Summing Up The Week

This week was a 4-day trading week thanks to the upcoming holiday tomorrow, but that didn’t mean it was quiet. Quite the opposite, in fact!

New news on the suspected Russian hack, a more contagious Covid-19 strain, and U.K.’s Christmas Shutdown all kicked off before the week even started! Then, Congress finally passed a stimulus bill but Trump declared it wasn’t enough; existing home sales declined; another 800,000 people are newly-unemployed; and more.

The combination of crazy news catalysts caused the markets to whipsaw during intraday trading despite remaining relatively unchanged when looked at as a weekly result.

Read on to learn what moved the markets this shortened week…

Market News

Suspected Russian hack much worse than feared

Over the weekend, more details about the Russian hack indicated that the SolarWinds security hole may “pose a grave risk to the federal government,” reported CNBC.

First, let me get anyone who doesn’t know what I’m talking about up to speed. SolarWinds is a software package that the vast majority of S&P 500 companies along with the federal government and many state governments use to manage their computer networks. This means the software gives users access to virtually every aspect of a computer network.

Unfortunately, there was a weakness in the code which allowed hackers to break in and access companies’ and governments’ entire networks.

Sounds bad, right? It gets worse.

Turns out that the hackers have had access to these organizations’ networks since early this year, potentially as early as March 2020 – that’s nearly nine months where the hackers may have had access to 400 publicly-traded companies as well as a variety of government agencies.

Over the weekend, the scale of the cyberattack became bigger than first anticipated. The Cybersecurity and Infrastructure Agency (CISA) said in a summary that “state, local, tribal, and territorial governments as well as critical infrastructure entities and other private sector organizations” are also at risk.

“The threat actor has demonstrated sophistication and complex tradecraft in these intrusions,” continued the CISA’s statement. “Removing the threat actor from compromised environments will be highly complex and challenging.”

While the CISA hasn’t identified the responsible parties, experts believe it to be from Russia, if not sponsored or supported by the Russian government, itself.

On Saturday, President Donald Trump contradicted his Secretary of State, Mike Pompeo, playing down the risks of the attack as well as Russia’s involvement, reported CNBC.

Via Twitter, Trump said via a pair of tweets, “Russia is the priority chant when anything happens because Lamestream is, for mostly financial reasons, petrified of….. discussing the possibility that it may be China (it may!)”

On Monday, Attorney General William Barr joined those pointing to Russia as the culprit behind the SolarWinds hack, reported CNBC. Barr sided with Pompeo, saying that the hack “certainly appears to be” the work of Russia.

Further complicating the matter, several news outlets reported that White House officials prepared a public statement late last week on the cyberattacks which placed responsibility for the hack entirely on Russia. However, at the last minute, the officials were prohibited from releasing the statement.

U.K. orders stricter London lockdown, cancels Christmas

On Saturday, British Prime Minister Boris Johnson told Londoners that Christmas gatherings can’t go ahead and non-essential shops must close in London and much of southern England, reported CNBC.

Initially, Britain had planned five days of easing of socialization rules that would have allowed up to three households to meet in “Christmas bubbles,” however, those plans have been canceled for any area covered by the new restrictions.

“It is with a very heavy heart that I must tell you we cannot proceed with Christmas as planned,” said Johnson. “I know how much emotion people invest in this time of year, but when the virus changes its method of attack, we must change our method of defense.”

New strain of Covid-19 more contagious, not more deadly

On Sunday, Vivek Murthy, President-elect Joe Biden’s pick for surgeon general, told NBC’s “Meet the Press” that a recently discovered new strain of Covid-19 isn’t necessarily more deadly, but it is more contagious, reported CNBC.

“While it seems to be more easily transmissible, we do not have evidence yet that this is a more deadly virus to an individual who acquires it,” Murthy said. “There’s no reason to believe that the vaccines that have been developed will not be effective against this virus as well.”

Murthy’s interview follows England’s top medical officer who announced that the new variant “can spread more quickly” than prior strains.

Congress finally agrees to $900B stimulus deal

After months of failed negotiations, Congress finally passed a $900 billion stimulus bill on Sunday aimed at helping Americans and small business, reported CNBC.

The relief plan includes direct payments of $600 to most adults, $284 billion for the Paycheck Protection Program small business loans, and another $20 billion for small business grants along with $15 billion to live event venues.

The bill also includes an additional $300 in federal unemployment supplements; aid for hospitals, schools, and colleges; and $25 billion in rental assistance. The bill also extends the federal eviction moratorium, however, no specified time was given.

While many analysts believed the relief bill would be a certainty, the market futures were relatively flat, leaving many to wonder what the week would bring – would the bill’s passage become a “sell the news event?” 

Existing home sales decline for first time in 5 months

The National Association of Realtors stated that existing home sales declined for the first time in 5 months in November as prices rose and supply fell, reported CNBC on Tuesday.

There were 1.28 million homes available for sale at the end of November, down 22% from a year prior and only a 2.3-month supply at the current pace of sales. The NAR pointed out that this is the lowest inventory count since the organization began tracking the metric in 1982.

Analysts believe the lack of sales in November was a combination of low existing inventory as well as the increase of prices with the median price of an existing home sold in November at $310,800, a 14.6% increase compared to just one year earlier in November 2019.

“Circumstances are far from being back to the pre-pandemic normal,” said Lawrence Yun, Chief Economist for NAR. “However, the latest stimulus package and with the vaccine distribution underway, and a very strong demand for homeownership still prevalent, robust growth is forthcoming for 2021.”

Weekly jobless claims not as bad as expected, but still bad…

The Labor Department reported 803,000 first-time unemployment benefit filers, less than the expected 888,000, reported CNBC on Wednesday. While the figure represents a “deceleration” from last week’s 885,000, the U.S. economy is still losing more jobs than are being created.

It’s also worth noting that actual unemployment is much higher than the figures the Labor Department reports once you account for individuals not receiving benefits and individuals not currently looking for work due to COVID fears.

Trumps calls relief bill unsuitable; demands bigger stimulus

On Wednesday night, President Trump tweeted that the $900 billion Covid relief bill passed by Congress was an unsuitable “disgrace,” reported CNBC. Trump went on to ask Congress to amend the bill to increase the direct payments from $600 per individual to $2,000.

Further complicating matters, House Speaker Nancy Pelosi agreed with his call for $2,000 payments, tweeting, “Democrats are ready to bring this to the Floor this week by unanimous consent. Let’s do it!”

A senior Democratic aide told CNBC on Thursday that the House Democrats intended to pass a measure for $2,000 direct payments by unanimous consent on Christmas Eve.

Senate Minority Leader Chuck Schumer (D-N.Y.) urged Trump to sign the current measure but said Democrats would be willing to vote for bigger stimulus checks. “Trump needs to sign the bill to help people and keep the government open and we’re glad to pass more aid Americans need,” he tweeted.

Britain, European Union reach brexit agreement

On Thursday night, Britain and the European Union announced the two had agreed to new Brexit trading arrangements following four years of negotiations, narrowly avoiding a potentially disastrous no-deal scenario, reported CNBC.

The deal will likely mean lower tariffs and costs for exporters than what they would have faced if the U.K. left the E.U. with no agreement. The trade agreement still has to be ratified by the U.K. and E.U. parliaments, but pundits believe it should pass with little to no issue.

In normal markets, this good news catalyst would have resulted in positive movement for the stock market, however, Trump’s threats and erratic actions overpowered any positive effect this news could have. 

Trump’s attack on relief bill could lead to gov’t shutdown

President Trump continued his attacks on the stimulus bill passed by Congress earlier in the week which could result in a government shutdown combined with a lapse in unemployment aid, reported CNBC.

In order to formally send Trump the bill, it must be printed on parchment which takes days as the bill is 5,593 pages which means the bill didn’t arrive at the White House until Thursday. Then, the President has a 10-day window to sign the bill (excluding Wednesdays) which means he could potentially wait until the new session of Congress starts on January 3.

In addition to no aid to Americans in need, Trump’s potential failure to sign the bill and/or veto it could result in a government shutdown as the bill also includes funding the Federal government.

Speaking in a House Republican conference call on Wednesday, House Minority Leader Kevin McCarthy told members that the president had not decided whether to veto the bill.

Despite Trump’s support for bigger direct payments, some Democrats questioned Trump’s motives in pushing for them now after sitting out the legislative talks. “Trump took no interest at all in the negotiations, none – [and] it was his own party that insisted the checks be $600,” tweeted Democrat Senator Chris Murphy from Connecticut on Wednesday. “If you think he cares about the size of the checks, I’ve got a bridge to sell you. All this is is a middle finger to America on his way out the door.”

Next Week’s Gameplan

With the potential negative catalysts resulting from the lack of a stimulus bill, Trump’s erratic behavior, and the more contagious strain of Covid-19, next week’s shortened trading week might still have surprises for us, so stick to trading plans and sit on your hands whenever you don’t know what to do.

And, with that, let me wish everyone a very merry Christmas, a belated happy Hanukkah, a delayed but excellent Kwanzaa, or just a safe and satisfying three-day weekend.

Next week caps off this insane year that has been 2020, so hang on tight because the year still has four more trading days for the market to throw more crazy our way!  

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 truly didn’t rest on its laurels after making its new all-time high, breaking through the $24,000 mark and making new all-time highs on both Saturday and Sunday, locking in $24,300.00 as the new, new all-time high (until it decides to go for the next one, that is…).

The crypto pulled back on Sunday and Monday to make a new weekly low of $21,913.84 before stabilizing and consolidating the last few days. 

The Bullish Case

Bulls believe this rally still has legs as Bitcoin has demonstrated price consolidation more akin to stock equities and bonds rather than past crypto moves. Instead of wildly volatile pullbacks, Bitcoin has actually demonstrated restraint in this bull rally with the biggest pullback around 16-17%, historically very nonvolatile comparatively.

In addition, Bulls point to the crypto’s current price consolidation as acting more like a stock building up strength for a further upside move as opposed to Bitcoin preparing to sell off in any dramatic fashion.

The Bearish Case

Bears believe Bitcoin needs a bigger pullback before it has any momentum to head higher following its failure to break higher than $24,300 with any further strength.

If the new weekly low fails to provide support, the next stop for Bitcoin might be December’s low of $17,580.00, followed by November’s low of $16,200.00, and then the Support of Last Resort trendline currently at the $13,900-$14,200 range.

Bitcoin Gameplan

Current Allocation: 0.937% (Unchanged since last week)
Current Per-Coin Price: $22,701.17 (Unchanged since last week)
Current Profit/Loss Status: +2.128% (+2.698% since last week)

Bitcoin’s price consolidation like a stock certainly is unfamiliar, however, I know better than to think “this time is different.” While I have raised my first buy target to be slightly above Bitcoin’s weekly low in case it tries to test it, I believe any pullback will result in breaking the weekly low.

Accordingly, I’m using very small buys in case Bitcoin performs a traditional pullback of -40% from its new all-time high.

Bitcoin Buying Targets

Using Moving Averages and supporting trend-lines as guides, here’s my plan for my next ten (10) buying quantities and prices:

0.417% @ $22,108
0.403% @ $21,177
0.389% @ $20,417
0.370% @ $19,476
0.351% @ $18,427
0.333% @ $17,508
0.323% @ $16,738
0.675% @ $15,460
0.918% @ $14,638
0.731% @ $14,128

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, Bitcoin rallied +530% to a new all-time high of $24,300.00 in December.

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.