Summing Up The Week

September continues to keep up its historical tradition of being a downright volatile month as the markets see continue declines. COVID fears, promises of a new Supreme Court Justice, and increasing unemployment claims drove the markets this week.

Let’s take a look at the news…

Market News

COVID-19 fears cause further drop in the stock market

On Tuesday, the death toll from COVID-19 in the United States crossed over 200,000 Americans, reported CNBC. This grim milestone came just days after areas throughout Europe and the globe reported a resurgence in COVID cases which may result in countries closing once again.

The United States, too, has been seeing a resurgence in COVID-19 cases, prompting many investors to fear the additional damage closures may wreak on the economy combined by Congress’ inability to pass additional stimulus. The markets sold off on Monday and Tuesday as a result of these reports.

On Wednesday, Disney (DIS) announced it would postponed the debut of “Black Widow” to 2021 and pushed back the rest of its Marvel movies, reported CNBC. Disney’s lack of faith in the return of the move industry and, subsequently, a reasonable reopening of the economy caused the movie theater stocks to collapse and added to the crescendo of selling seen this week. 

Trump to announce pick to replace RBG

Following the passing of legendary Supreme Court Justice Ruth Bader Ginsburg (nicknamed “RBG”) last Friday night, President Trump nearly immediately announced he would seek to replace her before the presidential election in November. On Tuesday, Trump said he will announce his nomination this upcoming Saturday, reported CNBC.

 The Supreme Court with its lifetime appointments and sweeping reach, affects virtually everything in the U.S. and the stock market is not immune. Many analysts pointed to this week’s volatility as caused, at least in part, by the Supreme Court vacancy and the unknowns of who might replace RBG.

DOJ reveals Trump legislation reform to tech liability shield

On Wednesday, the Department of Justice unveiled the Trump administration’s legislation to reform tech’s legal liability shield, reported CNBC.

Currently, tech companies are protected from lawsuits for content posted by users of their platforms from a section of law called Section 230. The idea was that platforms like Facebook (FB) or Twitter (TWTR) are so expansive that the companies shouldn’t be held liable for a single user posting illegal content somewhere.

The reform started when Twitter marked several of Trump’s tweets with a fact-check label in May. In a baffling counter-intuitive move, Trump sought to remove the liability shield – seeming to think that removing the shield would allow Trump to post more allegedly false claims on social media.

In reality, a reform of the kind initally described in Wednesday’s reveal indicates that the social media platforms will have fewer protections which will likely lead to the companies cracking down even more, not less, as Trump intended.

As a result, Twitter (TWTR) stock popped more than 7% initially following the release.

Jobless claims rise unexpectedly by 870K

On Thursday, the Labor Department reported that initial jobless claims for the week came in at 870,000 versus the 850,000 expected by economists, reported CNBC.

“Bottom line, we have a mix of people going back to work because they are now greater incentivized to do so without the extra $600 per week and those that are still challenged in finding a job that matches their skills in this unfortunate pandemic landscape,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group.

This news came on the back of Fed Chairman Jerome Powell telling lawmakers on Wednesday, “We’ve come a long way pretty quickly, and that’s great, but there’s a long way to go.”

Next Week’s Gameplan

The selloff is starting to present buying opportunities. I’ve adjusted many of my price targets to accommodate adding to positions which have seen dramatic reductions in price. In addition, I’ve also been putting money to work in my retirement ETF accounts.

If the selloff continues through September and October, the coming weeks could throw us into Buying Season.

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 continued to rally after last week to make a new weekly high of $11,179.90 before losing ground Sunday and Monday. However, Bitcoin did not break through $10k, finding support near $10,200 before bouncing.

The Bullish Case

Bulls once again point to the $10k as the mark in the sand. If Bitcoin can continue to find support, bullish analysts continue to believe that we’re setting up for another substantial bull market similar to the one in 2017.

The Bearish Case

Bears point to the correlation between Bitcoin and the stock market, arguing that if stocks continue to sell off, Bitcoin will have no choice but to follow suit, testing its weekly low of $9813.00 before it heads even lower. 

Bitcoin Gameplan

Current Allocation: 1.775% (unchanged from last week)
Current Per-Coin Price: $10,608.48 (unchanged from last week)
Current Status: +0.867%

While $9,813 – $11,179.90 is quite the range, Bitcoin is definitely consolidating for the moment. From here, it’s a matter of waiting to see what it will do next.

If we break through $10k, I do believe the Bears may be right that the $9813.00 level really won’t hold. As for the upside, I’m holding steady with my allocation unless I see significant profits to lock in.

Bitcoin Buying Targets

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

0.878% @ $9738
0.878% @ $9357
0.878% @ $8927
1.316% @ $8687
1.316% @ $8277
1.316% @ $7922
1.755% @ $7666
1.755% @ $6888
1.966% @ $6488
4.195% @ $6008

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.