Summing Up The Week

Despite extremely hawkish Fed comments kicking off the week, all three major stock indexes showed impressive bullish performance this week, rallying significantly all the way into Thursday’s CPI report before calming down… slightly.

On Friday, many of the moneycenter banks whiffed their quarters. Combine that with more recession talk from the #1 most respected bank CEO, Jamie Dimon, and markets pulled back on the week’s last trading day.

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

Market News

Powell warns Fed may make “unpopular decisions”

In a speech delivered to Sweden’s Riksbank on Tuesday, Federal Reserve Chairman Jerome Powell said, “price stability is the bedrock of a healthy economy… but restoring price stability when inflation is high can require measures that are not popular,” reported CNBC. However, despite all Fed bankers speaking in unison about the intended to plan to hike interest rates and leave them there for a long time, the markets seem to continue to not take them seriously, as stocks rallied.

Powell also addressed the importance of an independent central bank, reinforcing the idea that even if politicians complain about the Fed’s decisions, they will persevere, “The absence of direct political control over our decisions allows us to take these necessary measures without considering short-term political factors.” 

December CPI fell 0.1%, in line with expectations

On Thursday, the moment all market participants were waiting for the entire week finally happened – the Labor Department released the Consumer Price Index (CPI) for December showing a drop of 0.1% for the month, reported CNBC. However, even with the decline, the basket of goods and services still rose 6.5% from a year ago, showing that inflation is still very much with us.

“Inflation is quickly moderating. Obviously, it’s still painfully high, but it’s quickly moving in the right direction,” said Mark Zandi, Chief Economist at Moody’s Analytics. “I see nothing but good news in the report except for the top-line number: 6.5% is way too high.”

Initially, the markets rallied on the news before rolling over and meandering around quite flat on Thursday.

The Big Banks kick off earning season with a… meh?

On Friday, the major moneycenter banks like JPMorgan Chase (JPM), Wells Fargo (WFC), Citibank (C), and Bank of America (BAC) kicked off the start of earnings season. JPMorgan reported a great quarter but CEO Jamie Dimon said that while he still sees a recession in the near future, it will likely be mild, reported CNBC.

“We still do not know the ultimate effect of the headwinds coming from geopolitical tensions including the war in Ukraine, the vulnerable state of energy and food supplies, persistent inflation that is eroding purchasing power and has pushed interest rates higher, and the unprecedented quantitative tightening,” Dimon said.

With the other banks reporting mediocre to downright bad quarters (I’m looking at you, Citi!) the markets did pull back. However, given the run stocks had throughout the majority of the week, it was definitely time for the bulls to rest.

Next Week’s Gameplan

We might be out of the woods when it comes to economic releases and Fed speak, but we’re only barely entering the thick of earnings season. From here, we’ll get to see what’s really been happening at companies as they revise their outlook for 2023.

What happens in the next three weeks will be instrumental in guiding the mood of the markets for at least the next few months. If companies remain resilient, stocks may hold up, however, if companies start to warn about their upcoming earnings potential, the market may get weak in a hurry.

In the meantime, I’ll see you back here in a week so we can once again review the week’s action in the greatest casino of all time!

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

Could crypto winter actually be over??

Bitcoin’s inexplicable rally continued this week with the crypto breaking through the key Downtrend line, breaking through the weekly and monthly highs before finally finding resistance at $19,115.85, its new weekly and monthly high.

Using Parallel Channels, I’ve created a new potential Downtrend (?) line, although its resistance power will have to be tested in the coming weeks to confirm its legitimacy.

Given the macroeconomic conditions being negative, the only positive news I was able to find was a story on Wednesday about how John Ray, the famous executive for helping reclaim lost assets when Enron went bankrupt,  has helped failed brokerage FTX reclaim $5 billion in “liquid” assets according to lawyers, reported CNBC. 

Perhaps the crypto market believes that now stakeholders and users in FTX may be able to reclaim at least some of their lost assets that the Crypto Winter is over?

The Bullish Case

Bulls finally got the price action and corresponding rally they were hoping for. Many bulls claim that the 2022 low at $15,460.00 and Bitcoin will now consolidate before starting the next Bull Market. Given this week’s amazing rally, they could be right…

The Bearish Case

Bears must concede that the past week’s rally was, indeed, impressive. However, now that Bitcoin has had such a significant run, the crypto has become overbought on the Daily Relative Strength Indicator (RSI), perhaps hinting at a correction coming in the next week. The big question will be… how much will Bitcoin give back when it pulls back?

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: -16.113% (+9.629% since last update)

With Bitcoin rallying so tremendously yet still nowhere near my cost basis at $22,582.74, this was another week of sitting back and watching price action. While many bulls were claiming this will be the last chance to buy Bitcoin below $18,000, I remain skeptical.

At 18.513%, I don’t have as much of an allocation as I would like if this truly was the bottom, however I’m more than comfortable with the position I have. With the memory of the 2018-19 Crypto Winter seared into my brain like a scalding brand, I have no interest in underestimating Bitcoin’s ability to potentially sell off significantly more even than its 2022 lows.

All that being said, after Bitcoin’s impressive performance over the past week, I have raised my next buy target to a little less than 10% off Bitcoin’s highs to account for a typical bull market pullback… just in case we’re actually out of Crypto Winter.

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% @ $17,471
0.028% @ $16,871
0.028% @ $16,477
0.028% @ $15,967
0.028% @ $15,656
0.028% @ $14,835
0.055% @ $14,124
0.083% @ $13,669
0.111% @ $13,296
0.138% @ $13,007

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.