Summing Up The Week

After last week’s brief hiccup to the downside thanks to retail traders squeezing shorts in stocks like GameStop (GME) and AMC Movie Theaters (AMC) combined with a failed attempt to send up the price of silver, the institutions retaliated in force this week, destroying the gains in the short-squeezed names.

In the meantime, the selloff which was likely caused by hedge funds selling their long positions to cover their shorts, reversed course in a big way this week with the S&P 500 closing Thursday at an all-time high.

Thanks to Federal Reserve money printing and rock-bottom interest rates, the markets continue to act as if TINA – There Is No Alternative – to investing in stocks.

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

Market News

Gov’t sees rapid growth recovery, labor to normal by 2022

On Monday, the Congressional Budget Office (GBO) released a report showing the U.S. economy to recover “rapidly” and the labor market returning to full strength quicker than expected thanks to the vaccine rollout and a barrage of legislation enacted in 2020, reported CNBC.

Gross Domestic Product (GDP) is expected to reach its previous high by the middle of 2021 and the labor force is forecasted to return to its pre-pandemic level in 2022. The CBO’s projection does not include any potential new stimulus such as President Joe Biden’s proposed $1.9 trillion plan.

What the CBO sees for the U.S. economy:

• Real GDP to grow 3.7% in 2021
• GDP growth to average 2.6% for the next five years
• Unemployment rate to fall to 5.3% in 2021, and down to 4% between 2024-2025
• Inflation to rise to 2% after 2023
• The Federal Reserve to start hiking interest rates mid-2024
• Upgrades the economic outlook through 2025

Later on Monday, Atlanta Fed President Raphael Bostic told CNBC that he expects a potentially strong economic rebound which could lead to interest rate hikes as soon as mid-2022.

Bostic’s estimate is well ahead of the other Fed Presidents with most not seeing any rate hikes through 2023, at the earliest. “A lot of recent developments have been positive,” he told CNBC. “We should be open to the possibility that things might happen more strongly than they would otherwise.”

Democratic senators look to pass cannabis reform bill

On Monday, three Democratic senators including Majority Leader Chuck Schumer said they will push sweeping legislation to end the federal prohibition on marijuana in 2021, reported CNBC.

Followers of my Investments in Play and Speculation in Play portfolios know I hold positions in GrowGeneration (GRWG), GW Pharmaceuticals (GWPH), and, my biggest position, Canopy Growth Corporation (CGC) for expressly this likelihood.

With state governments and economies strapped for revenue, many states will likely legalize cannabis for recreation use. However, if the Federal Government legalizes marijuana at the national level, there will be a whole new ballgame for cannabis-related stocks.

“The War on Drugs has been a war on people, particularly people of color,” Schumer said in a statement co-issued with Senators Cory Booker of New Jersey and Ron Wyden of Oregon. “Ending the federal marijuana prohibition is necessary to right the wrongs of this failed war and end decades of harm inflicted on communities of color across the country.”

Private companies added 174K jobs in Jan vs. 50K estimate

On Wednesday, ADP’s jobs report showed private companies added 174,000 jobs in January versus the Dow Jones estimate of 50,000, reported CNBC.

The sectors seeing largest gains included health care, social assistance, and professional & business services. “The labor market continues its slow recovery amid COVID-19 headwinds,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute.

While the increasing number of new jobs added is certainly positive, the ever-increasing number of new jobless claims vastly overwhelms the jobs added back in; the economy has a long way to go to recover to pre-pandemic levels.

New jobless claims 779K vs 830K estimate

On Thursday, the Labor Department reported 779,000 new jobless claims since last week versus Dow Jones estimates of 830,000, reported CNBC. The decreasing number of jobless claims is being touted by economists as a good sign, however, this fact somewhat baffles me since the U.S. economy continues to consistently lose significantly more jobs than it adds.

I hope and expect these figures to reverse once more Americans are vaccinated and the hospitality sector – entertainment, hotels, and restaurants – can return to near post-pandemic levels of operation.

Until that point, I view the weekly jobless claims number as a bearish sign until the economy adds more jobs than it continues to lose.

Jobs grow slightly by 49K, Unemployment falls to 6.3%

On Friday, the Labor Department released a report showing nonfarm payrolls growing by an anemic 49,000 and an unemployment rate falling to 6.3%, reported CNBC.

While, on paper, an unemployment rate falling sounds good, even the economists warned this figure is not a good representation with so many Americans choosing not to return to work. “Though we gained jobs in January after a December loss, this is not a ‘we’ve turned-the-corner’ report,” said Robert Frick, corporate economist at Navy Federal Credit Union. “We especially shouldn’t take solace that the unemployment rate fell dramatically given that’s mainly because more Americans dropped out of the labor force.”

For me, the key sign of a turnaround in the economy will be when the new payrolls/jobs is greater than the new jobless claims, however, even that will just be the beginning and not signifying true strength in the economy.

Next Week’s Gameplan

While I’ve aggressively raised my buying price targets to account for garden-variety selloffs like what we saw last week, I still can’t get over how overheated the market feels.

For the time being, I will continue to buy any dip and take profits where appropriate, but I’m being very cautious with my sizing. The froth doesn’t seem to stop in the biggest casino on Earth.

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

Interesting price action…

Bitcoin exhibited decent strength this week, holding support with a new weekly low of $32,200.00. Some attribute its newfound rise to glory to Elon Musk, CEO of Tesla (TSLA), who recently made changes to his Twitter (TWTR) profile suggesting he has interest in the crypto space.

I’ve adjusted the Bitcoin Shall Not Cross line to reflect its strength, flattening the triangle which may offer a longer period of price consolidation before Bitcoin’s next big move.

A new week, a new Crypto-broker

Before we get started, I wanted to let my readers know that I’m switching from Coinbase to Gemini. Like Coinbase, Gemini offers an Active Trader platform similar to Coinbase Pro, all USD funds are SEIC-insured (cryptocurrency is not insured anywhere, of course) and Gemini permits users to withdraw crypto from its network.

However, Gemini’s fees for makers are only 0.25% per transaction in comparison with Coinbase’s whopping 0.50% per transaction (yes, their fees are half of that of Coinbase).

If you’re interested in using my Gemini referral link, we each receive $10 after you trade $100 worth of USD. 

The Bullish Case

Bulls continue to point to the increasing interest in crypto from both popular individuals as well as institutions as the reason for Bitcoin to eventually break through its current all-time high. 

The Bearish Case

Bears point out that Bitcoin remains in a period of price consolidation, and while it did make a new weekly low, the likelihood it will test its prior low of $28,732.00 and even the monthly low of $27,678.000 made in January remains high.

Bearish analysts also point to the fractal pattern made by Bitcoin following its last all-time high near $20k and the subsequent -85% drop as significant reason for concern.

Bitcoin Gameplan

Trade Closed: +20.59% gain in less than a month

Since I had to change brokers and had a decent gain in my trade, I decided to close it out on Thursday, earning +20.586% (after fees, of course).

My buy price was $30,517.80 made in two purchases (one on January 11 and the other on January 21) and a sell price of $37,167.14 on February 4. That’s a 20%+ gain in less than a month. No complaints from me!

Bitcoin Buying Targets

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

1.864% @ $30,572
0.533% @ $28,459
0.458% @ $24,368
0.433% @ $23,108
0.400% @ $21,357
0.362% @ $19,358
0.338% @ $18,068
0.300% @ $15,985
0.274% @ $14,616
0.249% @ $13,259

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.