Summing Up The Week

Unsurprisingly, this week focused entirely on the peaceful transition of power in the U.S. from President Donald Trump to President Joe Biden on Wednesday.

Following Trump’s disgraceful final days in office, many law enforcement agencies feared additional insurrection attempts throughout the week. Fortunately, those fears did not come to pass.

However, with a new president, new catalysts – both positive and negative – are appearing on the horizon for the stock market.

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

Market News

President Joe Biden sworn in as 46th U.S. President

Of course, the biggest news of the week happened Wednesday when President Joseph Robinette Biden, Jr. was inaugurated as the 46th president of the United States, reported CNBC (and every other media outlet).

The markets rallied during the event, a boost cynics might attribute to promised government spending, but a rally I prefer to attribute to Biden’s words of unity and promising to bring together the fractured country while also helping those Americans in need.

“Democracy has prevailed on this hallowed ground where, just a few days ago, violence sought to shake the Capitol’s very foundation,” said Biden in his address. “We come together as one nation, under God, indivisible, to carry out the peaceful transfer of power as we have for more than two centuries.”

Biden is the country’s oldest president and faces a number of crises throughout the U.S. as he and Vice President Kamala Harris take power. VP Harris, at age 56, is the country’s first woman, first Black American, and first South Asian American to become vice president, reported CNBC.

Biden’s agenda includes turning over the misinformation culture, stopping the spread of the pandemic, and healing the economy among other priorities including threats to democracy, systemic racism, economic inequity, health care, immigration, and climate change.

President Donald Trump became the first president since Andrew Johnson in 1869 not to attend his successor’s inauguration, instead leaving the White House for Florida earlier that morning. After giving brief remarks to supporters, Trump lifted off in Air Force One while Biden attended a Catholic mass with Democratic and Republican congressional leaders.

However, Vice President Mike Pence and Senate Majority Leader Mitch McConnell did attend the inauguration along with former Presidents Obama, George Bush, and Bill Clinton.

Biden’s First Days in Office…

President Biden hit the ground running, announcing 10 executive orders and directing agencies to use wartime supplies to require U.S. companies to make N95 masks, swabs, and other equipment to fight the pandemic, reported CNBC on Thursday morning.

Key components of the president’s plan include restoring trust with the American public, accelerating vaccinations, funding state and local governments, safely reopening schools, reopening business & travel, and slowing the spread of the virus.

Biden will also use the Defense Production Act to compel companies to manufacture PPE and other needed supplies. “It’s past time to fix America’s COVID-response supply shortage problems for good,” Biden’s plan says.

Existing home sales in 2020 highest since 2006

On Friday, the National Association of Realtors announced 2020 existing home sales were at the highest level since 2006 with closed sales of existing homes in December increasing 0.7% month-to-month, reported CNBC.

Experts point to the pandemic as the reason for driving home sales as buyers relocated to larger suburban homes with spaces for both work and school. However, the ever-increasing prices has some concerned for first-time homebuyers who typically make up 40% of buyers but only made up 31% of sales in 2020.

While home sales are typically a good sign of a thriving economy, closures throughout the country combined with record unemployment indicate otherwise.

Next Week’s Gameplan

Despite many analysts pointing to the market’s overbought nature as a potential cause for a substantial pullback (at least one adviser believes we’ll see a pullback in excess of –50% by the end of April), I am actually raising my buying price targets.

Why?

With the vaccine continuing to roll out, a Democratic majority in the Federal government virtually ensuring stimulus, and the Fed keeping interest rates at zero, as the stock traders say, “TINA” (There Is No Alternative) to the stock market.

Anyone who wants a return on their money and cannot afford alternative investment ecosystems such as real estate, precious metals, or private business ownership will be pouring funds into the stock market, causing it to continue higher.

For the moment, I believe any substantial selloff presents a buying opportunity. That being said, I’m still approaching my buying strategies conservatively – I’m not loading up (just as I never do) at any specific level of selloff.

However, we’ve passed many of the negative catalysts that gave me pause back in late 2020, so it’s time for a change to a more optimistic trading plan. 

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

That’s more like it…

Bitcoin returned to its wily ways of extreme volatility following its surprising bounce from last week’s bottom as the crypto did not maintain the momentum needed to break its all-time high of $41,986.37, losing support on Thursday to crash once more.

And crash Bitcoin did, dropping -28.40% from its weekly high of $40,127.66, eventually breaking through last week’s key support of $30,100.00, and crashing down to create a new weekly low of $28,732.00. 

The Bullish Case

Bulls point out that Bitcoin’s monthly low of $27,678.00 held, indicating that the cryptocurrency is in price consolidation before it regains momentum to make new all-time highs as more speculators buy in near the $30,000 level.

The Bearish Case

Bears point out how, historically in crypto, the third time is the charm as in – once a support line has been tested three times, it typically breaks dramatically (just like it did Thursday). For those keeping track, the first two tests of the $30k support occurred on January 5 and January 11.

From here, Bears point out that Bitcoin is entering a historical fractal pattern similar to what happened in 2018. In other words, the crypto may heading into another “cold winter,” a phrase crypto enthusiasts use to describe the period in 2018 where Bitcoin crashed from its high near $20,000 to its low near $3000.

Bitcoin Gameplan

Current Allocation: 1.142% (+0.569% since last week)
Current Per-Coin Price: $30,470.75 (-$0.61 since last week)
Current Profit/Loss Status: +5.873% (-13.777% since last week)

If you follow along with any of my stock portfolios, you’ll know that I absolutely hate buying up my cost basis, so, over the course of the past week I performed more Technical Analysis and realized a trend line I was following wasn’t quite right.

After adjusting it, I decided to lower my first buy to add to my position without increasing my per-coin basis. On Thursday afternoon, Bitcoin hit my buy point with my order filling at $30,318.36 giving me a per-coin cost of $30,470.75 after fees. The buy order also increased my allocation by +0.569% from 0.573% to 1.142%. 

Obviously, I’m not convinced this is the end of the selloff. Contrary to what bullish analysts say, if they believed in fractal patterns on the way up, they must believe in fractal patterns on the way down. While I’m hopeful that Bitcoin will head higher since I do hold a small position, I believe Bitcoin is headed lower, potentially to the Support of Last Resort trendline and possibly even lower.

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:

0.522% @ $27,736
0.492% @ $26,166
0.443% @ $23,529
0.382% @ $20,267
0.356% @ $18,902
0.317% @ $16,828
0.290% @ $15,388
0.450% @ $12,978
0.704% @ $11,609
0.443% @ $10,946

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.
• Next, Bitcoin dropped -32% to a low of $28,732.00 later in January 2021.

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.