Summing Up The Week

Inflation numbers continue coming in at record-breaking levels, however, the markets continue to remain nonplussed, edging higher for the most part. Reassuring comments from the Federal Reserve and Treasury Secretary seem to be keeping any bears at bay, for the moment.

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

Market News

Inflation expectations surge, hit new high

On Monday, the New York Fed’s Survey of Consumer Expectations for June showed a median inflation expectation increase of 4.8% over the next 12 months, the highest in series history for data going back to 2013, reported CNBC.

The survey reveals that the Federal Reserve Bank’s continual assurances that the inflation seen in the economy is simply “transitory” aren’t working on the U.S. consumer. The survey kicked off a number of different inflation reports for the week, with the Consumer Price Index (CPI) and Producer Price Index (PPI) releasing on Tuesday and Wednesday.

Despite the high inflation concerns, the stock market didn’t react on Monday, instead rising higher.

Consumer Price Index climbs 5.4%, higher than expected

On Tuesday, the Labor Department’s Consumer Price Index (CPI) showed a 5.4% increase year-over-year in inflation, the largest spike since August 2008 versus an expected 5% gain, reported CNBC.

Even without food and energy prices, the core CPI rose 4.5%, the highest move since September 1991 and far exceeding the estimate of 3.8%.

“What this really shows is inflation pressures remain more acute than appreciated and are going to be with us for a longer period,” said Sarah House, Senior Economist for Wells Fargo’s corporate and investment banking. “We are seeing areas where there’s going to be ongoing inflation even after we get past some of those acute  price hikes in a handful of sectors.”

Fed assures easy-money policy will not change

On Wednesday, Federal Reserve Bank Chair Jerome Powell said the central bank will not adjust its current policy in a prepared statement, reported CNBC. Many economists say that the Fed’s current easy monetary policies are the main catalyst for the stock market’s ongoing rally since March 2020’s lows.

“At our June meeting, the Committee discussed the economy’s progress toward our goals since we adopted our asset purchase guidance last December,” Powell read from a statement. “While reaching the standard of ‘substantial further progress’ is still a ways off, participants expect that progress will continue.”

Jobless claims at 360K, meeting estimates

On Thursday, the Labor Department reported 360,000 new weekly jobless claims, matching estimates by Wall Street economists, reported CNBC. This total represents a decline from last week’s revised 386,000 new claims.

While continuing claims fell 126,00 to 3.24 million, that huge figure still represents millions of Americans out of work. Markets did not react to the news, declining instead of raising on the relatively positive news.

Yellen: “Several more months of rapid inflation…”

On Thursday, Treasury Secretary Janet Yellen told CNBC that she expects the U.S. economy will see “several more months of rapid inflation.”

“I’m not saying this is a one-month phenomenon,” said Yellen. “I think, over the medium term, we’ll see inflation decline toward normal levels, but, of course, we’ll have to keep a careful eye on it.” Yellen’s comments come following this week’s CPI report which measures inflation at having increased 5.4% in June alone, the fastest pace in 13 years.

Next Week’s Gameplan

Despite the overall indexes remaining steady, I am noticing deteriorating conditions in several sectors throughout my portfolios which has offered a buying opportunity here or there with more on the horizon. We’ll see how things go as we move through July as the summer months are historically volatile.

Maybe there’s more action ahead?

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’s technicals continue to weaken…

Bitcoin was once again rejected from The Line That Shall Not Be Crossed (2021) after making an attempt to break this key resistance line on Sunday, July 11, only to be turned away once more.

Bitcoin broke down throughout the week, breaking through last week’s low before finding support at $31,025.42 early today (Friday).

The Bullish Case

Bulls point to the decreasing volatility and the fact that the current levels have held as reasons for a continuing bull rally as we move through the summer.

The Bearish Case

Nothing is changing my mind about the bearish case for crypto. With no real positive catalysts on the horizon and a bearish downtrend that is eerily identical to 2018, I still believe we’ll see Bitcoin break down below $30,000 and deep into the low $20Ks with a very high probability of no real bottoming until around $16K.

Bitcoin Gameplan

Curse my fat fingers!

Current Allocation: 8.034% (+6.374% from last update)
Current Per-Coin Price: $32,917.53 (-1.191% from last update)
Current Profit/Loss Status: -3.234% (-4.379% from last update)

I decided to trim a bit of my position when Bitcoin bounced up to touch The Line That Shall Not Be Crossed (2021) on Sunday with a limit sell order that filled at $33,964.41. The order reduced my per-coin cost -1.320% from $33,558.86 to $33,115.94 and reduced my allocation -0.103% from 1.660% to 1.557%.

On Tuesday, Bitcoin broke bearish below my per-coin cost and triggered a small buy order at $32,579.80 which lowered my per-coin cost -0.215% from $33,115.94 to $33,044.86 and increased my allocation +0.26% to 1.817% from 1.557%.

On Wednesday, a fat-finger buy order (pro tip: take your time when entering orders to avoid stupid mistakes) resulted in me having to make serious adjustments to my sizing in order to maintain my per-coin cost, increasing my allocation +4.024% from 1.817% to 5.841%.

I decided to seriously ramp up my position size on Thursday with a buy order that filled at $31,684.18 and reduced my per-coin cost an additional -0.385% from $33,044.86 to $32,917.53 and increasing my allocation 2.193% from 5.841% to 8.034%, giving me a bigger position to work with should Bitcoin make another attempt at The Line That Shall Not Be Crossed (2021).

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:

0.406% @ $30,620
0.563% @ $28,822
2.251% @ $25,337
5.627% @ $23,072
5.627% @ $19,782
5.627% @ $17,568
5.627% @ $16,017
5.627% @ $11,358
5.627% @ $8,612
12.759% @ $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 June, Bitcoin crashed -56% to a low of $28,800.00.

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.