Summing Up The Week

With the consensus being the Fed would say something hawkish and cause the stock market rally experienced since the beginning of the year to turn around, the markets exploded to the upside when Federal Reserve Chair Jerome Powell came out with, well, relatively even-handed comments about the Fed’s next move… a smattering of both dovish and hawkish statements.

On Friday, the jobs report proved that good news is bad news once more as a strong economy means the Fed will need to hike rates higher for longer.

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

Market News

Wage inflation rose less than expected in Q4

On Tuesday, the employment cost index showed wages increased at a slower than expected pace in the fourth quarter of 2022, an honest-to-god piece of good news for the Federal Reserve’s fight against inflation, reported CNBC.

While the cost to produce and purchase goods and services coming down is certainly important, the Fed has been particularly concerned about wage inflation as increasing wages are the highest cause of inflation. Labor remains the biggest expense for companies, so if labor costs more, everything costs more.

Naturally, the markets rallied on Tuesday (after selling off on Monday) on the back of the news, despite the Federal Reserve meeting looming on Wednesday. Most investors waited on the sideline knowing the Fed meeting would determine the mood of the market for the short-to-moderate term.

Fed does what everyone expects… Market rallies epically!

On Wednesday, Federal Reserve Jerome Powell announced that they increased the benchmark interest rate by +0.25% as the markets expected, but then the markets rallied despite reiteration made by the Chair that rates will be kept high and not cut for some time in the subsequent press conference, reported CNBC.

While it’s true that Powell said the economy’s disinflationary process had started, he also added that it’s far too early to declare victory against inflation. “It would be premature,” he said. “It would be very premature to declare victory, or to think that we’ve really got this.”

Powell added that the market should expect more rate hikes throughout the year and there will be no rate cut in 2023, as some bulls hoped. “Given our outlook, I don’t see us cutting rates this year, if our outlook comes true,” the Fed chair said. “If we do see inflation coming down much more quickly, that will play into our policy setting, of course.”

As a result of what many saw as a dovish press conference, the markets completely flipped what had been a bearish move prior to the press conference to close the day incredibly positive. This price action wasn’t simply in stocks, either, as gold, silver, Bitcoin, and other markets flipped from negative to positive following the conference.

January jobs put unemployment at 53-year low

The party ended on Friday when good news once again became bad news. The Labor Department released January’s nonfarm payrolls report, showing an increase of 517,000, well in excess of the Dow Jones estimate of 187,000 and nearly double December’s gain of 260,000, reported CNBC.

Additionally, the unemployment rate to a 53-year low at 3.4%, far lower than the estimate for 3.6% and the lowest since May 1969. “Today’s jobs report is almost too good to be true,” wrote Julia Pollak, chief economist at ZipRecruiter. “Like $20 bills on the sidewalk and free lunches, falling inflation paired with falling unemployment is the stuff of economics fiction.”

As we’ve come to expect, the markets fell after the report as the Fed is actually hoping for a weaker job market as a sign their ongoing fight against inflation is working.

Next Week’s Gameplan

With stocks (and virtually every asset) seemingly in a new bull market and not just a bear market rally, investors and traders experienced a huge amount of FOMO this week and piled into everything.

Naturally, I’ve been taking profits wherever I can. My selling doesn’t mean there’s no possibility this is actually the start of a bull market, however it’s important for me to prudent. When stocks rally this far this fast, there will be a correction of some sort.

If you have money you want to put to work in the markets, instead of jumping in, consider reviewing the charts of what you want to buy and find key levels of support below the current prices where you can start building a position. I have raised many (if not most) of my buy targets quite a bit higher than the 2022 lows, but I only BUY on RED days, so I use the rally to look at where my positions are setting levels of support and/or finding areas of resistance.

In the meantime, grab some popcorn and enjoy the ride. This rally has been positively vertigo-inducing! 

I’ll see you 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

How long can Bitcoin keep up this rally???

Bitcoin’s rally continued this week, showing virtually no signs of real weakness with the biggest pullback only managing a -6.12% drawdown from peak to trough before reversing course and heading higher once more.

The crypto cracked last week’s high and set a new high at $24,262.18, its new breakout coinciding with the rally in stocks on Thursday. Its new higher weekly low was set Monday at $22,500.00.

The Bullish Case

Bulls believe this is it… this rally is the big one and the crypto’s headed to break through its all-time high at $69,000 and this is your last chance to jump on board or you’ll be left behind at the station. The FOMO is overwhelmingly palpable on Twitter with bulls ridiculing any bear foolhardy enough to present a counter-point.

The Bearish Case

Bears continue to argue that the rally can’t last, however Bitcoin confounds them with each new leg higher. Whenever the crypto seems to consolidate in preparation for a correction, it shows that it was only resting before making new higher-highs. For the moment, the Bulls have the edge, even if every macroeconomic condition seems to be screaming that no asset should be increasing in value in this environment.

Bitcoin Trade Update

Current Allocation: 5.266% (-4.990% since last update)
Current Per-Coin Price: $21,894.77 (-2.317% since last update)
Current Profit/Loss Status: +8.218% (+5.284% since last update)

With Bitcoin maintaining the very precarious level quite a bit above my cost basis but below a very key and powerful cloud of resistance, I continued to reduce my position size. With the end of the month happening mid-week, I knew that the bullish mood of the crypto market could roll over at any given moment, and I continue to believe we’ll see Bitcoin retest its low in the mid-to-upper $15K range (if not lower).

I made several sales throughout the week at any average selling price of $22,929.22 (after trading fees) which reduced my per-coin cost -2.317% from $22,414.03 to $21,894.77. The sales reduced my allocation exposure -5.266% from 10.256% to 4.990%.

I have set higher buying prices where I will replace the Bitcoin I sold, but I will continue using small quantities unless we break through the crypto’s current low.

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:

0.033% @ $20,459
0.055% @ $19,617
0.138% @ $18,720
0.276% @ $17,912
0.276% @ $17,374
0.414% @ $16,657
0.551% @ $15,780
0.689% @ $15,028
0.827% @ $14,021
0.827% @ $13,669

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.