Summing Up The Week

Despite talks for additional Federal stimulus hitting a stalemate, improving economic data and hopes for a vaccine against Covid-19 continue to push the markets higher. 

In fact, some analysts believe the S&P 500 may break through to all-time record highs… in the middle of a global pandemic and economic slowdown. Goes to show what a few trillion in printed dollars will do to support the markets, eh?

Let’s take a look at the news that moved the markets (a little) this week…

Market News

Trump’s Attempts to Save Economy Fail as Talks Continue

Treasury Secretary Steven Mnuchin told reporters the White house is open to resuming coronavirus aid talks with Democrats and putting more relief money on the table to reach a compromise, reported CNBC on Monday.

Mnuchin’s comments followed two presidential executive orders (EOs) made by Trump over the weekend – one to instate a payroll tax holiday and another to provide $400/week in unemployment benefits. Members of Congress from both parties questioned the constitutional viability of the EOs since Congress controls the budget and both EOs would need budgetary support in order to function.

Many viewed the executive orders as too narrow to do anything beneficial even if they were deemed possible. Senate Minority Leader Chuck Schumer (D) referred to them as “unworkable, weak, and far too narrow” during an interview with MSNBC.

The confusion over potential stimulus resulted in weakening price action in the stock markets as, without stimulus, the economic conditions will worsen.

TSA Numbers Show Pandemic High for Travelers

More than 800,000 people passed through U.S. airport checkpoints on Sunday, the highest since mid-March, reported CNBC on Monday referring to a report released by the Transportation Security Administration (TSA).

While increased travel was viewed by some as a sign of economic rebound, other analysts demonstrated concern about the end of summer travel rush. “As such, we remain cautious on the pace of recovery from here as we head into more off-peak leisure travel periods this fall,” wrote Andrew Didora, an analyst for Bank of America (BAC).

The airlines are pushing for additional federal aid to prevent more than 70,000 employees from being fired in October. A proposal providing airlines with aid to preserve jobs through March 2021 has been gaining bipartisan support.

Putin Uses Daughter as Guinea Pig for 1st Vaccine?

Russian President Vladimir Putin announced what Russia claims to be the first vaccine for the coronavirus in the world and said one of his daughters had already taken it, reported CNBC on Tuesday.

Despite concerns to safety effects, Putin assured his citizens of the vaccine’s safety, “Although I know that it works quite effectively, it forms a stable immunity, and, I repeat, as passed all the necessary checks.”

No data has yet been published by the researchers and the long-term effects and safety of this possible vaccine currently remain unclear. Internationally, the World Health Organization (WHO) said it is in “close contact” with Russian health authorities about the “possible pre-qualification process for a Covid-19 candidate vaccine which requires rigorous review,” Reuters reported, citing a WHO spokesman.

In addition to the WHO, White House coronavirus advisor Dr. Anthony Fauci, also remains skeptical, casting doubt on the approaches Russia and China take to testing new pharmaceuticals in development.

Biden Selects Kamala Harris as VP Running Mate

Presumptive Democratic Presidential Nominee Joe Biden has selected Kamala Harris, a senator from California, as his vice presidential running mate, he announced during a press conference on Tuesday.

Harris, 55, is the first Black person ever tapped as the vice presidential nominee of a major party, and also helps Biden keep his ticket within the more moderate wing of the Democratic party as Harris’ political leanings are viewed as similar to his.

Harris viewed by many Washington to be a moderate, pragmatic lawmaker rather than an idealogue, reported CNBC. She has repeatedly teamed with Republican colleagues to draft legislation during her first three years in Senate.

Jobless Claims Below 1M; First Time Since March

The Labor Department reported new jobless claims totaling 963,000 last week, the first time since March the number was below 1 million, reported CNBC. Continuing claims totaled 15.5 million, down more than 600,000 from the week prior.

While not an exceptional indicator of an economic bounceback, many analysts hope this reversal of figures may indicate a reverse in trend as well. The unemployment rate “dropped” to 10.2%, a number still representative of a severe economic recession. 

Retail Sales Rose 1.2% in July vs. 2.3% Expected

Consumers spent less than expected in July – +1.2% vs. +2.3% expected – due to sluggish auto sales, reported CNBC on Friday.

Economists did point to a bright spot: excluding autos, the gain was +1.9% which was ahead of the 1.2% estimate. “Consumer spending has rocketed to record highs [over the past three months],” said Chris Rupkey, chief financial economist at MUFG Union Bank. “There can’t still be a recession in the country if the consumer is spending their hearts out like this.”

While consumer spending may be at record highs, the ongoing stalemate in Federal stimulus could portend bad things for the economy heading forward.

Next Week’s Gameplan

The S&P 500’s trying to break through to record highs, a pile of negative catalysts rest just over the horizon, and trillions of dollars is sitting in cash in investors’ accounts.

With the consensus seeming to be that the market’s definitely going to sell off, what happens if we actually get some good news? The market will rocket higher still!

All that being said, I’m sticking with my gameplan, waiting for individual stock positions to sell off before I buy more, and using market pullbacks to add to my Exchange Traded Funds (ETFs) and 401k rather than investing in individual stocks.

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 tried to sell off on Tuesday, but found support at $11,120.00, the new weekly low. The recent $12,134.29 high set a few weeks ago remains the point of resistance that Bitcoin will need to break through in order to make higher-highs from here.

The Bullish Case

Bulls point to the support found during Tuesday’s selloff as a sign that the bull rally will continue from here, further strengthened by global economic uncertainty and a U.S. Federal government deadlocked on providing additional stimulus. 

The Bearish Case

Bears point to Bitcoin’s inability to break through the $12,134 mark and failure to break 2019’s high near $14,000 as potential indicators the bull rally is failing. If Bitcoin drops through the $11,120.00 weekly low, the next point of support is the Support of Last Resort around $10,600 followed by the monthly low way down at $8,815.01.

Bitcoin Gameplan

Current Allocation: 0.889% (unchanged from last week)
Current Per-Coin Price: $11,161.44 (unchanged from last week)
Current Status: +4.792%

Given Bitcoin’s price consolidation above my per-coin price, the past week involved nothing more than sitting on my hands and observing. From here, it’s simply a matter of waiting for Bitcoin’s next big move, whether that’s bullish or bearish.

Bitcoin Buying Targets

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

0.442% @ $10,788
0.442% @ $10,582
0.663% @ $10,182
0.663% @ $9777
0.884% @ $9317
0.884% @ $8973
0.884% @ $8784
1.326% @ $7956
1.326% @ $7766
1.768% @ $7167

Bitcoin Selling Targets

Right now, the position remains in a holding pattern. If Bitcoin continues its upward trend, I’ll once again eventually use stop-loss limit orders to take profits and close the position, however, that will require a much more substantial increase from here.

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 rallied +343% to $13,868.44.
• From June 2019, Bitcoin dropped -54% to a low of $6430.00 in December 2019.
• From December 2019’s low, Bitcoin rallied +64% to $10,522.51 in February 2020.
  
• In March 2020, Bitcoin dropped -63% to a low of $3858.00, mostly in 24 hours.
• From March 2020, Bitcoin rallied +215% to $12,134.29 in August 2020.
• 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.