Bitcoin and Ethereum took a breather after months of downtrend line resistance. Bitcoin (BTC) prices and the broader market saw a correction on August 15, while the S&P 500 and Dow looked to build on a strong four-week winning streak. The Dow broke above its 200-day moving average for the first time since April 21, according to TradingView and CNBC, a possible sign that the bull market has hit bottom.

While stocks have been very bullish in the face of high inflation and a steady timetable for rate hikes, many traders are worried that the current 32-day uptrend in the Dow and S&P 500 could be a bear market rally.

This week's release of Federal Open Market Committee minutes should provide more context to the Fed's current view of the health of the US economy and could shed light on the size of the next rate hike.

Over the past month, overly bullish cryptocurrency traders on Twitter have also been promoting a narrative that highlights Bitcoin, ether (ETH), and knockoff coins being sold ahead of the FOMC meeting and then rallying later if the exchange rate is set in line with investors' expected numbers.

Somehow, this short-term dynamic has also fed investors' belief that the Fed will "pivot" to a monetary policy of rate hikes and quantitative tightening after "inflation peaking". This can be a lucrative trade for savvy day traders, but it's important to note that inflation is currently at 8.5% and the Fed's target is 2%, which is a long way off.

Ultimately, bitcoin prices remain highly correlated with the S&P 500, so investors would be wise to avoid narrow views consistent with their biases and keep a close eye on the performance of the stock market.

Bitcoin sold off at multi-month trendline resistance

Over the weekend, bitcoin moved strongly above the $24,000 level on a more than month-long downtrend line, along a path that many traders expected would trigger an upward move, and the VPVR gap closed at the $28,000 to $29,000 level.

Trader Cheds said that "BTC really looked like it was going to go last night," but the selling of resistance levels created an "outside bar" where "prior trends were challenged," suggesting, according to Cheds, that "the trend may be stalling and watch for signs of further weakening."

Pseudonymous trader "Big Smokey" seemed to agree that a "strong directional move" could be on the way, citing the tightening of the Bollingband and super guppy indicators, respectively, as bitcoin prices approach a multi-month downtrend line.

In a separate chart, Big Smokey said that if the downtrend line is broken, bitcoin could "rally 26% to $28,000 before more lateral chopper," eventually retesting the $24,000 level.

After reaching similar upper resistance levels, most counterfeits followed Bitcoin's lead and posted single-digit losses, but those that were flashing bottom signals continued to end in what appeared to be a reversal pattern.

Interestingly, on Sunday (Aug 14), popular traders on cryptocurrency Twitter predicted that the sharp rise in meme tokens like SHIB and DOGE was a clear sign that the bull phase had been overextended and was heading for a correction.

Finally, everyone is ready to take some profits, especially at resistance levels, after ETH and BTC rallied 130% and 42.5%, respectively. Open interest in both assets remains near all-time highs, but how to trigger a BTC breakout or crash on a multi-month downtrend line is unclear.

Perhaps a 1% interest rate hike, tighter crypto regulation or an unexpected turnaround in the stock market could send prices back down to annual lows. Alternatively, a successful Ethereum merger could be a positive catalyst that triggers significant trading above Bitcoin's key resistance level.