Summing Up The Week

The holiday-shortened week meant that the stock market didn’t entirely return to normal this week as some of the investment professionals choose to wait until next week to return to work full-time from summer vacations.

Regardless, trading volume increased substantially from the summer trading season and may have been the reason for the relative lack of volatility when compared to the substantial choppiness we’ve seen in recent weeks.

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

Market News

“We are in this for as long as it takes…” -The Fed

On Wednesday, in what’s almost becoming a daily dose of inflation talk, Federal Reserve Vice Chair Lael Brainard once again reiterated the Fed’s intent to flight inflation saying, “We are in this for as long as it takes to get inflation down,” reported CNBC.

“At some point in the tightening cycle, the risks will become more two-sided,” Brainard added. “The rapidity of the tightening cycle and its global nature, as well as the uncertainty around the pace at which the effects of tighter financial conditions are working their way through aggregate demand, create risks associated with overtightening.”

Despite the indisputably hawkish comments, stocks rallied following Brainard’s statement, perhaps implying the market priced in the Fed’s hawkishness after Chair Jerome Powell positively destroyed the bear market rally with his 8-minute speech from Jackson Hole, Wyoming a few weeks ago.

Fed Chair Powell reiterates plan of attack on inflation

On Thursday, Federal Reserve Chair Jerome Powell reinforced what Brainard said earlier in the week, stating he is “strongly committed” to fighting inflation in a presentation at the Cato Institute, reported CNBC. 

Powell’s presentation focused on the importance of the Fed not weakening its stance fighting inflation. “History cautions strongly against prematurely loosening policy,” he said. “I can assure you that my colleagues and I are strongly committed to this project and we will keep at it until the job is done.”

Despite his indisputably hawkish comments, the market remained muted to flat following his speech.

Guggenheim thinks stocks should fall another 20% by October

On Thursday, Guggenheim’s noted Chief Investment Officer Scott Minerd said, “we should see stocks fall another 20% by mid-October” in a tweet, which sent media companies like CNBC and Barron’s headed for the headlines proclaiming further bearish action for the stock market.

Minerd points to macroeconomic issues like the energy crisis facing Europe as a result of the Russia-Ukraine war as well as the ongoing COVID-19 lockdowns in China as reasons for the selloff. That, and this time of the year just happens to be historically really bad for the stock market. 

“Given the recent strength over the last few days, it just appears that people are ignoring the macro backdrop, monetary policy backdrop, which would basically indicate that the bear market is intact,” he said in additional tweets. “And given where seasonals are and how far out of line we are historically with where the P/E is, we should see a really sharp adjustment in prices very fast.”

Next Week’s Gameplan

While there are bullish analysts who believe not only will 2022’s lows hold, but that the market will not even test them, I continue to side with the more bearish analysts who believe there is more downside in store from current levels, regardless of whether we test the 2022 lows.

As I’ve been saying since early August, the seasonality of this time of the year is not good for those wanting the stock market to head higher, as is evident by the S&P 500 already having sold off nearly 10% from its summer rally highs. Historically, a selloff of at least 4.5% is typical, so we’ve already exceeded that low target by more than double.

Will the 2022 lows hold?

That’s the question all analysts appear to be asking, however, for me, it’s irrelevant. I will add to my positions above 2022’s lows, but I also have many targets below 2022’s lows in case the market does see an even more painful pullback than what we’ve seen already.

I’ll see you here next Friday!

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

… aaannnd BITCOIN BOUNCE!!!

Bitcoin continued to get slammed with the rest of investment assets this week, crashing through the prior weekly support at $19,513.74 and then falling through the monthly support at $18,892.00 before establishing new support at $18,527.00.

Then, on no news, Bitcoin catapulted itself through last week’s high of $20,582.64 on Thursday evening, rocketing higher before setting a new weekly high at $21,443.63, confounding both the bulls and the bears.

However, given the ferocity of the selloff from Bitcoin’s current monthly high at $25,214.57 set just a few weeks ago, I have adjusted the Downtrend line slightly in order to fit the overall macro environment of bearish activity.

The Bullish Case

Bulls believe Bitcoin’s relatively quick recovery from its lows below $19K to finding support above $21K indicate the amount of buying interest at these levels. Bullish analysts suggest this buying activity indicates that Bitcoin will not break through its 2022 lows.

The Bearish Case

Bears have history on their side. In 2018, Bitcoin appeared to find support for months and months at a key level ~$6,000, periodically testing the low and then recovering. However, the recoveries became weaker and weaker, much like what we’re seeing currently, until Bitcoin lost another -50%.

To make the current situation even more intriguing, even the timeframe was the same. Throughout summer 2018, the $6K level provided support. Then, heading into the fall of 2018, Bitcoin eventually tested $6K, broke through briefly in late August/early September, and completely collapsed in November of the same year, reaching its ultimate bottom in mid-December 2018.

Will a similar selloff befall the crypto sector this year? Only time will tell, but I’m choosing to side with history and not take on any more risk than I currently hold as we wait for Bitcoin’s next big move.

Bitcoin Trade Update

Current Allocation: 16.026% (+0.129% since last update)
Current Per-Coin Price: $23,656.22 (-0.186% since last update)
Current Profit/Loss Status: -10.468% (+3.864% since last update)

When Bitcoin collapsed, it triggered my next buy order which filled at $19,154.40, with the buy lowering my per-coin cost -0.186% from $23,700.19 to $23,656.22 and raising my allocation +0.129% from 15.897% to 16.026% 

I was too pessimistic with my outlook targets and Bitcoin found support before my next price target around $18,388. Accordingly, I have adjusted my buying plan with many more small-quantity buys targeting key potential levels of support found over the past week.

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:

0.141% @ $18,789
0.411% @ $18,037
0.658% @ $17,843
0.900% @ $17,057
1.406% @ $16,325
1.406% @ $15,208
1.406% @ $14,090
1.406% @ $13,138
1.406% @ $11,489
1.406% @ $10,060

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.
• In August 2022, Bitcoin rallied +44% to a high of $25,214.57.
• In September 2022, Bitcoin dropped -27% to a low of $18,527.00.

Where will Bitcoin go from here? Truly, anything is possible…

What if Bitcoin’s headed to zero?