Summing Up The Week

A combination of declining consumer sentiment, a Federal Reserve plan which includes tapering this year, and increasing COVID fears across the country caused the markets to pull back this week. Is there more in store?

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

Market News

July retail sales drop -1.1%, worse than expected

On Tuesday, the U.S. Commerce Department released figures showing retail sales in July fell 1.1%, worse than the Dow Jones estimate of -0.3%, reported CNBC. Consumer sales make up nearly 70% of economic activity for the United States so economists closely watch the figures to determine economy’s health.

“Although retail sales fell in July, the outlook for consumer spending remains positive,” said Gus Faucher, Chief U.S. Economist at PNC Bank. “However, spending growth will shift from goods to services over the next couple of years, limiting growth in most categories of retail sales.”

The Fed prepares for a 2021 taper

On Wednesday, the minutes released from the Federal Reserve’s July meeting showed the central bank intends to reducing asset purchases before the end of the year, reported CNBC.

Since late March 2020, the Federal Reserve Bank has been propping up the American economy by buying U.S. treasury bonds, junk bonds, and a variety of other assets at a rate of around $120 billion per month. In order for the economy to prove its health and to slow the incredible rate of inflation we’ve been seeing, the Federal Reserve needs to be able to cut back on how much it buys in the markets each month… a tapering of the buying.

To be clear, tapering doesn’t mean the Fed will stop buying in the markets – it simply means the Fed will start buying less. Even with this action being anticipated, the markets sold off following the release of the meeting minutes.

Jobless claims hit pandemic-era low: 348K vs 365K estimate

On Thursday, the Labor Department reported jobless claims totaling 348,000 for the past week, less than the Dow Jones estimate of 365,000, reported CNBC. The continuing decline of new jobless claims is taken as a sign of the U.S. economy improving as businesses continue to open throughout the country.

The number of Americans receiving continuing benefits dropped to 11.74 million, a decline of 311,787. CNBC reports this decline was due to a “big drop in those receiving enhanced benefits, which will come to a complete close in September.”

Next Week’s Gameplan

As the economy continues to improve, the likelihood that the Fed will have to rein in their easy-money policies remains high.

The potential result?

The stock market will likely slow in its stead upward move to accommodate stricter Fed policies which could result in a corrective pullback. The gameplan remains unchanged – keep an eye out for positions where profit-taking could be prudent while also spotting other positions pulling back to worthy buying opportunities.

The summer’s starting to get exciting as traders return from vacation and the volume returns to non-vacation levels, sports fans!

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

Are the bulls starting to make breakthroughs?

Bitcoin once again showed bullish strength over the past week, requiring me to continue leveling The Line That Shall Not Be Crossed (2021) in an effort to determine what kind of channel Bitcoin may be trading in right now. The bullish action has definitely decreased the severity of the bearish channel.

Despite seeing weakness throughout the week since last Saturday, the bulls really turned it around on Thursday, causing a significant bounce from the crypto’s new weekly low at $43,955.00.

The Bullish Case

Bulls believe we’re in for higher-highs with many predicting an attempt at the all-time high near $65K and some even predicting six-figure price targets before the end of this year – with a few having nutty predictions of $200,000 or higher per coin.

The Bearish Case

Bears continue to believe that this recent rally off the lows near $29,000 are simply the result of short-covering. Bearish analysts believe the continued resistance  around $48K-$50K around indicates Bitcoin will pull back with some suggesting price targets as low as $10,000 before the crypto will make new all-time highs.

Bitcoin Gameplan

*Trade Closed: +4.797% in 9 Days*

I know it must seem like I’m a little trigger-happy to take profits as it feels as though I’m opening and closing trades every week, but when Bitcoin is floating around in the $40K-$50K range, I just feel like there’s more risk to the downside than there is gain to the upside. So, on Tuesday, with Bitcoin seeing continued resistance from The Line That Shall Not Be Crossed (2021), I decided to close out my trade.

Overall, my trade had an opening price of $44,028.32 and an average selling price of $46,140.36, giving me a +4.797% gain in just 9 days, an annualized gain of 194.545%. Given this trade had a very small allocation, I only added 0.221% to my banked crypto, but, hey, any gain is still a gain.

A new trade enters the ring…

Current Allocation: 0.411% (+0.276% since trade start)
Current Per-Coin Price: $44,796.81 (-2.154% since trade start)
Current Profit/Loss Status: +6.749% (*New Trade*)

Shortly after closing my trade, I opened a new one when Bitcoin pulled back on Monday with my first buy – a very small 0.135% allocation – at $45,782.78 (after fees).

On Wednesday, Bitcoin triggered two additional small buys, one filling at $44,450.01 and another at $43,943.79 – two key areas of support. The additional buys lowered my per-coin cost -2.154% from $45,782.78 to $44,796.81 and increased my allocation +0.276% to 0.411%.

I continue to use very small purchases in the $40K-$50K price range as I still feel a significant pullback is very possible – no crypto winter in the past 12 years has ended so quickly or abruptly as this.

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:

0.137% @ $44,177
0.137% @ $42,912
0.137% @ $40,816
0.137% @ $39,673
0.137% @ $38,713
0.137% @ $37,817
0.137% @ $36,584
0.137% @ $35,137
0.137% @ $34,481
0.274% @ $31,470

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 2021, 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.