Summing Up The Week

The markets flew into the week with far too much bullish optimism only to have that hopeful outlook sliced and diced by a very hawkish Federal Reserve on Wednesday and weak economic figures later in the week.

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

Market News

Consumers see inflation easing in 2023

Markets rallied on Monday after the New York Federal Reserve survey showed consumers expect inflation to ease considerably in 2023, reported CNBC.

Consumer sentiment has a lot to do with the U.S. economy since, well, the U.S. is a consumer-driven economy. Much of the GDP comes from the sale of goods and services as opposed to other countries which derive their GDP from the production of goods.

Respondents see one-year inflation running at a 5.2% pace in 2023, down -0.7% from the survey’s reading in October. The 3-year projection also dropped -0.1% from 3.1% to 3.0% and the 5-year outlook dropped by the same amount to 2.3%.

CPI rose less than expected… inflation easing?

On Tuesday, markets, investors, and consumers got the report they were hoping for: the Consumer Price Index (CPI) rose 0.1% from the previous month to 7.1% from last year, a beat of expectations for 0.3% and 7.3%, respectively, reported CNBC.

“Cooling inflation will boost the markets and take pressure off the Fed for raising rates, but most importantly this spells real relief starting for Americans whose finances have been punished by higher prices,” said Robert Frick, Corporate Economist with Navy Federal Credit Union. “This is especially true for lower-income Americans who are disproportionately hurt by inflation.”

While a peaking inflation rate is a good sign, I will continue to be a “Debbie Downer” and warn that any positive CPI indicates prices are still increasing. While the markets did rally on Tuesday’s news and could potentially rally through the year-end, I’m still bearish about how the market will perform when the calendar rolls over into 2023.

Fed raises rates +0.50%, shows no sign of slowing

On Wednesday, the moment everyone was waiting for happened when Federal Reserve Chairman Jerome Powell gave his press conference announcing another +0.50% hike to the benchmark interest rate, as expected, and gave no signs of slowing the pace of hikes, reported CNBC.

Many bullish analysts were theorizing that the Federal Reserve would slow the pace of hikes after December, however the statement’s verbiage remained unchanged from November, indicating more hikes are likely.

“Inflation data received to far for October and November show a welcome reduction in the monthly pace of price increases,” Chair Powell said at his post-meeting news conference. “But it will take substantially more evidence to have confidence that inflation is on a sustained downward [path].”

Stocks had rallied going into the release but immediately sold off following the hawkish statement and Powell’s press conference. The release reinforced my bearish stance that there are many headwinds facing markets and the first half of 2023 could be rough for stocks.

Retail sales fell 0.6% in November

On Thursday, retail sales fell 0.6% in November according to a study from the Commerce Department, far exceeding Dow Jones estimates for a 0.3% drop, reported CNBC. A weakening consumer is naturally not a good sign for the overall economy as Americans are feeling the pain of inflation.

“With weak global growth and the strong dollar compounding the domestic drag from higher interest rates, we suspect this weakness is a sign of things to come,” Andrew Hunter, senior U.S. economist at Capital Economics, wrote of the retail report.

Next Week’s Gameplan

Unfortunately, my bearish inclinations seem to be playing out with the possibility for a Santa Claus Rally becoming less and less likely as the bad news rolls in. This week was a busy one for my portfolios with profit-taking in some positions on rallies and adding to others on selloffs.

On the bright side, next week should be a little less eventful as the majority of big known news events smacked the markets around this week, instead. As always, plan for both the upside and the downside so you’ll be prepared to handle whatever the market throws your way.

In the meantime, 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

“It’s a (Bull) Trap!”

Between Sam Bankman-Fried being arrested in the Bahamas (finally!) and Congress holding very negative hearings into both the FTX scandal and crypto as a sector (source: CNBC), it was bizarre to see Bitcoin and the rest of the sector rally for most of the week.

Bitcoin ended up breaking through both the weekly and monthly resistance levels at $17,424.59 and $18,140.62, respectively, and even made it through the Downtrend line before being rejected shortly afterward, setting a new level of resistance at $18,385.36 and retreating when Powell’s commentary wasn’t as dovish as some had hoped for. 

In fact, the counterintuitive price action led me to take profits in one of my altcoin positions (I only cover Bitcoin here because the others are just far too speculative). As the adage goes, “better lucky than good,” as the market rolled over shortly after I took my profits and ran for the exits myself.

The Bullish Case

Historically, the trend of higher-highs and higher-lows is a bullish pattern, so many crypto Bulls were particularly excited when Bitcoin rallied over $18K on Wednesday before the Fed’s press conference.

The Bearish Case

Despite the bullish price action this week, Bears continue to hold the upper hand. The Downtrend line resolutely rejected Bitcoin’s attempt and the Federal Reserve’s hawkish commentary virtually guarantees Bitcoin will remain in a downward channel, particularly with all the unknown news coming from Congress, the DoJ, and more.

Bitcoin Trade Update

Current Allocation: 18.462% (Unchanged since last update)
Current Per-Coin Price: $22,606.17 (Unchanged since last update)
Current Profit/Loss Status: -25.392% (-1.315% since last update)

Another week, another bout of rangebound trading meaning Bitcoin didn’t hit my buying or selling targets. Hand-sitting, it is. However, thanks to all the negative news that hit the markets and crypto, specifically, I think the next few weeks could bring some… interesting-looking price action.

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:

0.028% @ $16,339
0.028% @ $15,905
0.028% @ $15,566
0.055% @ $15,187
0.083% @ $14,587
0.111% @ $13,904
0.138% @ $13,614
0.138% @ $12,986
0.498% @ $12,406
1.107% @ $11,909

Not Your Keys, Not Your Crypto…

In light of everything happening with brokerages, I no longer keep any of my crypto on an exchange and I only keep enough USD on the exchange to execute my next few buys. I use multiple cold wallets from the brands Ledger and Trezor to hold my crypto (click the links to access the direct sites, and I receive no affiliate benefits from these links).

Additionally, I have now divided my allocated USD between two different exchanges – Gemini and Coinbase – in case one (or both) becomes insolvent. Disclaimer: We both receive a bonus if you use either my Gemini or Coinbase referral links to open accounts.

Given everything that happened with FTX and Sam Bankman-Fried claiming customer funds were safe only to have it go completely bankrupt, I do not trust anyone in the space, even with Coinbase (COIN) being publicly traded (and one of my own Investments in Play positions).

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 November 2022, Bitcoin crashed -78% to a low of $15,460.00.

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

What if Bitcoin’s headed to zero?

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.