Summing Up The Week

Remember how I said we might be heading into a “Buying Season” at the end of last week’s Week In Review?

Yeah. About that…

When the “Blue Wave” of Democrats being elected to the Senate failed to materialize and Biden appeared to be the front-runner to the presidency, the markets roared to life and rallied almost all week long.

Why?

The stock market loves certainty and hates the government, and nothing prevents the government from making any kind of changes more than a split government where the country has a president from one party and a majority in Congress from the opposing party.

When both sides have to compromise, nothing ever gets done. Bad news for making sweeping change to the country, good news for stocks. The change has been so dramatic this week that we swung from being on the fringe of a Buying Season to completely in the throes of a Selling Season.

Oh, and let’s not ignore the fact that Bitcoin is on the verge of cracking $16,000, its highest level since early 2018 and within a stone’s throw of its all-time high around $20,000.

With that, let’s look at the news that didn’t move the markets this week… 

Market News

U.S. reports record 99K new cases; Worst yet to come

COVID-19 continues to dominate the market movements and the news didn’t slow down over the weekend. On Saturday, the U.S. reported a record 99,321 new Covid-19 cases from Friday, and scientists warn that the U.S. is only at the beginning of the latest surge, reported CNBC.

“We’re at a point where the epidemic is accelerating across the country [and] we’re right at the beginning of the steep part of the epidemic curve,” said Dr. Scott Gottlieb, the former U.S. Food and Drug Administration commissioner, told CNBC Friday evening. “You’ll see cases start to accelerate in the coming weeks; December’s probably going to be the toughest month.”

Over last week, the U.S. reported an average of more than 78,000 new cases every day, the highest seven-day average recorded yet and up nearly 25% from the week prior. None of this was good news for the market’s opening into potentially the most volatile week of the year thanks to the presidential election.

Despite election uncertainty, the market rallied…

U.S. stocks climbed on Wednesday, led by tech shares, even as the results of the presidential contest so far failed to yield a clear winner, reported CNBC.

Market analysts tried to make sense of the move since the markets typically hate uncertainty, preferring to head bearishly lower rather than rally higher as it did following Tuesday’s election.

“I think the big news for the markets right now at least it looks preliminary and there’s not going to be a blue wave, which is generally supportive for the markets,” said Mike Lewis, managing director of U.S. equity cash trading at Barclays. “I think the outlook going forward for the markets is this is going to be more about policy and the Fed than it’s going to be about politics, which is a good thing for markets.”

U.S. daily coronavirus cases top 100K for first time

The number of new daily coronavirus cases recorded in the U.S. topped 100,000 for the first time on Wednesday, reported CNBC on Thursday. The data showed 102,831 new infections, up from 91,530 on Election Day.

More concerning is how hospitalizations are also surging. Eight states across the midwest are reporting record highs in terms of a seven-day average number of current hospitalizations. Officials in Iowa and Missouri, specifically, have warned that hospital bed capacity could soon be overwhelmed.

New jobless claims total 751K for past week…

The Labor Department reported 751,000 new workers filing for unemployment benefits last week compared to the 741K expected by economists, reported CNBC on Thursday.

Continuing claims fell for the sixth straight week from by 538,000 to around 7.3 million, however, part of the reason for the decrease is many are migrating into the Pandemic Emergency Unemployment Assistance program which saw its rolls increase 277,564 to 3.96 million.

With no stimulus to help small businesses – a sector that employs a huge number of Americans – economists remain concerned about a potential wave of unemployment and economy-destroying catalysts looming on the horizon.

Job growth stronger than expected in October

The Labor Department reported that nonfarm payrolls increased by 638,000 and the unemployment rate fell to 6.9% in October, reported CNBC on Friday. Economists had forecasted 530,000 and 7.7%, respectively, so the results were a pleasant surprise to a market that was taking a breather after a positively insane week of rallying.

“The strength of this report is really amazing in the face of rising coronavirus cases,” said Michael Arone, chief investment strategist at State Street Global Advisors. “You would have expected that to show up in the data, particularly in places like leisure and hospitality, where the numbers are incredibly strong.”

Next Week’s Gameplan

While I have made changes to my Trading Plan by raising buy price targets on certain positions to accommodate a potentially stronger stock market in the coming months, we’re in the middle of Selling Season which means I’m eyeing positions where I should reign in the greed by taking profits.

There might be more volatility between now and the end of the year, but as long as the markets are skyrocketing, I’m peeling off profits.

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 is definitely an animal all its own. There are big weeks sometimes, and then, sometimes, there are BIG weeks. This week was HUGE for the bulls, as the crypto rallied to a new 2020 high of $15,977.67, destroying 2019’s high and potentially on track to try for the all-time high made in 2017 near $20,000.

The Bullish Case

Bulls point to Bitcoin’s powerful strength as definitive proof that the fractal pattern seen from 2017 is repeating itself with a potential new all-time high very much within sight. Whether that happens after a few days or even weeks of price consolidation, Bullish analysts believe Bitcoin’s well on its way.

The Bearish Case

Bears must concede that there’s strength in the crypto space not seen since its heady 2017 days, however, Bears will also refer to history, and warn that even when heading to its all-time high, 20% pullbacks were common and even extreme pullbacks of 30-40% were not all that rare.

Bitcoin Gameplan

— Waiting for a trade to form —

Bitcoin’s rocketing rally caught me completely off-guard so it was a week of watching the price fly higher. While I certainly experienced a certain degree of FOMO from not participating, keeping all of the profits from prior trades in Bitcoin gave my overall portfolio quite a pop from Bitcoin’s epic move without me needing to be actively involved in a trade.

While I certainly haven’t seen Bitcoin’s +115.33% Year-to-Date (YTD) gains, my portfolio is up +30.63% YTD, not shabby at all given my incredibly conservative approach to trading in the space.

Right now, I’m eyeing a first buy at 19% under Bitcoin’s current high, then using historical points of resistance and trendlines to build the rest of the trade. 

Bitcoin Buying Targets

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

0.906% @ $12,942
0.906% @ $11,537
0.906% @ $11,029
0.906% @ $10,556
0.906% @ $10,115
1.812% @ $9382
1.812% @ $8876
1.812% @ $8272
1.812% @ $7856
4.802% @ $6806

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 +314% to $15,977.67 in November 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.