Summing Up The Week
Despite a shortened four-day holiday week, the markets saw some serious price action this week when the S&P 500 sold off -2.00% in a single day to kick off the week on Tuesday! With continued hawkish commentary from the Federal Reserve Bank, is it possible the market is finally taking them seriously?
Let’s take a look at the news that moved the markets this week…
Market News
Fed President James Bullard pushes for 0.50% rate hike
On Wednesday, St. Louis President James Bullard said he would prefer a more aggressive interest rate hike now so the FOMC could have a better chance to bring down inflation in an interview with CNBC.
Following the Federal Reserve’s last meeting, many analysts believed the Fed would continue to raise interest rates at the more historically common 0.25%. However, after last week’s hotter than expected inflation reports, the more aggressive 0.50% hike is back on the table for the Fed’s next meeting in March.
Despite his push for a higher rate hike, Bullard is cautiously optimistic, “If inflation continues to come down, I think we’ll be fine,” he said. “Our risk now is inflation doesn’t come down and reaccelerates, and then what do you do? We are going to have to react, and if inflation doesn’t start to come down, you know, you risk this replay of the 1970s … and you don’t want to get into that. Let’s be sharp now, let’s get inflation under control in 2023.”
Fed meeting minutes show FOMC ready to fight inflation… still
While the market can baffle at times, sometimes it acts exactly as it should.
Many analysts and pundits were talking about how important the release of the minutes from the Federal Reserve’s last meeting would affect the markets (one way or the other). However, when they came out on Wednesday. the Fed minutes showed the members maintain their resolve to fight inflation, reported CNBC.
Since the minutes reflected exactly what all the Fed members have been saying, the market didn’t move at all, remaining almost eerily flat. To me, that was the correct outcome – no sudden rally, no sudden drop, a news event that should have been entirely priced in turned out to be, well, entirely priced in. Go figure!
Fed’s key inflation measure rose 0.6%, more than expected
On Friday, the Personal Consumption Expenditures (PCE) index, the Fed’s preferred inflation metric, rose 0.6%, more than the 0.5% expected by analysts, reported CNBC. With so many key inflation metrics – CPI, PPI, PCE – coming in hotter than expected, it’s starting to look a lot like the Federal Reserve has a lot more wood to chop.
To emphasize the point, Cleveland Fed President Loretta Mester told CNBC that “the level of inflation is still too high.” At this point, the chance of a 50-basis point (0.5%) rate hike in the benchmark interest rate has gone from 0% to 33% according to the CME Group. Naturally, the markets sold off on this news – bad news is bad news.
Next Week’s Gameplan
The rally we’ve seen since the start of 2023 finally saw the first cracks in its foundation with this week’s -2% single-day drop in the S&P 500. Once again, with no bullish catalysts on the horizon, I remain defensive, taking profits whenever prudent (like following Nvidia’s (NVDA) epic pop on Thursday).
I remain true to my rule: Buy on RED days, Sell on GREEN days. Or, said another way: I buy into weakness and sell into strength, contrary to whatever the movement is.
All that being said, it’s always possible that the markets could return to rally mode, so just stay on your toes and I’ll see you all 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
Important Disclaimer
Get Irked contributors are not professional advisers. Discussions of positions should not be taken as recommendations to buy or sell. All investments carry risk and all readers must accept their own risks. Get Irked recommends anyone interested in investing or trading any asset class consult with a professional investment adviser to determine if an investment idea is suitable to them and their investment goals.
Bitcoin Price (in USD)
%
Weekly Change
Bitcoin Price Action
Bitcoin’s gotten all bouncy…
Bitcoin established a higher weekly low after we went to print last Friday at $23,344.12 and a new weekly high at $25,288.88 although a lot of analysts don’t think that counts as a new high since it wasn’t a substantial break of $25,526.83.
With the amount of day-to-day whipsaw price action the crypto’s exhibiting, I don’t have whole lot of faith in that weekly support, so I’m using the low from a couple weeks ago at $21,366.45 as my true guide whether this bull rally maintains its energy (followed by the monthly low at $20,370.01).
The Bullish Case
Bulls believe that the current rally could take Bitcoin all the way to $45K, continuing to stay true to the concept that the Crypto Winter has finally ended.
The Bearish Case
Bears point out that there is nothing in the macroeconomic environment that should spur Bitcoin higher. Additionally, given that Bitcoin has never existed in a rising-rate environment, Bears point out that using past price action and fractal patterns could be challenging as Bitcoin may react in ways it hasn’t, historically speaking.
Bitcoin Trade Update
Current Allocation: 2.035% (-0.427% since last update)
Current Per-Coin Price: $20,514.93 (-2.541% since last update)
Current Profit/Loss Status: +16.152% (+2.627% since last update)
When Bitcoin broke through $25K over the weekend, I once again took more profits, locking in an average selling price of $24,041.73 (after fees) which lowered my per-share cost -2.541% from $21,049.85 to $20,514.93 and reduced my allocation -0.427% from 2.462% down to 2.035%.
If Bitcoin breaks through its new resistance around $25K to a much higher stage, I will once again transfer additional Bitcoin to the brokerage and take more profits as I believe a significant pullback is virtually certain in the coming months.
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:
0.019% @ $20,424
0.137% @ $19,775
0.274% @ $19,424
0.411% @ $18,809
0.548% @ $18,285
0.685% @ $17,926
0.822% @ $17,333
1.096% @ $16,836
2.055% @ $16,367
2.740% @ $15,635 <– Slightly above the current Crypto Winter low
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?
The only reason I speculate in the cryptocurrency space is I truly believe Bitcoin isn’t headed to zero. I am prepared for that possibility, however, by knowing I could potentially lose all of the capital I’ve allocated to this speculative investment. Professional advisers recommend speculating with no more than 5% of an investor’s overall assets. Personally, I’ve allocated less than that to speculating in crypto. I feel that anyone who doesn’t fully believe in the long-term viability of cryptocurrency would be better served not speculating in the space. On a good day, this asset class isn’t suitable for those with weak stomachs. On volatile days, the sector can induce nausea in the most iron-willed speculator. If a speculator isn’t confident in the space, the moves will cause mistakes to be made.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.
