Summing Up The Week

Inflation exists and it may not be transitory!

Okay, so that might be news to the readers of this blog, however, the big news this week is now the Federal Reserve Bank admits that it sees inflation, too! The shocking revelations that the Fed has at least half-opened eyes threw the markets for a loop as the Fed announced two rate hikes expected in 2023.

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

Market News

Producer prices see largest 12-month increase on record

On Tuesday, the Labor Department released the Producer Price Index (PPI) showing costs for production increases 6.6% in May, the biggest 12-month increase since the Bureau of Labor Statistics began tracking the data in November 2010, reported CNBC.

The PPI tracks the cost of materials and supplies needed for companies to produce the products they sell to consumers. While those costs aren’t always passed on to consumers in the form of price increases, most economists believe PPI to be a good indication of inflation.

In fact, the general consensus isn’t whether or not we’re seeing inflation – we are – it’s whether or not the inflation is permanent or, as the Federal Reserve describes it, “transitory” in nature.

Fed moves up rate hike timeline as inflation increases

On Wednesday, the Federal Reserve announced it had considerably raised its expectations for inflation this year and brought forward the time frame for raising interest rates, reported CNBC.

The Fed now believes there will be two interest rate hikes in 2023, however, the bank gave no indication to when it will stop buying bonds. “You can think of this meeting that we had as the ‘talking about talking about’ meeting,” said Powell.

“This is not what the market expected,” said James McCann, deputy chief economist at Aberdeen Standard Investments. “The Fed is now signaling … two hikes in 2023; this change in stance jars a little with the Fed’s recent claims that the recent spike in inflation is temporary.”

Jobless claims show surprise increase

On Thursday, the Labor Department released new jobless claims numbers totaling 412,000 for the past week, much higher than the 360,000 expected by economists, reported CNBC.

The increase came primarily from Pennsylvania (with 21,590 new claims) and California (with 15,712 claims). Many economists speculate the ongoing enhanced unemployment benefits are continuing to affect the new claims numbers.

“Factors related to the pandemic, such as caregiving needs, ongoing fears of the virus, and unemployment insurance payments appear to be weighing on employment growth,” said Federal Reserve Chair Jerome Powell on Wednesday. “These factors could wane in coming months against a backdrop of rising vaccinations leading to more rapid gains in employment.”

Next Week’s Gameplan

The markets remain unsettled about the new revelations from the Fed combined with the negative economic news regarding jobless claims, but, as always, my trading plan continues forward unfazed – buy the stocks of quality companies when they become cheap, take profits when they become expensive.

Let’s see what next week brings…

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

Bouncy, Bouncy, Bouncy…

Bitcoin bounced +33.31% from its $31,004.95 low last week to a weekly high of $41,332.55 before losing momentum on Tuesday. Bitcoin continued to drop and is in freefall as of the writing of this piece, down -11.35% from its weekly high, currently at $36,640.77.

The Bullish Case

Bulls point to Elon Musk, the ultimate Flip-Flopper, and his tweets that Tesla (TSLA) would return to accepting Bitcoin now that miners become more green as the reason for the bounce off the weekly low. Bulls continue to say that the $30,000 mark will be permanent support and see nothing but blue sky breakouts from here.

The Bearish Case

For the moment, I remain firmly in the bear case as seeing repeated patterns from the Crypto Winter of 2018 continue to give me Post Traumatic Stress Disorder (PTSD). Throughout the entire history of Bitcoin, if it falls below its 150-Day Moving Average and stays there as long as it has currently, the current support is not the lowest support. Pullbacks of more than -84% from the last All-Time High (ATH) are incredibly common which gives Bitcoin a potential downside price target of $10,383.48 – 84% off its current ATH of $64,896.75.

Bitcoin Gameplan

*Trade Closed with +2.497% Gains*

Current Allocation: *No Current Trade* 
Current Per-Coin Price: *No Current Trade*
Current Profit/Loss Status: *No Current Trade*

Any trade you can walk profitably away from…

When Bitcoin made a run for the upper $30K limits on Sunday, I decided it was time to lock in my meager +2.497% gains as I expect Bitcoin to once again test its low $30K low in the coming days and it makes no sense to have a profitable trade go to waste, even if the trade wasn’t all that profitable.

On Sunday, the trade closed at $38,857.87. Initially started on April 13 with an opening price of $56,378.63, I’m quite proud of how my technique of Buying in Stages and Selling in Stages successfully lowered the per-coin price of this two-month trade down to the point where I could lock in any gains at all, especially given that Bitcoin collapsed -46.788% from my buying price over that same time period.

Bitcoin is down -5.71% from where I closed my trade.

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:

1.636% @ $35,228
2.181% @ $31,775
2.726% @ $30,886
3.271% @ $28,777
3.817% @ $25,986
4.362% @ $21,761
4.907% @ 19,087
5.452% @ $15,965
6.543% @ $8,586
10.372% @ $5,977

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 some of Bitcoin’s price movements over the past couple of years:

• In 2017, Bitcoin rose +2,707% from its January low of $734.64 to make an all-time high of $19,891.99 in December.
• 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, Bitcoin dropped -32% to a low of $28,732.00.
• In February 2021, Bitcoin rallied +103% to a new all-time high of $58,367.00.
• Later in February, Bitcoin dropped -26% to a low of $43,016.00.
• In March 2021, Bitcoin rallied +44% to a new all-time high of $61,788.45.
• Later in March, Bitcoin dropped -19% to a low of $50,305.00.
• In April 2021, Bitcoin rallied +29% to a new all-time high of $64,896.75.
• In May, Bitcoin crashed -54% to a low of $30,000.00.

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.