Summing Up The Week

The 4-day trading week (thanks to Labor Day) kicked off with a continuation of last week’s tech selloff on Tuesday before the market bounced back significantly on Wednesday. The market rolled over slightly on Thursday but stabilized Friday, albeit with choppy action.

Despite the seemingly resilient buying of any dip, most market analysts continue to believe that the market has a lot further to fall before it can truly stabilize to make another attempt at new all-time highs. 

Market News

Jobless claims total 884K vs. 850K expected

An additional 884,000 new jobless claims were made in the past week versus the expected 850,000 claims, reported CNBC on Thursday. The negative news was compounded as continuing claims totaled 13.385 million, an increase of 93,000 from the previous week.

While the rate of incoming claims has slowed, economists worry that the lack of additional stimulus from Congress combined with a potential resurgence of the virus in the fall (as well as normal flu season) could slow or reverse the progress.

Senate 2nd stimulus bill fails

The Senate’s second coronavirus stimulus plan failed in a procedural vote on Thursday, reported CNBC.

All Senate Democrats and one Republican voted against the bill with a 52-47 result. The bill included enhanced unemployment insurance at a rate of $300 per week compared to the $600 weekly payment which expired in July and also included new small business assitance along with funds for testing, treatment and vaccines.

Opponents to the bill stated that it did too little as it did not include funding for state and local government, food assistance, and other measures.

Next Week’s Gameplan

I started putting a little money to work in my retirement ETF accounts this week, selecting key ETFs to add to. As always, my 401k makes contributions once weekly regardless of market action.

All of my other portfolios remain untouched except for profit-taking. While we have seen a decent garden-variety pullback, my perspective on the market remains the same as most analysts – the market is substantially overvalued and currently has almost all possible good news events priced in with almost no negative news events accounted for.

September and October are historically volatile times in the market. Presidential Election years are also historically volatile times in the market. There’s no need for me to raise my price targets on my individual positions until we either see a bigger systemic drop in the markets or get through the election in November.

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 spent the entire week in a very tight trading range with $9813.00 holding as the new weekly low and $10,638.34 holding as the weekly high made last Friday after the sell off from the $12,000s.

The Bullish Case

Bulls see the support and price consolidation above $10,000 as signs of good things to come. Some analysts believe they see a pattern repeating from before the 2017 run-up to nearly $20k, and expect that Bitcoin will experience an equivalent exponential increase from the current levels. Bulls also point to the weakening U.S. Dollar (DXY) as offering further credence to the bull rally case.

The Bearish Case

Bears point to the correlation between the cryptocurrency market and the equity markets, suggesting that should the stock indices continue to sell off, Bitcoin and the rest of the cryptocurrency market will see an equivalent selloff with a break of $9813.00 and a test of the $8815.01 monthly low set in late June.

Bitcoin Gameplan

Current Allocation: 1.775% (unchanged from last week)
Current Per-Coin Price: $10,608.48 (unchanged from last week)
Current Status: -3.068%

The gameplan remains relatively unchanged from last week. Given Bitcoin’s current price consolidation and no news in the global space, there’s no change to the thesis.

If Bitcoin breaks bullish, I’ll hold on to my current allocation until the crypto reaches a reasonable gain and then use stop-loss orders to lock in my profits. If Bitcoin breaks bearish, I’ll accumulate more at key levels lower from here. 

Bitcoin Buying Targets

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

0.888% @ $9591
0.888% @ $9146
0.888% @ $8773
1.332% @ $8108
1.332% @ $7747
1.332% @ $7463
1.775% @ $6737
2.397% @ $6257
3.285% @ $5859
5.593% @ $5356

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 +224% to $12,486.61 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 fully 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. If a speculator isn’t confident in the space, the moves will cause mistakes to be made.

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.