Summing Up The Week

The markets are definitely unstable now with any potentially bad news sending stocks spiraling down. In fact, many pundits seem to be having a hard time coming up with anything to be optimistic about as we move into the fourth quarter.

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

Market News

Low Consumer Confidence & 10yr yield sends stocks spiraling

On Tuesday, the Consumer Confidence Index fell 5.9 pts to 109.3 in September, its lowest level in seven months, thanks in large part to inflation, reported Reuters.

Also on Tuesday, a sudden increase in the yield of the 10-year U.S. treasury caused a marketwide selloff as investors fear the potential of the Federal Reserve being forced into tightening economic policy.

Economists tried to stay positive about the ailing Consumer Confidence numbers in light of the Delta variant of Covid-19 seeming to decrease in its spread. “But given that wave seems to be cresting, there’s hope confidence just hit its nadir,” said Robert Frick, Corporate Economist for the Navy Federal Credit Union in Vienna, Virginia. “Assuming predictions of Delta dropping hold true, this setback may be a three-month trough during the recovery rally.”

Oil approaches $80/barrel, posing threat to demand

On Wednesday, the price of a barrel of WTI Brent oil (the international benchmark) fell back below $80 a barrel, a price which will send the market toward demand destruction according to Morgan Stanley (MS), reported CNBC.

“Oil prices have disconnected from the marginal cost of supply,” Morgan Stanley wrote in a report released in June. “Instead, they are travelling to the level where demand destruction kicks in which we estimate at ~$80/bbl.”

Morgan Stanley predicts the global oil supply will continue to tighten, pointing to the average 3 million barrels of crude oil per day of inventory draw-downs in the past month compared to a typical 1.9 million barrel per day draw-down in preceding months. “These draws are high and suggest the market is more undersupplied than generally perceived,” said Martijn Rats and Amy Sergeant, bank analysts for Morgan Stanley.

Government shutdown avoided, but crisis looms…

On Wednesday, the Senate reached a deal to avoid a government shutdown due to the looming debt ceiling debacle, reported CNBC. While Congress did reach a stopgap measure to prevent government shutdown later this week, the debt ceiling debacle remains with a deadline of October 18.

If Congress fails to raise the debt ceiling, the United States will experience its first-ever default payment on its debt, potentially sending the entire economy into a recession.

One idea is to pass the budget through a reconciliation process only requiring a simple majority, however, it still presents its own issues. “It is very risky and could well lead us to default even if only one senator wanted that to happen,” said Majority Leader Chuck Schumer. “So, you can’t do it through this route.”

Next Week’s Gameplan

The markets are finally getting exciting, dipping low enough for me to put more money to work in all of my portfolios. As we continue into October – a seasonably volatile time for the markets – it’s time to look for buying opportunities and deals as different sectors get hit harder than others.

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 Wild Ride Continues

Volatility in Bitcoin and the rest of the cryptocurrency space continued over the past week with Bitcoin falling to $40,683.29 last Friday and testing that level repeatedly over the week. The crypto was also unable to test its daily highs, potentially indicating that the bearish trend could persevere.

However, after Bitcoin retested its $40,683.29 weekly bottom on Wednesday, it bounced… hard. Bitcoin rallied all the way up to nearly $48K from Wednesday through Friday morning, looking as though it wants to test its weekly high of $48,825.62 set a few weeks ago.

The Bullish Case

Bulls point to the continued resilience of the $40K line as the new bottom, indicating that not only do they expect the crypto to test its $65K all-time high, but break through. Some bulls even have crazy predictions of $400K by the end of 2021.

The Bearish Case

Bears may have been surprised by the late-week rally, but they point to the macro view where Bitcoin is still very much in a downward trend as indicated by the Line That Shall Not Be Crossed (2021). Until Bitcoin breaks through that line, the crypto remains in a trading range, one with a bearish bias.

Bitcoin Trade Update

Current Allocation: 0.735% (+0.034% since last update)
Current Per-Coin Price: $43,483,58 (-0.469% since last update)
Current Profit/Loss Status: +9.092% (+13.176% since last update)

I added a bit more to my position on Tuesday when Bitcoin dipped back below $41K with a buy order that filled at $40,958.39. The small buy lowered my per-coin cost just -0.469% from $43,688.64 to $43,483.58 and increased my allocation +0.034% from 0.701% to 0.735%.

Now that Bitcoin has started rallying, I have a sell order right below the incoming Line That Shall Not Be Crossed (2021). The sell order will only take profits on about 25% of my current allocation in case Bitcoin does break through, but I also want to make sure I don’t squander an opportunity to lock in nearly 20% in gains on at least some of the allocation if Bitcoin tests the line, fails, and drops back down again.

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:

0.082% @ $41,030
0.136% @ $37,279
0.136% @ $34,910
0.162% @ $33,359
0.305% @ $31,769
0.585% @ $29,432
0.884% @ $27,050
1.853% @ $23,805
1.406% @ $22,462
3.106% @ $20,288

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.