Summing Up The Week
Monday saw a washout sale and capitulating bounce unlike anything we’ve seen since the pandemic selloff in both stocks and crypto. Then, on Tuesday, the market performed a similar selloff and recovery, too.
Volatility is definitely back in the markets in a big way, and both Monday’s and Tuesday’s action weren’t caused by any specific news events.
Let’s take a look at some of the news that did come out this week which did (or didn’t) move the markets…
Market News
Could Monday’s washout be just what the doctor ordered?
The market hadn’t seen a selloff as bad as Monday’s since February 2020 when the pandemic rout started, however, Wall Street veteran Art Cashin explained that Monday’s carnage could be exactly what the market needs, reported CNBC. As painful as huge one-day selloffs can be for investors, there is little doubt that irrational exuberance had made its way into the markets in a big way with a new wave of millenial investors betting their stimulus checks to make it rich throughout 2020-2021. With so many new traders using margin and other forms of leverage to boost their potential profits and having no experience of what a true downturn feels like, a selloff the kind we’ve seen throughout January was bound to happen. Cashin feels that the kind of carnage we’ve been enduring may help reset the markets and allow buyers to come back in now that nearly the entire market has been pushed down to lower levels.IMF cuts global growth forecast for 2022
On Tuesday, the International Monetary Fund (IMF) downgraded its 2022 global growth forecast to 4.4% from 5.9%, reported CNBC. The IMF pointed to weakening economies in the United States and China as the reason for its global downgrade. “The global economy enters 2022 in a weaker position than previously expected,” the report noted. The IMF went on to emphasize that even this reduced growth outlook is dependent on continued declines in COVID-19, “The forecast is conditional on adverse health outcomes declining to low levels in most countries by end-2022, assuming vaccination rates improve worldwide and therapies become more effective.”The Fed indicates rate hike in March
On Wednesday, what should have come as a surprise to absolutely no one, the Federal Reserve Bank announced that it would be raising the primary benchmark interest rate soon, likely in March, reported CNBC. Additionally, the committee stated that the bond-buying program will likely terminate in March as well, although bond-buying will continue at $30 billion in February. “The Fed’s announcement that it will ‘soon be appropriate’ to raise interest rates is a clear sign that a March rate hike is coming,” noted Michael Pearce, senior U.S. economist at Capital Economics. “The Fed’s plans to begin running down its balance sheet once rates begin to rise suggests an announcement on that could also come as soon as the next meeting, which would be slightly more hawkish than we expected.”GDP grew 6.9% in 2021, stronger than expected
On Thursday, we finally received some good news when the U.S. Commerce Department reported that Gross Domestic Product (GDP) grew at 6.9% annualized in 2021, a stronger figure than the 5.5% expected by Dow Jones economists, reported CNBC.
Despite the Omicron variant’s rapid spread, the U.S. economy was still able to outperform during the year, primarily stemming from strong consumer activity.
While the GDP’s strength is good news for the U.S. economy, the figures only serve to strengthen the Fed’s resolve to tighten quickly and begin raising interest rates to fight the inflation we’ve been seeeing.
Personal Consumption rose 4.9% in 2021, biggest since 1983
On Friday, the Commerce Department reported the core personal Consumption expenditures Price Index (CPI) rose 4.9% in 2021, slightly higher than the 4.8% Dow Jones estimate, reported CNBC.
A key inflation gauge for the Fed, an increase in the CPI of this magnitude, the largest since September 1983, indicates that the central bank is on the right course in its attempts to stem the rise of inflation.
Of course, this means further downside pressure in the stock market.
Next Week’s Gameplan
When the market starts to whipsaw like this, it’s important to remember to stick to your plan and to always use limit orders, never market orders. Sure, the likelihood of buying at the absolute bottom is slim to none, but as long as I’m Buying in Stages, I know that I’m always getting a good deal comparatively to the last time I bought…
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
Important Disclaimer
Get Irked contributors are not professional advisers. Discussions of positions should not be taken as recommendations to buy or sell. All investments carry risk and all readers must accept their own risks. Get Irked recommends anyone interested in investing or trading any asset class consult with a professional investment adviser to determine if an investment idea is suitable to them and their investment goals.
Bitcoin Price (in USD)
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Weekly Change
Bitcoin Price Action
Is Bitcoin’s bottom in?
On Monday, Bitcoin and the rest of the crypto sector dropped with the rest of the markets, however, Bitcoin found support and bounced significantly from a new weekly low at $32,933.33, coincidentally also at a very key trendline I put in place back in early 2018 which I named the Support of Last Resort. Bitcoin’s bounce found it pop to create a new weekly high at $38,960.00 on Wednesday before it found resistance.
The Bullish Case
Naturally, I’m not the only one tracking the particular trendline where Bitcoin found support, and Bulls point to the big bounce as a good sign that the selling is done for this round with Bitcoin once again heading to higher-highs from here.
The Bearish Case
Bears concede that Bitcoin’s capitulating bounce was, indeed, impressive, however, the Bears also point to March 2020 where the trendline failed. When Bitcoin broke through the support line, it dropped more than -50% before it found support, so many Bears believe a price target of $16,500 or lower is very much on the table now.
Bitcoin Trade Update
Current Allocation: 6.060% (+1.901% from last update)
Current Per-Coin Price: $42,138.82 (-10.544% from last update)
Current Profit/Loss Status: -12.798% (+5.174% from last update)
When Bitcoin continued its collapse over the weekend, it triggered a buy order on Saturday which filled at $35,127.90. The order lowered my per-coin cost -10.544% from $47,105.88 to $42,138.82 and increased my allocation +1.901% from 4.159% to 6.060%.
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:
1.838% @ $33,030
3.387% @ $30,257
4.056% @ $26,482
7.599% @ $23,260
8.201% @ $21,218
12.25% @ $19,168
3.041% @ $15,767
3.041% @ $12,365
3.041% @ $10,481
7.112% @ $8,956
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 April 2021, Bitcoin rallied +51% 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 January 2022, Bitcoin crashed -52% to a low of $32,933.33.
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.
