Summing Up The Week

A relatively quiet week in the markets despite Congress missing the debt-ceiling deadline and a disappointing jobs report from ADP. The government jobs report, however, dramatically overshadowed the outlier report from ADP which may have resulted in the mild trading week.

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

Market News

Congress misses debt-ceiling deadline

On Monday, the Treasury Department announced it would begin conducting emergency cash-conservation steps to avoid busting the federal borrowing limit after a two-year suspension of the debt ceiling expired at the ned of July, reported CNBC.

The limit prevents the Treasury from issuing bonds to fund government spending once a certain debt level is reached. That level, $22 trillion, was reached in August 2019 and the debt ceiling was suspended until this past Saturday.

If the government defaulted on its debt, something it never has done previously, economists say doing so would cause a spike in interest rates as lenders would consider the U.S. a bigger risk. “The government needs to have funds, for example, to pay interest on its debt,” said Karen Dynan, Harvard University economics professor. “If it were to stop paying interest, that could be extremely unsettling for financial markets.”

ADP jobs report whiffs: 330K vs 653K estimate

On Wednesday, the ADP payroll report showed private companies added 330,000 positions in July, far below the 653,000 estimate by economists, reported CNBC.

July’s job growth was the smallest gain since February, and added to concerns that the economy may not be reopening as quickly as hoped. “The labor market recovery continues to exhibit uneven progress, but progress nonetheless,” said Nela Richardson, Chief Economist at ADP. “July payroll data reports a marked slowdown ffrom the second quarter pace in jobs growth.”

Labor dept jobs report exceeds expectations 943K vs 845K

On Friday, the Labor Department released its nonfarm payroll report for July which showed an increase of 943,000 for the month compared to Dow Jones estimates of 845,000, reported CNBC. Additionally, the report showed a drop in the unemployment rate down to 5.4% compared to estimates of 5.7%.

While not unheard of, the stark contrast between the Labor Department’s report and the ADP private payroll report was dramatic and unusual. Markets did react positively with both the Dow Jones Industrial Average and S&P 500 hitting new record highs during trading on Friday.

“The data suggests that the rising demand for labor associated with the recovery from the pandemic may have put upward pressure on wages,” the Labor Department said in the report, however it also warned that the Covid impact may still skew data and wage agains across industries.

“It feels like a Goldilocks report,” said Beth Ann Bovino, Chief U.S. Economist at S&P Global Ratings. “You have not too hot in terms of wages, but not too low in terms of job gains.”

Next Week’s Gameplan

Given the market’s uneven approach to different industries, the gameplan remains the same as last week – look for opportunities to buy and sell on an individual position-by-position basis.

While some pundits and economists are expecting a significant correction or pullback with targets ranging from 10-20%, the bulls continue to buy the dip strongly and with so much liquidated money out there, it’s hard to tell if we’ll get the sale that everyone expects (and that I desperately want).

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 struggling to break the $42,000 resistance

The resistance at the $42,000 level continued to present a problem for Bitcoin throughout the week with the crypto pulling back substantially from this key point before finding support at $37,300.

With $42,000 marking a point of support for the crypto when it broke down earlier in 2021, many pundits point out there may be a lot of “weak hand” buyers at that level who would be ecstatic to be at their break-even point where they are getting out.

The Line That Shall Not Be Crossed (2021) is redeveloping after some adjustments and appears to show a new, less severe but still greater-than-moderate, downward bearish slope for the crypto. As always, I continue to keep an eye on both the support and resistance for Bitcoin.

The Bullish Case

Bulls continue to make the argument that with all the institutional buying and with famous investors like Elon Musk and Jack Dorsey that Bitcoin will never fall below $30,000. Some of the more bullish bulls suggest the crypto won’t retest that level and there are only higher-highs in store from here.

The Bearish Case

Bears believe this entire rally could be a short-covering rally that will result in an epic bull trap with Bitcoin crashing through $30K. Some bears – including myself – believe the historical repetition of an -85% pullback from all-time highs which Bitcoin has performed every time it’s made a new all-time high will happen here. That gives Bitcoin a potential low-end target of $9,735.

Bitcoin Gameplan

*Trade Closed: +7.5% gain in 5 Days*

After Bitcoin continued to find resistance around the $42,000 mark over the weekend, I decided it was time to take my profits and wait to see what the crypto wanted it to do next.

I closed the trade with an average selling price of $40,578.20, giving me about a gain of +7.5% after fees from my $37,746.66 buying price on July 27.

Due to my small position size since I was being conservative, I increased my banked Bitcoin by only 0.411%, however, my trading discipline dictates that I should never turn a profit into a loss, particularly given such a short trade duration.

Let’s do the time warp trade again!

Current Allocation: 0.807% (+0.277% from opening buy)
Current Per-Coin Price: $38,472.34 (-2.908% from opening buy)
Current Profit/Loss Status: +6.176% (*New Trade*)

I entered a new trade when Bitcoin lost support at the $40,000 level on Sunday with an opening buy at $39,624.51 (after fees) and a 0.530% allocation.

I added to my position on the way down with additional buys throughout the week which lowered my per-coin cost -1.388% from $39,624.51 to $39,074.52 and increased my allocation size +0.539% to 1.069% from 0.530%.

Once again, I’m using very small quantities with these trades that start near $40,000 as I still believe the probability of a retest of $28K-$30K plus a fall below $20K remains incredibly likely.

On Thursday and Friday, sell orders I had in place were triggered at an average selling price of $41,163.63, lowering my per-coin cost -1.54% from $39,074.52 to $38,472.34 and decreasing my allocation -0.262% to 0.807% from 1.069%.

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:

0.130% @ $37,525
0.134% @ $35,455
0.134% @ $33,424
0.134% @ $32,865
0.268% @ $30,509
1.071% @ $29,017
1.338% @ $26,505
1.338% @ $24,156
5.353% @ $19,989
5.353% @ $17,380

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.