Summing Up The Week

The week of American Thanksgiving is always a weird one for the markets because it’s a substantially-shortened week with the markets closed entirely on Thursday for the holiday itself, and then the markets close three hours early at 1 p.m. Eastern Time on Friday for… Black Friday holiday shopping?

While a shortened trading week might imply a calmer market, nothing could be further from the truth. The week kicked off with President Joe Biden nominating Jerome Powell for a second term as Chair of the Federal Reserve followed by inflation scares, and, then, to top it all off… a new variant of COVID-19 potentially more contagious than even Delta!

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

Market News

Biden picks Jerome Powell to lead Fed for second term

On Monday, President Joe Biden announced that Jerome Powell would be his nominee for Powell’s second term as Chair of the Federal Reserve bank, reported CNBC. Markets rose after hearing the news as the stock market always prefers the devil it knows to the devil it doesn’t.

While, at first glance, it may appear unusual that a Democratic President would elect to stay with a Republican Fed Chair, the move has multiple purposes: first, it seems like an excellent bipartisan move and a vote of confidence in Powell. More importantly, it gives Biden and his administration a convenient scapegoat – if the economy improves, Biden can take credit. If the economy goes into recession, Biden can point to Powell and say, “See? That’s what you get when a Republican picks a Fed Chair?”

Trump was the one to originally nominate Powell to replace Janet Yellen during Trump’s first term, a decision that haunted him. In 2018, Powell announced several interest rate hikes that sent the markets into a -20% selloff tailspin and resulted in the worst Christmas Eve the markets had ever seen.

In fact, through much of Trump’s term, he argued that Powell wasn’t dovish enough, regularly berating the Fed Chair for refusing to lower interest rates to 0% (and lower – Trump actually stated he wanted negative interest rates on several occasions. Had Trump just stuck with Yellen – a Democrat chosen by President Barack Obama – he would have been able to blame her for the failings of the economy. Since Trump selected a member of his own party, the blame rested squarely on his administration and his party.

For the markets, while being undeniably dovish, Powell is a far better choice than some of the Democrat hopefuls, in my opinion, as the Democrats want even easier monetary policy than the historic QE offered by Powell. In order to jumpstart the economy and avoid high monetary inflation, I agree with the hawkish economists who warn that the Fed must remain vigilant with both QE and interest rates.

U.S. and other countries to release oil from reserves

On Tuesday, the White House announced that the U.S. would release 50 million barrels of crude oil from the Strategic Petroleum Reserve (SPR) coordinated with China and Japan as a way to combat rising energy prices, reported CNBC.

“This is a well-timed move to try and lower oil prices,” John Kilduff, Partner at Again Capital, said after the announcement. “This added supply should help to bridge the production shortfall ahead of winter, especially if we get confirmation of meaningful supply, as well, from several of the major Asian consuming nations.”

Unfortunately, many analysts believe that releasing oil from reserves – even coordinated globally – may only serve as a stop-gap measure since the major oil producers are no longer incentivized to spend funds on drilling. With the ongoing emphasis on shifting to clean energy, the major oil manufacturers have backed away from cap-ex spending traditionally use for investments, preferring to simply pass on profits to shareholders.

Inflation up 4.1% Year-over-Year in October

On Wednesday, the Personal Consumption Expenditures index (CPE) showed a year-over-year increase of 4.1% in October, the highest for the reading since January 1991, reported CNBC.

Given that the Federal Reserve has been struggling to control inflation for a year or more, many analysts believe that the renomination of Jerome Powell, the more “hawkish” of the two candidates, means that the Fed will raise interest rates faster than expected. An increase in interest rates will have a negative effect on stocks and the rest of the equity market as the “smart money” will move into bonds or cash.

‘Alarming’ new COVID variant alarms WHO

On Thursday, the World Health Organization (WHO) raised alarms about a new variant of COVID-19 found in South Africa, Botswana, and Hong Kong, known as B.1.1.529, reported CNBC.

The new variant exhibits a number of mutations making it more contagious and more resistant to the existing vaccines. While studies are still being performed about its lethality, a more contagious version of COVID than even Delta is not what the global economy needs right now.

“It is alarming what is emerging,” Mairead McGuinness, the EU commissioner for financial stability, told CNBC’s “Squawk Box Europe” Friday. “For our economies, of course, if there are further restrictions should this escalate, which we hope it will not, then you will probably see some impact,” she added, noting that the bloc is better placed now to deal with the pandemic compared with the first wave.

Next Week’s Gameplan

Next week returns to a full week combined with the end of the month rolling in on Tuesday. Historically, the period between Black Friday and the end of the year is good for the markets (except for 2018… the worst Christmas Eve for the markets… ever).

As always, I have buying and selling targets for each of my position. The market sentiment continues to be one of a stockpicker’s market meaning there’s no distinct trend – I have positions nearing profit-taking points and positions selling off to where I plan to add more.

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

The meltdown continues…

Bitcoin continued to lose support this week after a brief bounce over the weekend. On Tuesday, Bitcoin broke last week’s low, finding a new weekly low at $55,415.84.

After meandering around a bit on Wednesday, Bitcoin made a stab at its weekly high on Thursday, only to turn around sharply and break its weekly low a second time, not finding support until $53,533.00

The Bullish Case

Bulls still remain extremely optimistic about Bitcoin’s short-term potential with many suggesting the crypto will see six-figures by the end of the year (that’s only one month away) with some holding $250K price targets which seem, quite literally, unbelievable.

The Bearish Case

Bears point to Bitcoin’s weakness since making its new all-time at $69,000 as the reason for a more substantial pullback. Just like in May 2021, many Bears believe Bitcoin could pull back at least 50% from its new high giving us a $34K-$35K price target with more extreme Bears thinking $20K and lower is still in the cards.

Bitcoin Trade Update

Current Allocation: 1.012% (+0.175% from last update)
Current Per-Coin Price: $60,010.15 (-1.623% from last update)
Current Profit/Loss Status: -9.086% (-2.672% from last update)

On Monday, I added a small amount more to my position when Bitcoin tested the $56K mark with an order that filled at $56,214.30. The buy lowered my per-coin cost by just -0.261% from $61,000.46 to $60,841.34 as the small allocation increased my position size by just +0.036% from 0.837% to 0.873%.

On Friday, Bitcoin’s continued meltdown triggered another buy order at $54,123.60 which lowered my per-coin cost -1.366% from $60,841.34 to $60,010.15 and raised my allocation size +0.139% from 0.873% to 1.012%.

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:

0.145% @ $52,661
0.145% @ $50,529
0.145% @ $49,004
0.225% @ $46,002
0.575% @ $42,904
0.281% @ $41,855
1.292% @ $37,667
2.062% @ $33,686
4.233% @ $28,939
6.306% @ $25,406

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.
• In November 2021, Bitcoin rallied +140% to a new all-time high of $69,000.00.
• Later in November, Bitcoin dropped -22% to a low of $53,533.00.

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.