Summing Up The Week

The markets opened up the week volatile as the Democrats prepared to and eventually impeached President Donald Trump for a second time (the first time in U.S. history for a President to be impeached twice).

Later in the week, the markets looked forward to hearing the details of President-elect Joe Biden’s next stimulus plan amid rumors of armed protests across the U.S. and staggering new jobless claims.

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

Market News

House impeaches Trump a second time

On Monday, the House of Representatives announced plans to introduce an article of impeachment after President Donald Trump incited an insurrection and attack on the U.S. Capitol, reported CNBC.

The House also planned to pass a resolution to call on Vice President Mike Pence and the Cabinet to invoke the 25th Amendment to remove Trump from office before his term ends on January 20.

Pundits believe the House will delay sending the article of impeachment to Senate as it is unlikely that Congress would have enough time to hold a vote before Trump’s term expires. The primary purpose of impeachment would not to be to remove Trump from office, rather to prevent him from ever running for public office in the future as many expect he may try to run for president in 2024.

On Wednesday, Trump became the first president to be impeached twice as a bipartisan majority charged him with inciting the Capitol riot, reported CNBC. The final vote, 232-197, include all Democrats as well as 10 Republicans. Later that day, Trump condemned the Capitol violence a week after the riot, reported CNBC.

FBI warns states of potential for armed protests

On Monday, the FBI released a memo warning law enforcement across the U.S. of possible armed protests at 50 state capitols, reported CNBC.

The memo discussed possible threats by online actors for January 16 through the inaguration of President-elect Joe Biden on January 20, however, it also mentioned that law enforcement agencies should expect violent mass protests or confrontations in every state.

“At this point in time, the FBI Boston Division is not in posession of any intelligence indicating any planned, armed protests at the four state capitals in our responsibility (ME, MA, NH, and RI),” said an FBI spokesperson stationed in Boston. “As always, we are in constant communication with our law enforcement partners and will share any actionable intelligence.”

Fed says unemployment 20%+ for lowest-paid workers

On Wednesday, Fed Governor Lael Brainard said unemployment for the bottom quartile of workers is probably above 20%, reported CNBC.

Brainard went on to point out that this figure underscores the importance of policy help for the economy. “The damage from COVID-19 is concentrated among already challenged groups,” Brainard said in his speech. “The K-shaped recovery remains highly uneven, with certain sectors and groups experiencing substantial hardship.”

Comparatively, the national unemployment rate is currently 6.7%. However, the Black unemployment rates is 9.9%, the Hispanic rate is 9.3%, while the rate for Whites is 6%, further reinforcing the inequities in America currently.

Weekly new jobless claims highest since August

The Labor Department reported 965,000 new weekly jobless claims versus the Dow Jones estimate of 800,000 and the highest since August on Thursday, reported CNBC.

The increase in claims in certain states was correlated to those states with the strictest restrictions on businesses such as Illinois and New York. Those with looser restrictions, such as Florida and Texas, saw gains in their job markets, not losses.

However, despite the dire unemployment figure, the stock market didn’t react to the report – heading ever higher.

Why?

The markets continue to work higher on the promises of new stimulus from the Biden administration and the hopes of a reopening economy. More jobless claims means more stimulus which means more money pouring into the markets.

Powell says no interest rate hikes on horizon

Federal Reserve Chairman Jerome Powell said he sees no interest rate increases as long as inflation stays low, reported CNBC on Thursday.

“When the time comes to raise interest rates, we’ll certainly do that, and that time, by the way, is no time soon,” he said during a Q&A session presented by Princeton University.

While low interest rates should be good news for the markets, there is a contrary effect that might be happening as the markets started to roll over shortly after his comments – too much reassurance. 

During the March selloff, confidence from the Fed stopped the market collapse and caused it to rebound. However, in the past, there’s been a curious trigger to the markets, too – when the Fed reassures too often and too much.

Constant reassurance from the Fed causes some investors and traders to believe (maybe rightly so) that the Fed sees economic constraints the market doesn’t see, causing those in the markets to take profits and keep cash on the sidelines.

One slight hiccup doesn’t a trend make, but it will be interesting to see exactly how much gas (if any) is still left in this historic bull rally.

Biden releases $1.9T stimulus plan, Market rolls over

There’s an adage in the stock market – “buy the rumor, sell the news” and that adage seemed to be executing in full effect on Friday after President-elect Joe Biden released his $1.9 trillion Covid relief plan on Thursday afternoon, reported CNBC.

Biden’s proposal, named the American Rescue Plan, includes additional $1,400 direct payments to Americans (for the as-promised $2,000 checks), increased federal unemployment benefits of $400 weekly, an increase of the federal minimum wage to $15/hr, and billions for state/local governments, K-12 schools, Covid-19 testing, vaccine programs, and more.

The stock market didn’t have a problem with Biden’s plan, it was just that pretty much everyone knew the basics of what would be included. So, when Biden released his plan, traders and investors needed to look through the plan to the next positive news catalyst. Seeing none, some started taking profits on Friday.

Next Week’s Gameplan

Next week’s where the action happens. Everyone is hoping Trump stays true to his word, that we see a peaceful transition of power, and that Biden is inaugurated without incident on Wednesday.

However, with the FBI ramping up information of potential attacks on state and federal capital sites, many Americans remain justifiably nervous, a state of mind that could have an impact on the markets.

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

 As expected…

Bitcoin finally witnessed its first real pullback (historically speaking) since last September this week, dropping -28.31% from its new all-time of $41,986.37 before finding support at its new weekly low of $30,100.00.

Unexpected…

Bitcoin bounced +33.31% before finding resistance at $40,127.66.

Historically, when Bitcoin hits a new all-time high and retreats, the pullbacks continue for more than a day or two and usually hit a loss of -40% at minimum with losses in excess of -80% not being all that rare. Bitcoin not even pulling back in excess of -30% is unusual, to say the least.

Bitcoin started losing momentum on Friday, and is currently headed downward as this week’s Week in Review goes to “print,” currently back down to $36,459.11, so we’ll have to see what the weekend holds.

The Bullish Case

Bulls point to institutional buying as newfound interest in Bitcoin, claiming that we won’t see the typical historic pullbacks following a new all-time high. Bulls believe that the new weekly low of $30,100.00 will hold as new buyers will use the price as a buying opportunity to get into the crypto space.

The Bearish Case

Bears warn that this bull rally in Bitcoin is over. After making incredible new all-time highs, Bears believe a pullback in similar fashion to the epic run is in order, with some more bearish analysts predicting a test of the March 2020 lows of $3858.00.

Bitcoin Gameplan

**New Position**

Current Allocation: 0.573% (New since last week)
Current Per-Coin Price: $30,471.36 (New since last week)
Current Profit/Loss Status: +19.650% (New since last week)

After reviewing technical analysis on Bitcoin’s current trading patterns and building some new trend lines to track the crypto’s recent run to its all-time high, I decided to raise my initial buying target which filled at $30,319.76 ($30,471.36 after Coinbase trading fees) during Bitcoin’s plummet early Monday morning.

I intentionally bought a small allocation as I continue to believe Bitcoin will pull back 40% or more before finding real support as it has done historically following parabolic bull moves like this recent run to its new all-time high.

However, that being said, Bitcoin’s bounce has made me decide to double up at a trend line forming slightly above my current per-coin price. While this initial buy will increase my per-coin price, I’d rather pick up a small amount more in case the Bulls are correct and Bitcoin will no longer see epic pullbacks (Just to be clear – I side with the Bears on this one and believe history doesn’t repeat itself but it sure does rhyme).

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:

0.574% @ $31,011
0.545% @ $29,416
0.501% @ $27,060
0.467% @ $25,188
0.389% @ $21,006
0.361% @ $19,465
0.311% @ $16,816
0.282% @ $15,207
0.730% @ $11,647
1.049% @ $10,270

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 crashed -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.
• Then, Bitcoin rallied +988% to a new all-time high of $41,986.37 in January 2021.
• Later in January 2021, Bitcoin dropped -28% to $30,100 before bouncing.

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.