Crypto Sweet 16

Objective Technical Ranking System

The Excel spreadsheet below indicates the weekly change in the objective Technical Ranking (“TR”) of each individual Cryptocurrency. The technical ranking system is a quantitative approach that utilizes multiple technical considerations that include but are not limited to trend, momentum, measurements of accumulation/distribution and relative strength. The TR of each individual Cryptocurrency can range from 0 to 50. 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. Secondarily, a very low ranking can signal an oversold condition and very high number can be viewed as 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 and 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 not the entire “end game”.

Relative Rotation Graphs

The Relative Rotation Graphs, 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 over the past two weeks) and against each other over any given time period (in the case below, daily). 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 Crypto Sweet Sixteen Studies.

Technical Condition Factors Calculations

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 below). 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 below 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.

Sweet Sixteen Total Technical Ranking Indicator

The Sweet Sixteen Total Technical Ranking (“SSTTR”) Indicator (bottom panel in the chart below) is a total of all 16 Cryptocurrency Individual Technical 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 may develop, or a 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 in the indicator.