Summing Up The Week

The seasonal market volatility continued this week with pretty substantial selloffs and bounces both occurring throughout the week. A wide variety of news and market sentiment holds the key to which way stocks will head next.

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

Market News

U.S. trade deficit hits record high in August

On Tuesday, the Commerce Department reported that the trade deficit rose to a record high of $73.3B in August, the highest since the government started tracking the series, reported CNBC.

The trade deficit measures the amount of goods imported versus the amount of goods exported. Due to the U.S. dollar being used as the world’s reserve currency, many economists believe the trade deficit not to be an accurate representation of the health of the U.S. economy.

Of course, others believe that the U.S. should be actively trying to shrink its trade deficit in order to remain competitive with other countries as well as to find ways to reduce the national debt.

Regardless, the markets did not take this news as bad – instead rebounding from Monday’s fairly substantial pullback.

Private payrolls rose 568K in September vs 425K estimate

On Wednesday, payroll processor ADP reported that private jobs increased 568,000 in September versus the Dow Jones estimate of 425,000 despite fears about COVID and the economy, reported CNBC.

The leading sector was leisure and hospitality with 226,000 hires, although the industry still suffers from a 9.1% unemployment rate versus a national rate of 5.2%, according to the U.S. Labor Department. “The labor market recovery continues to make progress despite a marked slowdown from the 748,000-job pace in the second quarter,” said ADP Chief Economist Nela Richardson.

GOP offers short-term debt ceiling extension

The markets popped on Thursday after Senate Minority Leader Mitch McConnell offered a short-term suspension of the U.S. debt ceiling to avert a national default on Wednesday night, reported CNBC.

Part of Congress’s ongoing and never-ending approach of kicking the can down the road when it comes to anything vital to the country, the GOP offered to suspend the debt ceiling until December rather than tackle the issue by October 18.

Without a debt ceiling suspension or raise, the U.S. government could risk defaulting on its debt, an historical event that could send the country’s economy spiraling into recession. However, this extension simply means that Congress will have to once again have to confront this issue – just in time for the winter holiday season.

Despite the obvious negative long-term consequences, in the short term the markets saw this news as positive and rallied in a big way on Thursday.

Only 194K jobs created in September

On Friday, the Labor Department’s nonfarm payroll report showed only 194,000 jobs created in September, drastically missing the estimated 500,000 by Dow Jones economists, reported CNBC.

While the unemployment rate did drop to 4.8% versus the expected 5.1%, the lack of job creation certainly does not indicate a healthy economy.

Despite the obviously negative news, the markets reacted little and remained relatively flat, likely due to the news’ silver lining that the Fed would likely not tighten the easy money policies due to the economy not recovering as quickly as they hoped it would in order to reduce buying.

Next Week’s Gameplan

The past few weeks has seen me add to all three of my portfolios in earnest. While it can be difficult to add to positions with pundits expecting a market pullback as significant as -20% or more, I have learned that I need to start adding whenever the market sees a pullback of -5% or more.

As I like to say, the one thing that’s certain about investing is uncertainty. No one knows anything even though so many like to act like they can predict market movements – I have not found a single advisor or technician who can consistently predict how far the market may pull back or rise.

So, as always, it’s about having a shopping list of prices for my positions where I’d like to add more. Additionally, I never make big buys. I buy small, but I buy often.

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 full of surprises!

Bitcoin blasted through all resistance including its weekly high of $52,944.96 set in September to make a new weekly and monthly high of $56,056.38 just today. Obviously, the Line That Shall Not Be Crossed (2021) means nothing to Bitcoin, however, I do anticipate that the crypto might pull back to test it as support.

The Bullish Case

So far, Bulls have been validated that this time really is different as Bitcoin shocked all the bears by seeing very little to no resistance at the $50K mark. From here, Bulls expect Bitcoin to once again test its all-time high at $64,896.75 with some believing their price targets of $100K and higher by year-end to be playing out.

The Bearish Case

Bears concede that they were wrong about how weak the resistance was at the key upside targets where Bitcoin should have sold off. Many still believe the current movement still represents the fractal pattern from 2018 and that we should see the price drop through $30K and down to the $20K levels.

Bitcoin Trade Update

*Trade Closed: +12.341% Gains in One Month*

I decided to lock in some profits last Friday when Bitcoin consolidated around $48,000 with a stop-loss limit order that filled at $47,763.76. The order lowered my per-coin cost -5.587% from $43,483.58 to $41,054.24 and decreased my allocation -0.235% from 0.735% to 0.500%. 

On Sunday, I took an additional small bit of profit off the table when Bitcoin suddenly popped over $49K and started to retreat with an order that filled at $48,771.00. The sale lowered my per-coin cost an additional -1.023% from $41,054.24 to $40,634.19 and reduced my allocation -0.028% from 0.500% to 0.472%.

On Tuesday, Bitcoin made a run at a very key trendline which prompted me to close out the position entirely with a sell order that filled at $50,068.06. The final trade gave me a buy price of $43,509.35, a sell price of $48,848.88 and a gain of +12.341%. 

Of course, I was very wrong about Bitcoin’s next move and missed out on more than double the profits I was able to get. Bitcoin’s surprise strength has led me to cement the use of stop-loss limit orders to get out of crypto trades rather than use upside limit order targets.

The profits – kept as Bitcoin, of course – added +0.659% to my banked crypto.

Moving to Roinhood?!

As of this week, I have officially shifted funds from Gemini to Robinhood for all of my Bitcoin and Ether trades (Robinhood has very limited support for different crypto coins right now).

Given how negative I have been on Robinhood in the past since the brokerage didn’t previously allow traders to move crypto off the network to hard wallets (or anywhere outside the brokerage account, actually), this move might surprise some of my readers, however, in the past few weeks Robinhood announced support for crypto wallets.

While the feature hasn’t been implemented, yet, it wil be coming soon. This means that Robinhood is now the lowest-commission crypto exchange since, well, it charges zero commissions on crypto trading. While Gemini was cheaper than Coinbase with 0.35% taker fees and 0.25% maker fees, the combined trading fee at Gemini was 0.70% for takers or 0.50% for makers. When compared to Robinhood’s 0% fees, the move is a no-brainer.

As always, if you want to sign up for a Robinhood account using my referral link, we both receive a share of a random stock: https://join.robinhood.com/ericj652

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:

1.089% @ $46,176
0.272% @ $41,361
0.272% @ $37,843
0.272% @ $35,578
0.272% @ $34,085
0.272% @ $32,074
0.563% @ $30,049
0.338% @ $29,205
0.357% @ $28,426
1.104% @ $26,310

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.