Summing Up The Week

Despite geopolitical concerns still mounting over the potential of Russia invading Ukraine, the market remained fixated on inflation and what the Federal Reserve intends to do to fight it… until Friday.

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

Market News

Consumer debt totals record $15.6 trillion

On Tuesday, the Federal Reserve released data showing that consumer debt totaled $15.6 trillion at the end of 2021, an increase of $333 billion, the biggest annual rise since 2003, reported CNBC.

One of the largest segments of consumer debt to see increases were mortages, which saw a rise of $890 billion to nearly $11 trillion with originations totaling more than $4.5 trillion for the year, also a new record.

With the Fed still planning to raise interest rates, researchers believe the rising-rate environment could affect household cash flows, naturally.

Inflation soars to 7.5%, highest since 1982

You have to wonder how far out of hand things have gotten for the Consumer Price Index report (CPI) to surprise anyone as the entire market thought it would come in hot. Yet, the CPI shocked everyone on Thursday when inflation surged 7.5% on an annual basis – rising 0.6% in January alone – the highest figure since 1982, reported CNBC.

Dow Jones had estimated 7.2% for the inflation figure, but it turns out that the CPI was able to come in even hotter than that already-high figure.

“With another surprise jump in inflation in January, markets continue to be concerned about an aggressive Fed,” said Barry Gilbert, LPL Financial asset allocation strategist. “While things may start getting better from here, market anxiety about potential Fed overtightening won’t go away until there are clear signs inflation is coming under control.”

The bond market reacted as investors went to cash, causing the 10-year Treasury yield to top 2%, its highest level since even before COVID, and virtually guaranteeing that the Fed will take action at its March meeting.

White House warns Russia could invade Ukraine during Olympics

The markets largely ignored the potential of Russia’s invasion of Ukraine up until Friday when the White House warned that Russia could invade during the Olympic Games, reported CNBC.

The markets nearly moved into a freefall following the announcement with the S&P dropping significantly and almost closing the day down -2%. Naturally, geopolitical concerns negatively affect stocks… except for gold and oil stocks which rose substantially by the end of the day.

Next Week’s Gameplan

While I do continue to keep the potential of a Russian Invasion into Ukraine very much in my planning, the majority of my work revolves around the whipsaw action we’re seeing thanks to the inflation concerns. 

Since we haven’t been seeing the dramatic price action we saw in January (truly, there’s a general lack of market-wide action lately), the entirety of my moves have played out on a position-by-position basis; it’s still very much a Stock Picker’s Market right now.

Just remember to make a shopping list and buying plan in advance to take advantage of volatility on a market-wide or sector- / stock-specific basis.

Have a great week, everyone!

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 rallying or is it reaching resistance?

Bitcoin saw one heck of a bull rally this week, breaking through last week’s high to create a new weekly high at $45,855.00.

However, if you look at the charts, everyone’s favorite crypto found resistance at the Theoretical Resistance trendline that I’ve had on the chart for some time now.

I’m also continuing to adjust the Downtrend? line, but it’s not developing any significance until we so what Bitcoin does next, at least for the moment.

The Bullish Case

Bulls continue to state that the Support of Last Resort represents the ever-increasing bottom for Bitcoin and that the crypto will see a new all-time high of at least $100,000 before the end of 2022.

The Bearish Case

Bears believe the resistance Bitcoin has found just under $46,000 will be significant enough that the crypto will crash back down to its lows before developing enough strength to get back to its previous all-time high. Additionally, the rousing chorus of “$20,000!” continues with many Bears predicting Bitcoin still needs to break down to the $20K mark before it can head higher.

Bitcoin Trade Update

Current Allocation: 5.934% (-0.086% from last update)
Current Per-Coin Price: $42,105.44 (-$33.38 from last update)
Current Profit/Loss Status: +3.535% (+9.750% from last update)

With Bitcoin rallying all week, it was time to take some allocation off the table with a sell order that filled at $45,216.44. The sale locked in +28.719% in gains on some of the Bitcoin I bought at $35,127.90 back on January 22.

The order only reduced my per-coin cost -$33.38 from $42,138.82 to $42,105.44, but served the more important purpose of reducing my allocation -0.086% from 6.060% to 5.934%, freeing up capital should Bitcoin test the lows once more.

Since this trade started on November 10, 2021, the Buying in Stages technique has lowered my per-coin cost a total of -35.250% from $65,027.96 to $42,105.44.

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:

0.501% @ $34,507
0.905% @ $33,555
2.977% @ $30,884
3.409% @ $28,883
1.050% @ $27,207
7.285% @ $23,909
7.901% @ $21,804
12.42% @ $19,582
3.165% @ $15,435
3.165% @ $12,765

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.

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.