SSTTR”) Indicator is a total of all 16 Cryptocurrency rankings and can be looked at as a confirmation/divergence indicator as well as an overbought / oversold indicator. As a confirmation/divergence tool: If the broader market as measured by the CCi30 Index continues to rally without a commensurate move or higher move in the SSTTR the continued rally in the CCi30 Index becomes increasingly in jeopardy. Conversely, if the CCi30 Index continues to print lower lows and there is little change or a building improvement in the SSTTR a positive divergence is registered. This is, in a fashion, is like a traditional A/D Line. As an overbought/oversold indicator: The closer the SSTTR gets to the 800 level (all 16 Cryptocurrencies having a TR of 50) “things can’t get much better technically” and a growing number individual Crypto’s have become “stretched” there is more of a chance of a pullback in the CCi30. On the flip side the closer to an extreme low “things can’t get much worse technically” and a growing number of Crypto’s are “washed out technically” and an oversold rally or measurable low is closer to being in place. The 13-week exponential moving average in Red smooths the volatile SSTTR readings and analytically is a better indicator of trend (I have switched to an exponential moving average from a simple moving average in this weeks Study).

Last Tuesday the CCi30 Index spiked higher in a short squeeze on the Greyscale news. I warned those who follow me on X that they should not let the FOMO devil take control of their emotions and that they should wait to see if there was a follow through to the impulsive move. The rally failed at the underside of the Lower Warning Line (gold dashed line) of the Schiff Modified Pitchfork (gold P1-P3) and over the course of the three days that followed, the index retraced the entire rally (and then some). That price action drove the SSTTR to the lowest level since June 16th. MACD is tracking quietly lower in negative territory under its signal line. The only technical feature that the “base building camp”, of which we are cautiously one, can find solace in is that key support at the 6,580 has not been violated.

The CCi30 Index Weekly Cloud Model with the Average Sweet Sixteen Technical Ranking (ASSTR)

Last Tuesday’s short squeeze rally failed at the Median Line (purple dotted line) of the Schiff Modified Pitchfork (purple P1-P3). In doing so the CCi30 Index failed to hold onto the ground in the Cloud and closed lower on the week. The ASSTR has fallen to an oversold level the has led to at least a counter trend rally but the price action has yet to endorse that.

The Sweet Sixteen Index*

*The Sweet Sixteen Index is comprised of the larger market cap cryptocurrencies that we track in this Blog

Last week my Sweet Sixteen Index fell below the Median Line (gold dotted line) of the Schiff Modified Pitchfork (gold P1-P3) that I first applied to the Daily chart in July. The Index is trying to hook higher but the price move is not endorsed by the first mover oscillator, the Fisher Transform, which has turned lower through its signal line. The Sweet Sixteen Daily Momentum / Breadth did spike higher last week but it has retraced most of that move and is back to just below neutral. I am not compelled to do anything here.

Year to Date Relative Comparison

Charts are courtesy of Optuma whose charting software enables anyone to visualize any data including RRG Charts and our Objective Technical Rankings. Cryptocurrency price data is courtesy of Cryptowatch.

The following links are an introduction and an in depth tutorial on RRG Charts…

https://www.optuma.com/videos/introduction-to-rrg/

https://www.optuma.com/videos/optuma-webinar-2-rrgs/

To receive a 30-day trial of Optuma charting software go to…

www.optuma.com/TMC.

A three part tutorial series on Andrews Pitchfork may be read at my web site…. www.themarketscompass.com