Summing Up The Week

Get Irked is celebrating its 100th Week in Review this week! I mean that’s not really the same market-moving stories as the ongoing record-breaking numbers of new Covid-19 cases; a potential near-term top set on Monday; or the negative economic data released this week we’re all used to, but it’s something, right?

Maybe it’s just me…

On with the news that moved the markets this week:

Market News

Florida Reports More than 15K New Cases – New Record!

Get Irked’s not only the one breaking records this week – Florida shattered its previous record of new COVID-19 coronavirus cases on Sunday when it reported 15,299 confirmed new cases in a single day, the largest surge in infections since the start of the pandemic, bringing Florida’s total number of cases to 269,811, reported CNBC.

The previous high for the state was nearly 4,000 lower and Sunday’s results set a grim new daily record for the nation. Plus, you know it’s getting real when Donald Trump wore a mask for the first time while visiting Walter Reed military hospital on Saturday, reported CNBC.

For Whom the Bell Tolls – Have We Hit a Top?

Incredibly rare trading activity in the NASDAQ on Monday caused many analysts to wonder: have we hit a temporary top in the stock market? Tesla (TSLA), the market darling for the NASDAQ, surged 16% on Monday before reversing midday to lose all of its gains plus close down -3%, reported CNBC.

The NASDAQ index as a whole gained 2% to create a new all-time high before reversing and closing down -2% for the day. Market historians are quick to point out that the only other time in history the NASDAQ has made such a move immediately preceded the dot-com crash in 2000.

There’s an old stock adage: “there’s no bell that rings to let you know you’ve hit a top,” however, if there ever could be such a thing, it certainly felt like Monday’s trading action rang something ominous. Could we be in store for a very bad downside move?

China Attempts to Claim South China Sea, Sanctions

China’s attempts to claim the established international waters in the South China Sea as part of its empire caused the Trump administration to consider imposing sanctions on Tuesday, reported CNBC.

The news of escalating tensions between the U.S. and China led to a whipsaw market when the news first crossed the tape on Monday. Tuesday’s trading seemed calmer, however, the possibility of sanctions didn’t come to light until after the markets had closed for the day.

“There is room for [sanctions] and this is a language China understands, demonstrable and tangible action,” said David Stilwell, the U.S. assistant secretary of State for the Bureau of East Asian and Pacifc Affairs, “Nothing’s off the table.”

Although it seems like a distant memory now, not too long ago, it was China, not COVID-19, that caused the markets to rise and fall. I wonder what it’ll look like now that we’ve got both?

After the market closed Tuesday, President Donald Trump signed a law imposing sanctions on China, reported CNBC.

Moderna Vaccine Sees Promising Results – Market Pops

Despite the threat of an uprising in the Trade War against China, the market completely shrugged off the negative news of sanctions and leapt higher when Moderna (MRNA) reported its coronavirus vaccine had produced neutralizing antibodies in all 45 patients in its early-stage human trials, reported CNBC on Wednesday.

Even with ongoing negative economic indicators, the promise of a vaccine has many analysts believe the world will see a V-shaped economic recovery with jobs and consumer activity returning to normal nearly immediately.

Weekly Jobless Claims come in at 1.3M vs. 1.25M Expected

Jobless claims totaled at least one million new unemployed for the 17th straight week in a row as the U.S. Department of Labor reported 1.3 million new unemployed versus the 1.25 million expected by economists, reported CNBC on Thursday.

The negative news surprise caused the markets to sell off slightly with a sector rotation out of technology into the value sector. In other words, where tech led the current market rally, it now appears tech will lead the market down in selloffs, too. 

Next Week’s Gameplan

While I prefer the optimistic bullish view of a V-shaped recovery, there’s something to be said for not knowing how much of the damage caused by COVID-19 may be permanent.

Will all the lost jobs return once we have a vaccine?

What will happen to the commercial real estate market if companies realize they can keep the majority of their workforce telecommuting and no longer need as much office space?

What about the ongoing credit and debt bubble – consumer, commercial, and governmental – from the huge expenses bridging the gap from the beginning of the COVID closure to the release of a vaccine?

The number of bearish possibilities seem to overwhelm the bullish ones, but as long as the Federal Reserve is backing this market, there’s no fighting the Fed.

All of that is a long way of me saying while I’m not buying the market at these levels, I remain long while taking profits periodically when we reach higher-highs.

This Week in Play

Stay tuned for this week’s episodes of my two portfolios Investments in Play and Speculation in Play coming online later this weekend! 

Crytpo Corner

Bitcoin Price Action

Bitcoin’s ongoing period of seemingly endless price consolidation saw a bit of bearish break early Thursday morning when the cryptocurrency lost the support that had been holding around $9150-9200 and dipped to $9005.00 before bouncing.

The Bullish Case

Bulls continue to point to the inundation of freshly-printed money from the U.S. Federal Reserve and central banks globally as the reason for Bitcoin to head higher from here. The ongoing claim is that Bitcoin is “digital gold” and a store of wealth, despite continuous historical selloffs indicating this is not a viable thesis at this time. As you’ll read below, while I normally don’t take a position on the direction of Bitcoin’s next move, I’m definitely bearish at the moment.

The Bearish Case

Bears believe that the break on Thursday is the beginning of a selloff for Bitcoin. While I typically try to remain agnostic to the next move of Bitcoin, preferring to present both the Bullish and Bearish Cases, I have to say the chart definitely looks ominous and given its pullbacks in the past, a test of at least the Line That Shall Not Be Crossed in the $8300-8400 range (and lower) is a very real possibility.

Bitcoin Gameplan

Current Allocation: 1.515%
Current Per-Coin Price: $9,383.50 (lowered -0.55% since last week)
Current Status: -3.015%

My insomnia continued to kick in this week so I happened to be awake at 2:30 a.m. on Thursday morning when Bitcoin lost support. I decided to throw a tiny bit of money at the problem, buying less than 0.25% of my allocation at $9036.68.

The buy lowered my per-coin cost -0.55% from $9435.72 to $9383.50 and increased my allocation to 1.515% of my entire desired amount. Certainly not much of an effect, but I find tiny buys are enough to keep FOMO at bay should Bitcoin actually create this level at a new floor and head higher from here.

Why would I buy at this level if I’m bearish?

I added because I don’t know Bitcoin’s next move. No one does. That being said, I’m not confident it’s next move is up, so rather than not buy, I prefer to buy in very, very small increments when I’m not confident. In this case, I added 0.217% of my entire target allocation.

Bitcoin Buying Targets

Using Moving Averages and supporting trend-lines as guides, here’s my plan of buying quantities and prices:

0.433% @ $8658
0.649% @ $8327
0.866% @ $8131
1.082% @ $7777
1.298% @ $7289
1.731% @ $6857
2.597% @ $6177
3.030% @ $5747
3.462% @ $5378
5.886% @ $4789

Bitcoin Selling Targets

For the moment,  I have no upside selling targets, instead preferring to use stop-losses to lock in gains when Bitcoin begins price consolidation and then reopening the position at lower levels if the stop-loss is triggered.

Why the differing quantities at each level instead of a flat percentage?
Rather than buying an equal percentage, I change my buying quantity at each stage as a reflection of how likely Bitcoin could bottom and rebound from that stage. Rather than increasing my quantity on the way down, I’m used a fixed amount of money, so I’m basing how much I buy by how likely I think Bitcoin will drop to a certain level. In this case, I don’t think it’s likely Bitcoin will be able to break its $3128 low, so my quantities under that price point are less to account for the chances it will get to them.

No price target is unrealistic in the cryptocurrency space – Bullish or Bearish.
While traditional stock market investors and traders may think the price targets in the cryptocurrency space are outlandish due to the incredible spread (sometimes a drop of near -90% or a gain of up to +1000% or more), Bitcoin has demonstrated that, more than any speculative asset, its price is capable of doing anything.

Here are just a few recent price movements over the past couple of years:

• Bitcoin rose +2,707% from its January 2017 low of $734.64 to make an all-time high of $19,891.99 in December of the same year.
• Then, Bitcoin crashed nearly -85% from its high to a December 2018 low of $3128.89.
• In the first half of 2019, Bitcoin rebounded +343% from $3128.89 to $13,868.44.
• From June 2019, Bitcoin dropped -53.64% to a low of $6430.00 in December 2019.
• From December 2019’s low, Bitcoin rebounded +64% from $6430.00 to $10,522.51.
  
• In March 2020, Bitcoin dropped -63.33% to a low of $3858.00, mostly in 24 hours.
• From March 2020, Bitcoin rebounded +170.30% to $10,428.00 in June.
• Where will Bitcoin go from here? Truly, anything is possible…

What if Bitcoin’s headed to zero?
The only reason I speculate in the cryptocurrency space is I truly believe Bitcoin isn’t headed to zero.

I am prepared for that possibility, however, by knowing I could potentially lose all of the capital I’ve allocated to this speculative investment. Professional advisers recommend speculating with no more than 5% of an investor’s overall assets. Personally, I’ve allocated less than 2% of my assets to speculating in crypto.

I feel that anyone who doesn’t believe in the long-term viability of cryptocurrency would be better served not speculating in the space.

On a good day, this asset class isn’t suitable for those with weak stomachs. On volatile days, the sector can induce nausea in the most iron-willed speculator.

DISCLAIMER: Anyone considering speculating in the crypto sector should only do so with funds they are prepared to lose completely. All interested individuals should consult a professional financial adviser to see if speculation is right for them. No Get Irked contributor is a financial professional of any kind.