Both Sides of My Mouth...

I want to take this moment to put my cards on the table. At least the cards I'm playing in this market. If we recap  the last two month's journey, we went from the constant consternation of wave 4 and corrective action to major bottoms put in, to soon seeing major extensions and my counts being invalidated to the upside. If you've watched me play close enough you'll see that I positioned very low in that corrective wave with 'seed positions' and built them as setups proved themselves. This is how I trade, build a core slowly long term, then add as the short term proves it out. 

But let me speak out of both sides of my mouth. I am both cautious, and bullish. On the bearish side, I see the very mature extensions in Bitcoin as dangerous. I can't go to lunch without folks asking me about it, and how to buy it. And, just yesterday, a staff member that knows nothing about cryptos was asking me about Litecoin. This is dangerous. 

That said, these bullish extensions are signallying sonething bigger. Let's recap: 

XRP is signalling a move past my long term target of $1.30

LTC has blown past all my long term targets. 

STRAT has dodged completion of my triangle and moved into a third wave. 

Verge may be signalling that that big IV we came out of is not a IV at all but a multi-year wave 2 bottom. 

Many other coins may be in Verge's shoes: MCO, OMG, LTC, STEEM, REP are a few I am looking at. More are likely to show. 

So this is great, right? Yes and no. 

I still think we will an important top very soon. However, I think it now may be a top that is less important than I previously looking at. I think we'll get a bear market in the next 2-3 weeks actually. But that bear market may be short, and a smaller degree than expected. For example Verge may give us a wave 2 of a larger three, not the MAJOR wave 2 I expected. Litecoin may give us a wave 4 on the road to over $1000+. Steem may gives us a wave 2 of a larger three. Ditto for MCO and so on. 

Maybe during this time we finally get that big wave 4 in Bitcoin? I hope so. I want more Bitcoin. 

The question is whether this smaller degree correction that I expect will reset sentiment. I think it can. Let's take Verge for instance. If you look at the Verge chart that wave 2 down can be a 90% hit to one's PnL. Yes that's right. It just might be shorter in duration than a bigger count. I think that's enough to scare the living day lights out of any new investor. And, they may never come back. The same is true of all these charts. Cryptos put in big ranges in percentile terms. That means the spaces between key fibs are so huge and kill a PnL in a way you'd never see in an un-leveraged stock portfolio, even in a 2009 style bear market!!!. That's why I love them so much. But it also means you have to be prepared to take heat. And, know when to take profit. 

In the coming weeks, I expect to slowly draw the positions down and I'll be doing so on my own portfolio. However, my plan has changed. I was originally believing I was going to largely exit the crypto market and come back later. Except some kept around for short plays. That is not the case any longer. I'll still hold a core, perhaps down to 30% of my current holdings. And, I'll keep that cash handy for reentry. We'll talk more about strategy in the coming weeks, but I wanted to share what I am thinking now. I need to find time to study the long term charts more closely. What you will see are more 'red counts' coming out on the larger timeframe with parameters for 'confirmation'. That takes a lot of work so will need your patience. 

Ryan Wilday hosts the Cryptocurrency Trading service on ElliottWaveTrader.net.