Summing Up The Week

Between the tidal wave of omicron cases and tidal wave of inflation data, the week started off very weak as we headed into the Federal Reserve Bank decision on Wednesday. Then, in an odd move, the market actually bounced higher despite an incredibly hawkish plan presented by Chair Jerome Powell. 

Is it possible the markets actually want the Fed to fight inflation?

Read on to learn the news that moved the markets this week…

Market News

UK braces for ‘tidal wave’ of omicron cases

On Monday, United Kingdom Prime Minister Boris Johnson announced the first death from omicron found in the U.K. and that the country was preparing for a tidal wave of cases from the COVID-19 omicron variant, reported CNBC.

A new study performed by the University of Oxford showed a “substantial fall” in the neutralizing antibodies in participants who received two doses of either the Oxford-AstraZeneca or Pfizer-BioNTech vaccines compared to the immune responses seen against earlier variants. The research paper noted that some vaccine recipients “failed to neutralize [the virus] at all.”

“This will likely lead to increased breakthrough infections in previously infected or double vaccinated individuals, which could drive a further wave of infection, although there is currently no evidence of increased potential to cause severe disease, hospitalization or death,” the study’s authors said.

Scientists and medical experts have concluded that the booster shots are key to helping prevent the spread of COVID-19 with Pfizer releasing study results the same day showing that the Pfizer-BioNTech vaccine is readily capable of preventing omicron contraction in those who received three doses of the vaccine.

Wholesale prices jump 9.6%, highest since 2010

On Tuesday, the Labor Department reported the Producer Price Index (PPI) increased 9.6% over the past 12 months after rising 0.8% in November versus economist expectations for 9.2%, reported CNBC. The increase represents the biggest headline number going back to November 2010.

Demand for consumer goods is driving producer prices up while the services side of the equation seems to be lagging the rest of the economy. Naturally, the market sold off following the report as the Fed’s meeting on Wednesday left many investors expecting much more hawkish forward targets when it comes to tapering the bond-buying program and increasing the bank interest rate.

COVID omicron spreading faster than any other variant

Midday on Tuesday, the World Health Organization (WHO) said that the omicron variant of COVID-19 is spreading faster than any previous variant, reported CNBC.

“Omicron is spreading at a rate we have not seen with any previous variant,” WHO Director-General Tedros Adhanom Ghebreyesus said during a COVID update in Geneva. “Seventy-seven countries have now reported cases of omicron. And the reality is that omicron is probably in most countries, even if it hasn’t been detected yet.”

Additionally, the WHO warned that the current set of vaccines does not mount a formidable defense against the virus on their own. “It’s not vaccines instead of masks. It’s not vaccines instead of distancing. It’s not vaccines instead of ventilation or hand hygiene. Do it all. Do it consistently. Do it well,” said Tedros.

The additional negative news event added to the market selloff, already weakened by bad inflation data and the start of the Federal Reserve meeting.

Fed announces aggressive tightening, Markets… pop?!

On Wednesday, the Federal Reserve announced it would accelerate the reduction of its monthly bond-buying program and expected three interest rate hikes in 2022, reported CNBC. What might seem counter-intuitive to the uninitiated, the markets actually headed higher after the report.

So… why?

The stock market had been selling off for nearly a week in anticipation of the Fed meeting, so when Chair Jerome Powell announced pretty much the better-case scenario of what the markets had priced in (the market was prepared for a worst-case scenario of an interest rate hike the day of the meeting), the market did pop on the news.

“Economic developments and changes in the outlook warrant this evolution of monetary policy, which will continue to provide appropriate support for the economy,” Powell said at the news conference following the meeting. 

Next Week’s Gameplan

Every pundit from Jim Cramer with CNBC’s Mad Money all the way down to the lowly YouTube analysts (I include myself in this group) believes we’ll see a Santa Claus Rally going into year-end with the market inevitably finishing 2021 higher. 

While I’m certainly not going to sneeze at a higher year-end close, I’m skeptical. The memory of 2018’s Christmas Eve is still very fresh in my mind and will likely not go anywhere any time soon. There are a lot of unknowns that could surprise the markets before the last day of trading on December 31, so I’m sticking to my gameplan from here (not that I would really ever do anything differently, am I right?).

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

Is Bitcoin starting to collapse again??

Bitcoin spent the past week consolidating between last week’s high of $51,995.00 and the new weekly low it established Monday at $45,727.92. On Friday, as I’m writing this, Bitcoin seems to have broken down, cracking the week’s earlier low to create new support, at least temporarily, at $45,496.57.

The King of Crypto’s recent volatility has created two very diametrically-opposed perspectives of where it’s headed next as you’ll read below in the Bullish and Bearish case.

The Bullish Case

Bulls believe that the $42,333.00 low set a few weeks ago during a flash-crash is an aberration, but will remain Bitcoin’s new low. Most suggest Bitcoin won’t see a dip back below $40K with some still giving price targets of $100K+ before the end of 2021.

The Bearish Case

Bears point to the macro where Bitcoin is undeniably in a downtrend on the longer-timeframe charts. When it comes to stocks, bonds, and commodities, this sort of price action almost always points to further downside action. Bears argue this is the case for Bitcoin, too, with some suggesting Bitcoin will hit $20K before the end of 2021.

Bitcoin Trade Update

Current Allocation: 2.276% (Unchanged from last update)
Current Per-Coin Price: $50,716.42 (Unchanged from last update)
Current Profit/Loss Status: -9.437% (-4.629% from last update)

With Bulls and Bears so vehemently-opposed to each other’s arguments, it’s time for me to do what I do best – sit and wait.

As always, I have a plan for both directions, however, this time around I’m going to HODL a bit longer than normal if we see an upside pop. I have the tendency to take profits too early when it comes to my crypto trades, so if this really is the bottom, I’ll hang on for quite a bit longer before I start lightening up.

Of course, if we head lower, I will definitely start adding. Naturally, given the extreme selloff we saw a few weeks ago, although I do plan to add before that bottom, I will be starting with very small quantities as long as Bitcoin doesn’t break through $40K. If it drops through $40K, it’s back to my strategy with the entire trade planned out all the way down to below $4K, a drop of nearly -95% from Bitcoin’s high

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:

0.029% @ $43,615
0.143% @ $41,980
0.998% @ $38,226
1.740% @ $34,362
3.632% @ $29,580
5.447% @ $25,972
5.044% @ $24,164
13.575% @ $20,824
2.857% @ $18,692
2.857% @ $14,732

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.
• In December 2021, Bitcoin dropped -39% to a low of $42,333.00.

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.