Summing Up The Week

A depressing presidential debate, increasing concerns of a resurgence in COVID globally, the potential of a second round of government stimulus, and a U.S. President diagnosed with coronavirus resulted in quite a complicated week.

Let’s take a look at the news that moved the markets…

Market News

COVID concerns: <10% with antibodies, 40K new daily cases

A large national study said fewer than 1 in 10 Americans showed signs of a prior coronavirus infection as of late July, reported CNBC on Saturday.

The study shows that the country has a long way to go to achieve herd immunity – the point when enough of the population have antibodies to resist COVID-19 and essentially eradicate the illness as a threat.

On Monday, Dr. Anthony Fauci said the United States is “not in a good place” as the number of newly-reported coronavirus cases continues to swell beyond 40,000 people every day, reported CNBC.

1st Biden-Trump debate disappoints dems and reps

The first presidential debate Tuesday night between Joe Biden and Donald Trump disappointed both democrats and republicans, reported CNBC on Wednesday.

“I have never had a session blow up where the participants were disappointed on both sides, where everyone was embarrassed and everyone was upset about what had happened,” said Republican pollster Frank Luntz on CNBC’s Squawk Box on Wednesday. “They felt like the candidates behaved as though they didn’t deserve to be president – it actually makes [my participants] less likely to vote for any candidate.”

Among a myriad of shocking and disappointing moments from both men, at points Trump called on right-wing extremist groups to “stand by” and Biden snapped “Why don’t you shut up, man” at Trump. Trump even argued with the conservative Fox News moderator Chris Wallace, “I guess I’m debating you, not him” as Wallace tried to get the debate on track.

Luntz said his focus group participants felt Trump was the “aggressor” in the debate and the results made him recalibrate some expectations about voter participation in the election. “I would have said to you ‘we’re going to have the biggest turnout ever,’ [but] what happened last night absolutely encouraged people not to vote.”

Possible 2nd stimulus motivated markets

Markets popped on Wednesday when Treasury Secretary Mnuchin said he is “hopeful” about striking a coronavirus stimulus deal with House Speak Nancy Pelosi, reported CNBC.

Mnuchin told CNBC he planned to talk to Pelosi on Wednesday to make a counter proposal to the $2.2 trillion relief bill Democrats put forward this week. He also said the sides had found common ground in several areas including Paycheck Protection Program small business loans, direct payments to individuals, and school funding.

The stock markets saw a significant pop on the news, however, the markets sold off heading into Thursday’s close as news broke no agreement had been reached.

Companies added better-than-expected 749K September jobs

Private companies added 749,000 jobs in September vs. the 600,000 expected by Dow Jones economists according to payroll processor ADP, reported CNBC on Wednesday. The sectors seeing the greatest gains included construction, trade transportation & utilities, and hospitality. 

The positive news helped provide fuel to Wednesday morning’s rally.

Jobless claims at 837K vs. 850K expected

First-time jobless claims totaled 837,000 last week versus the 850,000 expected by Dow Jones economists, reported CNBC on Thursday. Continuing claims fell by nearly 1 million to 11.8 million. However, on Friday the Labor Department announced that nonfarm payrolls rose by 661,000 in September, far lower than the expected 800,000, reported CNBC.

While the markets looked at Thursday’s release as a positive story indicating the continuation of the economy’s slow recovery, analysts point out major flaws with how the unemployment number is calculated. Since unemployment benefits have an end date where an unemployed person may still be unemployed but simply no longer receiving benefits, correlating a decreasing continued claim number with an improvement in the economy could be misleading as there are unemployed individuals who are no longer tabulated simply because they aren’t receiving benefits.

Trump and First Lady test positive for COVID-19

President Trump and first lady Melania Trump tested positive for coronavirus on Thursday, reported CNBC. After Trump aide Hope Hicks tested positive following her trip with the President to the first debates against Vice President Joe Biden, the President was tested and found to have the virus.

Markets opened sharply lower on Friday despite reports that Trump’s symptoms were minor. Since the markets hate the unknown, even a mild case of COVID-19 presents a lot of concerns for investors.

Next Week’s Gameplan

With a president testing positive, two more presidential debates, raging coronavirus, continuing protests, and the eventual election, there are many catalysts on the horizon which will likely create volatile conditions in the market. 

While some analysts say we shouldn’t worry as they claim that October is historically a positive month, October certainly wasn’t in 2018 when the S&P 500 dropped nearly -11.5% in the one month alone, and that was only two years ago!

So, we could be in for a very spooky Halloween… maybe a Buying Season is right around the corner? Keep some cash on the sidelines and pick your targets!

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 broke its recent price consolidation bearish on Thursday morning, dropping -4% in 45 minutes before finding support at $10,427.75 and then dropping lower on Friday to $10,363.76.

If this support doesn’t hold, the next point of support is the weekly low currently at $10,135.22 followed by the monthly low $9810-$9820 made in September.

The Bullish Case

Bulls point to the progressively higher support levels as an indication that Bitcoin is maintaining its rally and will proceed higher after the next price consolidation.

The Bearish Case

Bears argue that this week’s drop is an indication of a new monthly downtrend as we’ve just switched to October. Month-over-month weakness would point to September’s low of $9813.00 as the line-in-the-sand for the Bulls with Bears believing its break would send the crypto to the $8800-$9000 level.

Bitcoin Gameplan

Current Allocation: 1.775% (unchanged from last week)
Current Per-Coin Price: $10,608.48 (unchanged from last week)
Current Status: -0.608%

Bitcoin continues to trade in a range between $9,800 and $11,200 so my next move is to add small amounts to my allocation if the crypto decides to retest its lows. If it breaks the low and heads lower, I’ll add ever-increasing quantities at key levels. 

If Bitcoin rallies from here, I’ll take what I have, wait for price consolidation at much higher levels where I’ll use stop-losses to lock in profits, start a new position, rinse, and repeat.

In the meantime, the space is just a lot of sitting on my hands and waiting lately.

Bitcoin Buying Targets

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

0.439% @ $10,188
0.878% @ $9827
0.878% @ $9439
1.316% @ $9010
1.316% @ $8633
1.316% @ $8359
1.316% @ $7875
1.316% @ $7615
1.755% @ $6958
2.878% @ $6470

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.