Welcome to the the second publication of the Market’s Compass Weekly 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.
This Week’s and 10 Week Trailing Technical Rankings of the 16 Individual Cryptocurrencies*
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”.
*I did not publish last week because of the holiday. Nonetheless all ranking and technical tools have been calibrated and filled in for the week ending April 7th.
As can be seen from the above spread sheet above there has been a across the board improvement in the individual TRs since the SSTTR reached a low on the week ending ending March 10th. Secondarily, the “heat map” quality of the spread sheet reflects that improvement. Six weeks ago there was not a single cryptocurrency with a TR in the “green zone” (a TR in the range of 35 to 50), there were ten TRs that ended that week in the “blue zone” (15.5-34.5) and six TRs ended in the “red zone” (1-15). That said, although the SSTTR reached the 261.5 level at the end of that week it marked a higher low in concert with price (chart to follow later in the Blog) and it has since, as of the end of last week, risen to 576 entering overbought territory. Further discussion of that technical condition follows in the Blog.
On a Wow basis twelve Cryptocurrencies registered improvements in their objective technical ranking with the standout being Solana by rising 22.5 “handles” to 40.5 from 18 the prior week. As can be seen above Solana sported the lowest TR of the Sweet Sixteen on April 7th “begging the question does a rising tide lift all boats” but as can be seen below on the daily chart Solana remains range bound after the parabolic move in January although as can be seen below, but there appears to be a technical change afoot with prices over taking Cloud resistance, MACD turning higher above its signal line into positive territory, with the Fisher Transform tracking higher and a small improvement in relative strength. That last feature is far from impressive and leads me to highlight Ethereum which for two weeks running had the best TR of the Sweet Sixteen (chart and analysis to follow).
Along with the overall positive technicals, a turn in MACD and Fisher Transform. Ethereum continues to be a leading outperformer on a relative basis vs. the CCi30 Index* (bottom panel on the chart below). Further evidence of that will be revealed later in 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 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 tracking the 30 largest cryptocurrencies by market capitalization, excluding stable coins (more details can be found at CCi30.com).
“What’s in Your Wallet?”
A look at the relative strength/weakness of the Crypto Sweet Sixteen versus the CCi30 Index
ChainLink, Tron, Uniswap and Binance have all registered 7-month Relative Strength lows versus the CCi30 Index this month and are below both their shorter and longer term moving averages.
Relative Rotation Graph of the Sweet Sixteen
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 end of last 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 at the end of this Blog.
The 7-day RRG Chart above reveals the three Cryptocurrencies that have underperformed the CCi30 Index the most since the end of last week; Dogecoin, Stellar, and Ripple. What stands out the most is the rate at which it has occurred as witnessed by the length of their tails as they have dropped quickly into the weakening quadrant and with the the distance between the daily plots highlighted by the dots in the tails as the three loose relative momentum and strength. Solana appears to be in a sweet spot in the short term as it tracks higher in the improving quadrant, and is approaching the Leading quadrant.
*Measured Friday to Friday
The Technical Condition Factor changes since the week ending February 3rd
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%.
This past week a 91.07% reading in the DMTCF was registered for the week ending April 14th, or 102 of a possible total of 112 positive points. Seven weeks before the DMTCF reading had fallen to a oversold reading of 3.57% or 4 of 112 positive points. The current reading leaves the DMTCF in the short-term overbought range between 85% and 100%.
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 7 TCFs rose and one was unchanged confirming the move higher in 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 moving average in Red smooths the volatile SSTTR readings and analytically is a better indicator of trend
The CCi30 Index 10-month base building process continues. That price action has been in concert with improving price momentum as witnessed by MACD which has continued to track high above its signal line as the momentum oscillator enters positive territory. I believe that with the March 10th higher low in price and the on going confirmation of the Sweet Sixteen Total Technical Ranking (although it is currently overbought), as its 13-Week Moving Average (red line) which is tracking higher as it has since the turn of the year that the CCi30 Index will easily challenge price resistance at last June/July highs at the 10,000 /11,000 level in the weeks ahead.
The Sweet Sixteen Daily Momentum Oscillator higher high vs. the underlying gives us confidence in that technical thesis.
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…
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