Summing Up The Week

• Bullish: The first is that since year-end bonuses are based on the amount of profits a professional investor makes, these institutions will stay in the markets to make as much profit as possible leading to a rally around the holidays commonly referred to as a “Santa Claus Rally.”

• Moderate: The second possibility is that if the market shows weakness, the professionals will sell their positions to lock in their gains since we’re so close to the end of the year, and this mass selling may cause a huge selloff or at least prevent the market from making higher-highs.

• “Black Swan” Bearish: The third is an event no one sees coming – a “Black Swan event.” These events are also referred to as the “unknown-unknowns,” the event no one predicts or even thought to keep in mind. The entire pandemic this year was a Black Swan event as professional and retail investors alike were caught completely off-guard by the devastating effects of COVID-19.

Market News

Winter Covid will be ‘worse event that this country will face’

On Sunday, Dr. Deborah Birx, the White House coronavirus response coordinator, warned that the escalating coronavirus surge is likely to be the most trying event in U.S. history, reported CNBC. In fact, she made a point to say on NBC’s “Meet the Press” that “this is the worst event that this country will face, not just from a public health side.”

Following the surge from Halloween, health experts believe we’re only beginning to see the cases resulting from Thanksgiving gatherings. “This fall/winter surge is combining everything that we saw in the spring with everything we saw in the summer, plus the fall surge going into a winter surge,” said Dr. Birx.

With more than 2,000 Americans dying on a daily basis and more than 100,000 hospitalized as of last Saturday, concerns have been raised by health experts nationally. The concerns are compounded by the fact the moratorium on evictions and foreclosures ends on December 31, 2020 when potentially tens of thousands of families will have nowhere to stay than crowded homeless shelters.

To the stock market, the concern focuses on the U.S. consumer who will likely spend less both as a result of closing economies and from the lack of additional stimulus.

FDA says Pfizer Covid vaccine meets success criteria

While the markets waited for news on the stimulus front before heading higher, on Tuesday the FDA said data from Pfizer’s coronavirus vaccine trials was “consistent” with recommendations put forth by the agency for an emergency use authorization, reported CNBC.

In addition, the FDA said data appeared to show the vaccine provided protection after the first does, and that two doses of the vaccine (the recommended dosage) were “highly effective” in preventing confirmed cases of Covid-19.

The FDA passed this information on to the health and advisory committee which met Thursday to review the data and recommend an action to the FDA (either agreeing with the emergency use authorization or not). However, it’s worth noting that the FDA doesn’t have to follow the advisory committee’s recommendation (although it usually does).

Jobless claims rise more than expected, 853K vs 730K

On Thursday, the Labor Department reported that weekly jobless claims increased by 853,000 over the past week versus the Dow Jones estimate of 730,000, reported CNBC. This is the highest report figure since September 19 and indicates continuing issues in the jobs market.

Continuing claims increased 230,000 to 5.76 million marking the first time the figure has increased since late August.

While many analysts were surprised by the increase, the colder weather combined with many states restricting and eliminating indoor seating at restaurants likely led to a decrease in hospitality jobs as restaurants terminated unneeded employees.

Without additional stimulus, small businesses throughout the United States will likely need to continue to furlough and lay off employees in an effort to survive until vaccinations start reaching the general public which many health experts don’t expect to happen until the second quarter of 2021.

McConnell rejects bipartisan covid relief plan

Senate Majority Leader Mitch McConnell rejected the bipartisan stimulus package on Thursday, leaving lawmakers with very little time to offer relief to Americans in need before Congress adjourns for the winter recess, reported CNBC.

Lawmakers still have not resolved sticking points such as legal immunity for businesses, extended unemployment benefits, and relief checks for Americans. The House of Representatives also adjourned until next week, leaving little possibility for further discussion before then.

FDA to quickly approve Pfizer’s Covid vaccine

Following a key FDA advisory panel overwhelmingly endorsing Pfizer’s Covid-19 vaccine for emergency use Thursday evening, FDA Commissioner Stephen Hahn tweeted Friday that the agency “is finalizing the necessary documents to ensure that patients and providers have the information they need to make informed decisions,” the final step before the vaccine is fully approved for emergency use, reported CNBC.

Data on Pfizer’s vaccine shows it was around 95% effective in preventing Covid-19 among trial participants. The authorization of the vaccine should come “in the next couple of days,” said Alex Azar, secretary of the Department Health and Human Servicesm, in an interview on ABC’s “Good Morning America” on Friday.

“We’re looking at 20 million Americans being vaccinated just in the next coming weeks, up to 50 million total by the end of January, and we believe we can have 100 million actual vaccinations in arm by the end of Friday,” he continued.

Following the FDA’s comments, President Donald Trump tweeted the FDA “is still a big old slow turtle. Get the dam vaccines out NOW, Dr. Hahn @SteveFDA – stop playing games and start saving lives!!!”

Next Week’s Gameplan

A few people asked me why I haven’t raised my buying price targets for many of my positions. The answer is I’m waiting for the potential negative catalysts to subside before I become overtly bullish on the market.

There are a few key upcoming events that could potentially have extreme negative impacts on the market. First, the end of the moratorium on evictions and foreclosures comes up on December 31. Without extension, this will mean that thousands and thousands of Americans will lose their homes, and it could potentially trigger a cascade of negative effects on the housing market.

Second, if Congress doesn’t pass a second stimulus bill, many small businesses will likely declare bankruptcy which will have ripple effects on unemployment as well as any of the publicly-traded enterprise companies that serve small businesses – think PayPal (PYPL), Square (SQ), Visa (VI) and pretty much any of the consumer banks.

Third, we need to see the vaccines make their way to the general public which is expected to start to happen sometime in late first-quarter/early second-quarter of 2021. 

Once all those factors clear and/or come together, I will become more bullish and raise my buying price targets as these are the biggest potential “known-unknowns” facing the market.

In the meantime, I will patiently wait. I will definitely take advantage of an overwhelming selloff if it happens before the catalysts clear, and, if not, I’ll just follow my trading discipline of lightening up in positions when it’s time to take 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 came under pressure this week, with a selloff starting on Tuesday which didn’t end until Bitcoin found support at $17,639.00 its new weekly low (and another of those round .00 numbers…). That was, until this Friday when Bitcoin broke the weekly low and didn’t find support until $17,580.00 (yet, another .00 number).

If Bitcoin breaks this new low, the next point of support could be the monthly low at $16,200.00 followed by the Support of Last Resort trendline currently near $13,700.

The Bullish Case

When confronted by Bitcoin’s inability to break the $20,000 mark, Bulls continue to argue that “this time is different,” suggesting that major institutions like Square (SQ) and PayPal (PYPL) involved in the space means epic selloffs are a thing of the past.

Instead, Bulls believe that the recent selloff represents a buying opportunity as the cryptocurrency consolidates to build up momentum to make much higher highs. One analyst even suggested Bitcoin could hit $300,000 per coin by the end of 2021.

The Bearish Case

Bears argue that while history doesn’t repeat itself, it certainly rhymes. Bears point to Bitcoin’s inability to hold its new weekly low indicates weakness and that a larger selloff is in store for the cryptocurrency.

Regardless of whether Bitcoin’s new all-time high price target is $50k, $100k, or $300k, Bears believe the crypto will repeat its past swings, selling off anywhere from 20-40% (a price range of $11,950-$15,950) from its new $19,915.14 high.

The most bearish analyst I heard suggested a selloff as deep as 85-90% (a price range of $2,000-$3,000) could be in store.

Bitcoin Gameplan

Current Allocation: 1.087% (Unchanged since last week)
Current Per-Coin Price: $17,528.26 (Unchanged since last week)
Current Profit/Loss Status: +2.941% (-5.885% since last week)

While Bitcoin sold off to just above my per-coin price, I continued to sit on my hands this week. Either the crypto will make higher-highs and I’ll stick with my current allocation, or it will sell off to my price targets where I’ll add more.

Whichever way Bitcoin chooses to head, its moves are almost always extremely volatile so a price swing of 5-10% in either direction doesn’t motivate me to take action; I’ll wait for the big fish.

Bitcoin Buying Targets

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

0.347% @ $17,067
0.347% @ $16,369
0.347% @ $15,578
0.347% @ $14,542
0.347% @ $14,162
0.347% @ $12,963
0.347% @ $12,537
0.503% @ $11,919
0.886% @ $11,286
1.837% @ $10,264

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 crashed nearly -63% to a low of $3858.00, mostly in 24 hours.
• From March 2020, Bitcoin rallied +416% to $19,915.14 in December 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 that 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.