Summing Up The Week

The first few trading days of a new year seem to typically be filled with confusion about which way the market wants to go, and 2023 was certainly no different. The first two days saw flat performance, Thursday sold off, and Friday rallied. Confusion.

The rapid fluctuation and volatility in stock prices throughout the week represents the perfect example of why I don’t try to predict which way the market wants to go – I simply have a plan for what I’m going to do if stocks raise in price and what I’m going to do if stocks drop in price.

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

Market News

Job openings remain strong despite rate hikes

On Wednesday, the Job Openings and Labor Turnover Survey (JOLTS) showed 10.46M available positions November, above the 10.0M forecast by FactSet, reported CNBC. Many analysts expected the Federal Reserve’s interest rate hikes would have negatively affected the job market by this point, however this does not appear to be the case as the economy remains strong.

Despite the JOLTS report representing a potential “good news is bad news” event, the markets did not sell off as a result of the report. Some pundits suggested that the market had already priced in the potential for a strong job openings number which resulted in the lack of a significant selloff on Wednesday.

Private payrolls grew by 235K in December, above estimates

On Thursday, the “good news is bad news” finally roiled the markets when ADP’s private payrolls report showed an increase in jobs of 235,000 in December versus Dow Jones estimates for 153,000, reported CNBC. Whereas the markets remained calm and even rallied on Wednesday following a strong JOLTS report as well as Fed minutes showing no plan to cut rates any time in 2023, stocks finally reacted on Thursdaay and sold off.

A strong economy in the face of inflation is one thing, a growing economy in the face of the Fed’s actions indicates the Fed’s actions might not even be taking effect, yet. With the Fed clearly indicating their sole mandate remains to tame inflation, stocks are naturally in the crosshairs as nothing the Fed’s doing seems to be having the effect they’re desiring.

Nonfarm payrolls beat, wage growth less than expected

On Friday, the nonfarm payrolls report showed 223,000 new jobs in December stronger than the 200,000 expected, but wage growth went up 4.6%, less than the 5% estimate, reported CNBC.

If you just read the headlines, you might have wondered why “good news is good news” on Friday since nonfarm payrolls coming in higher than expected would indicate a strong economy – a bad sign for the Federal Reserve. Well, in addition to strong jobs, there was a smaller increase in wages than expected. Since wage growth is a key element to inflation, the market reacted positively, believing the wage inflation being less than expected could be a sign that inflation has peaked.

To me, this isn’t news to get excited about. The Federal Reserve has repeatedly been clear about their approach to this rate cycle – they will raise rates to restrictive policy (an interest rate above the inflation rate) and then keep it there for a “long time.” In the early 1970s, the Fed fought inflation and thought it had won easing the interest rate only to have inflation come back stronger than before. Fed Chair Jerome Powell has made it crystal clear they will not repeat that mistake this time.

Accordingly, while the market reacted positively to Friday’s jobs report, Once market participants finally realize the Fed is not going to pivot, and since many analysts have still not reduced their expectations for earnings this year, I think there is significant downside risk in the market.

I don’t like trying to predict which way the market will head, but I believe that a test of 2022 lows is almost certain, and the potential for the market to make lower-lows is high.

Next Week’s Gameplan

So far, 2023 is kicking off exactly the way I expected – more pain. Nothing has changed in the economy, nothing has changed in the markets, so expecting a positive catalyst simply because we flipped a page in a calendar is a Fool’s Errand. 

Despite the generally negative tone up until Friday, I actually took profits in a couple of positions in my Investments in Play portfolio. That’s just the way it works – sometimes, stocks go up even in dark times which provides an even stronger reason to trim positions when you’ve got profits to take.

As I like to say: take profits when you can, otherwise the market will take them from YOU.

I hope everyone’s rested and ready for another exciting year in the markets, because, ready or not, it’s already on us!

I’ll see everyone back here next week!

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

Another week of no action…

Bitcoin remains stubbornly within its trading range, neither breaking $17,060.86, the weekly upside high, nor breaking $16,273.40, the weekly low. Accordingly, unless you’re the most nimblest of day-traders (which I certainly am not) this is a time to sit on my hands and reflect, not to make any moves.

The Bullish Case

Bulls believe that this period of rangebound trading represents consolidation and accumulation. Bulls continue to try to find evidence that whales (larger buyers) are buying up Bitcoin as a sign they believe the space is headed higher than here.

The Bearish Case

Bears continue to have the upper-hand given the macroeconomic situation. With Europe about to head into recession and the Fed remaining stubborn with the interest rate in the U.S., the lack of free money means very liquidity to flow into Bitcoin and the rest of the crypto space. It’s absolutely key to remember that Bitcoin has never existed in a tightening cycle – it has always been a hedge against fiat debasement. Despite the eventuality that fiat will likely flop, this is a tightening cycle with the U.S. Dollar gaining strength. For me, the Bear thesis is the one I choose to follow right now.

Bitcoin Trade Update

Current Allocation: 18.513% (Unchanged since last update)
Current Per-Coin Price: $22,582.74 (Unchanged since last update)
Current Profit/Loss Status: -25.742% (+1.004% since last update)

With Bitcoin trading in a such a very tight range, there was nothing to do this week but pop some popcorn and watch the price action. As I mentioned above, I do remain firmly sided with the Bears, so I continue to have my buying quantities set very small until prices become more favorable at much lower levels than where we are right now.

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% @ $16,277
0.028% @ $15,905
0.028% @ $15,525
0.056% @ $14,725
0.085% @ $13,669
0.113% @ $12,917
0.113% @ $12,489
0.113% @ $12,123
0.141% @ $11,606
0.141% @ $11,337

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.