ChartWatch Markets: Timberrr... Bitcoin's bust dissected, plus Nasdaq blues reflect concerning leading economic indicator

In today's edition of ChartWatch Markets, we'll be covering the technicals for:

• Nasdaq Composite

• Bitcoin vs US Dollar

• Lumber Futures (Front month, back-adjusted) CME

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Nasdaq Composite Index

Analysis

Um, we have a bit of a problem. 🤔

It’s the short term trend ribbon.

It looks like its transitioned to acting as a zone of excess supply. Translation: It appears to be pushing prices back down each time there’s a rally to challenge it.

Now, we’ve got all of two trading sessions evidence of this… so consider we’re talking about a very small sample size here!

But in my experience, when this item is combined with:

• Price has closed below short term trend ribbon

• Short term trend colour is no longer light green (i.e., “up”, so it could be “equilibrium/neutral” amber or “down” light link)

• Price action = Falling peaks and falling troughs

• Candles = predominantly black over the last month

MOTN (More Often Than Not) it’s confirmation that the supply side is in control of at least the short term price of the security in question – in this case, the Comp.

Monday’s candle with its upward pointing shadow, nearly perfectly tickling the short term trend ribbon, along with its close below the balance point / close to the session low – puts at risk the latest demand we have previously pegged at 22436-22563.

It certainly shows it’s under substantial pressure…⚠️

And we know that if it cracks then 22058-22185 is the next critical zone of potential latent demand, then it’s the long term uptrend ribbon – and below that it’s “this bull market is over” sort of stuff.

That’s the “analyse” part. The next part is “accept”. The next part after that is “action / manage risk”.

Carl's 3 A's of Good Trading: ANALYSE 🧐 + ACCEPT ✅ + ACTION / MANAGE RISK 🛡️

View

I’m going to remain at the present 2/3RP for my portfolio risk limit (Risk Position i.e., how much I can fill my “Risk Bucket” for US stocks exposure – in this case, 67%). However, I prefer not to add any new risk to current exposure if its already below this limit. A close below 22436-22563 would trigger a reduction to max-fill level of my Risk Bucket to 1/2RP (i.e., 50%).

Key levels

A close below 22436-22563 suggests clear supply-side control of the Comp's short term price. The next critical zone of demand is 22058-185 – below it, the long term uptrend is likely under significant pressure = ⚠️ The short term trend ribbon (presently 23005-23145) is the nearest critical zone of supply – the Comp must close above this zone with a strong demand-side candle to confirm the demand-side remains in control of the Comp's short term price.

Bitcoin vs US Dollar

Analysis

I’m not sure I could have nailed this one any better! (Check previous Bitcoin analyses on 13-Nov and 4-Nov).

But, as we both know, it’s pure coincidence that any call I make turns out to be correct – so I’d be an ignorant fool to take credit for it!

(Nobody can tell the future, because the future is unknown. If you experience a favourable outcome – it’s a fluke – don’t get a massive head about it… Similarly, if you experience an unfavourable outcome – it’s a fluke – don’t take it personally and don’t beat yourself up about it!).

So, I won’t take credit for my "-R" calls on Bitcoin – after which its the price has plunged around US$15,000 – but I will say that the short and long term trends in the Bitcoin price suggest increasing supply-side control.

As far as the 3 tent pegs of my technical model go, i.e., trends, price action and candles:

(Consistent with demand-side control = ✅ vs Consistent with supply-side control = ❌)

1. Short and long term trend ribbons: ⬇️/↔️, short term expanding / getting stronger vs long term contracting / getting weaker, the price is below both ribbons and both ribbons are acting as a zone of dynamic excess supply = ❌❌.

2. Price action: Falling peaks and falling troughs (i.e., demand removal and supply reinforcement) = ❌.

3. Candles: Supply-side control (i.e., black-bodied candles and or upward pointing shadows) = ❌.

4. Volume: No substantially above average volume days on strong demand-side candles potentially indicating supply exhaustion and major buy the dip activity = ❌.

❌❌❌❌❌ = Supply-side control of short and long term Bitcoin price.

How much it will it fall from here?

No idea.

Not a bloody clue.

How should I know – can’t tell the future, remember? 🤷

I have just as little idea as to where the Bitcoin price is going next as I did on 4 & 13-Nov when I made those last two -R calls.

I can say, that if today’s candle (i.e., the last on chart – still live so discount it!) closes below the 91713 point of demand – then 88798 is the next critical point of demand – but below that… there are very few other obvious points of demand until 74441. 🤯

View

No change from my 4 & 13-Nov views = My model requires ZRP or -R.

Key levels

88798-91713 is the closest zone of demand, on a close below here the next point of demand is 74441; it's likely that the short term trend ribbon (presently 101070-104100) and the long term trend ribbon (presently 105895-108760) will act as zones of dynamic supply.

Lumber Futures (Front month, back-adjusted) CME

Analysis

I'm not suggesting you're going to open up a futures trading account and trade this one (or you might!), simply I wish to point out a long-held relationship among both economists and futures traders that "as the US housing market goes – so too does the price of lumber".

The US housing market is the single biggest source of demand for construction-grade lumber, so housing cycles often flow directly into lumber prices. When homebuilding booms, developers and DIY renovators compete for limited supply, pushing prices higher. For example, during the pandemic housing surge, US housing starts jumped over 50% between May 2020 and May 2021 – over the same period, lumber prices rose about 175% (nearly triple the prior record!).

The reverse is also true: when the housing market weakens, lumber demand and prices usually soften. Academic work finds housing starts have a measurable, if moderate, influence on timber and lumber prices (for example, a 21% correlation between US housing starts and pine sawtimber prices according to Timberland Investment Resources.

In short, strong housing = high lumber demand and elevated prices, while weak housing, high rates and poor affordability = reduced demand and lower lumber prices.

The kicker is this: the U.S. housing market plays a major role in the US economy, accounting for roughly 16% of GDP in 2024 – composed of about 12.2% from housing services and about 4.1% from residential investment (Congress.gov).

• It also supports millions of jobs in residential construction, real estate services and the broader housing ecosystem are highly labour-intensive.

• It generates large downstream demand of appliances, furnishings, finance, utilities etc.

• Rising home prices also create a powerful wealth effect – when household real estate values increase, consumers feel richer and typically spend more, further stimulating economic activity – conversely, falling prices can sharply reduce confidence and spending.

The above factors ensure that a US housing downturn quickly ripples through employment and GDP growth, making the residential market a key economic indicator.

Anyways, that's the economics lesson... make of the chart above, and the chart below of US Housing Starts, what you will! ⚠️⚠️⚠️

United States Building Permits Aug 2024-2025 sources: Trading Economics & US Census Bureau