Summing Up The Week

The news remains bad when it comes to the Federal Reserve’s fight against inflation. Despite its best efforts, the combination of rising inflation indicators and weakening consumer confidence does not spell good things for the markets in the short- to medium-term.

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

Market News

Consumer Confidence falls to 9-year low…

The stock market was moving along fine until the University of Michigan released its Consumer Confidence Index with a surprisingly low value not seen since 2013, reported Yahoo! Finance. Expectations for the survey, which U of M performs monthly, predicted a reading of 100. Instead, the index fell from 103.2 in May to 98.7 for June.

“Consumers’ grimmer outlook was driven by increasing concerns about inflation, in particular rising gas and food prices,” said Lynn Franco, senior director of economic indicators at The Conference Board, the department at the University of Michigan which administers the index. “Expectations have now fallen well below a reading of 80, suggesting weaker growth in the second half of 2022 as well as growing risk of recession by year-end.”

As a result, the markets sold off pretty substantially with the S&P 500 finishing the day down -2.01%, the Dow Jones down -1.56%, and the NASDAQ falling -2.95%.

Inflation reigns! PCE rose 4.7% in May, near multi-decade highs

Despite many hoping the Federal Reserve’s actions were tamping down inflation, on Thursday, the Commerce Department revealed that its core Personal Consumption Expenditures (PCE) index rose 4.7% in May, a multi-decade high, reported CNBC. The PCE measures prices excluding food and energy and is one of the Fed’s preferred gauges for how high inflation is raging. In short, inflation is still running rampant.

Over the past week, Fed Chairman Jerome Powell said before Congress that he is closely watching gas price averages and headline numbers, so the PCE coming in hot means that a 0.75% interest rate increase for July is highly likely.

As a result, market selling grew in its intensity on Thursday.

Next Week’s Gameplan

Until inflation starts to weaken, the gameplan remains the same as it has been for much of 2022 – use any rally to take profits or shrink positions and sit on my hands during the doldrums to wait for the next selloff where I can add to positions at lower levels.

There’s at least one small spot of good news, though – June is over. 😉

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

Let the crypto liquidations begin…

With Bitcoin struggling to stay above $20K, struggling crypto firms who flew too close to the sun began experiencing liquidation problems… or worse. On Wednesday, Three Arrows Capital (3AC), a crypto hedge fund, collapsed after being unable to pay back margin loans it placed on poor bets, reported CNBC.

Later on Wednesday, crypto exchange CoinFlex announced withdrawals would remain frozen past Thursday, its previously-planned release date, CNBC also reported.

Then, on Thursday, sources revealed that crypto exchange FTX was closing on a deal to buy the lender BlockFi for $25 million, a whopping -99% discount from its most recent valuation of $4.8 billion, reported CNBC.

While I remember a lot of speculative investing and trading during the 2017 bull run to a high of $20K, there certainly feels like there is even more this time around, if that’s possible. These ongoing liquidity issues, with rumors of some truly epic downfalls potentially right around the corner, lead me to reaffirm my previous expectations that the bottom is far from in for Bitcoin and the rest of crypto.

While Bitcoin did set a slightly higher weekly high above its past $21,711.00 mark at $21,866.00 on Sunday, there was no follow-through price action and Bitcoin quickly sold off from that high. The crypto briefly found support on the Next Support of Last Resort trendline on Tuesday, but quickly lost that support to create a weekly low at $18,603.00 on Thursday.

None of this price movement is a strong sign for bulls in the space.

The Bullish Case

Bulls continue to rally around the hope that the bottom is in, claiming that Bitcoin’s apparent stability around the $17.5K-$20K mark indicates that it will find support at these levels while “big whales” accumulate more crypto at these “discounted prices.”

I’m not so sure…

The Bearish Case

Bears continue to point out how Bitcoin’s current price consolidation appears very weak, and I concur.

There is very little buying volume and the ongoing negative news coverage of so many failing crypto firms does not inspire confidence in anyone considering adding to their positions.

Not to mention newbies not currently in the space are likely terrified to start buying after seeing Bitcoin sell off 70% since its All-Time High.

Bitcoin Trade Update

Current Allocation: 16.026% (+0.088% since last update)
Current Per-Coin Price: $23,780.95 (-0.129% since last update)
Current Profit/Loss Status: -19.015% (-8.328% since last update)

I once again started buying when Bitcoin lost support on Wednesday night, triggering my buy order at $19,154.40. The very small quantity only lowered my per-coin cost -0.129% from $23,811.74 to $23,780.95, and raised my allocation an equally small +0.088% from 15.938% to 16.026%.

I only used tiny quantities as I believe Bitcoin will test its 2022 lows, at the very least. My expectation is that the crypto will hit at least $14K on the downside as Bears target putting the Celsius Network fully out of business.

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:

0.202% @ $18,989
0.202% @ $18,506
0.202% @ $18,030
0.202% @ $17,657
0.607% @ $16,339
1.012% @ $15,677
1.822% @ $14,932
2.834% @ $14,318
3.239% @ $12,027
4.858% @ $10,488

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 (possible moves include drops of -90% or more and gains of +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.
• In December 2019, Bitcoin crashed -54% to a low of $6430.00 in December 2019.
• In February 2020, Bitcoin rallied +64% to $10,522.51.
• 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 June 2022, Bitcoin crashed -75% to a low of $17,567.45.

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.