Summing Up The Week

With no significant news catalysts this week, the markets remained hostage to the trickle of news events coming from the Federal Reserve Bank in the form of interviews with Fed presidents who may or may not be voting members on the FOMC depending on the day of the week.

Accordingly, stocks remained extremely choppy throughout the week. Let’s take a look at the news that moved the markets (but not that much)… 

Market News

Mortgage demand drops to 28-year low

On Wednesday, the Mortgage Bankers Association’s index showed mortgage applications to purchase a home dropped 6% in the last week compared to the previous week, leaving the index at a 28-year low, reported CNBC.

The housing market is a key target for the Federal Reserve’s fight against inflation as housing prices have skyrocketed since the pandemic started. However, the United States is woefully lacking in home inventory with the majority of houses backed with 30-year mortgages carrying 3-4% interest rates. In other words, existing homebuyers have no desire to roll into a mortgage rate at 6%+ so they won’t sell.

“Data on inflation, employment, and economic activity have signaled that inflation may not be cooling as quickly as anticipated, which continues to put upward pressure on rates,” said Joel Kan, an MBA economist. “Refinance applications account for less than a third of all applications and remained more than 70% behind last year’s pace, as a majority of homeowners are already locked into lower rates.” 

The paradox has resulted in homebuilder stocks like D.R. Horton (DHI) and Toll Brothers (TOL) actually rallying in an economy that’s specifically targeting their industry. The U.S. needs new homes, so homebuilders are able to sell nearly every entry-level (and mid-level) priced home they produce.

Fed Bostic gives remarks perceived as dovish

On Thursday, Atlanta Federal Reserve President Raphael Bostic questioned whether monetary policy is slipping and whether slower growth and lower inflation is already underway during a speech he gave, reported Reuters.

As a result, the markets, which had been soft going into Bostic’s speech, made an about-face and closed Thursday much higher with hopes that the Fed might stay with 0.25% rate hikes at their next meeting rather than bringing out the 0.50% hike as some fear.

Oddly, at the same time, Fed Governor Christopher Waller gave decidedly hawkish comments as he said the jury is still out on what the next meeting might bring with jobs and inflation indicating a strong economy, to his perspective.

“Last month we received a barrage of data that has challenged my view … that the Federal Open Market Committee was making progress in moderating economic activity and reducing inflation,” Waller said in comments Thursday to the Mid-size Bank Coalition of America, an organization of around 100 financial institutions with assets between $10 billion and $100 billion.

“On the other hand if those data reports continue to come in too hot, the policy target range will have to be raised this year even more to ensure that we do not lose the momentum that was in place,” Waller said.

Next Week’s Gameplan

With the next meeting off the FOMC still a few weeks away (March 21-22), the stock market will likely continue to remain choppy in the coming days unless a pivotal news event pushes the markets higher or lower.

At risk of sounding like a broken record, my approach is always the same: have a plan for what I’m going to do if stocks go up tomorrow, have a plan for if stocks go down tomorrow, and have some popcorn waiting to be popped if stocks remain flat tomorrow.

I’ll see you all back 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

Silvergate rips the rug out…

Bitcoin pulled back last Friday, breaking through the previous weekly support at $23,344.12 before establishing new potential support with a low right below the Downtrend line at $22,520.00. 

However, on Wednesday night, Silvergate Capital (SI), a bank that specializes in dealing with crypto institutions, announced that they would delay their annual report (10-K) despite having reported the quarterly earnings just a few weeks ago. Investors justifiably panicked, believing that Silvergate may be the next domino to fall in what seems to be a never-ending Crypto Winter.

Bitcoin lost its new support and crashed through the Downtrend line before finding new potential support at $21,988.02.

The Bullish Case

Bulls believe that the Silvergate Capital issue is contained, and once the bank liquidates its holdings to steady itself, Bitcoin will return to the Bull Market. Many, if not most, bull pundits believe the low at $15,460.00 is very much in, with some suggesting Bitcoin will never drop through $20K again.

The Bearish Case

Bears point to Silvergate as the “Canary in the Coalmine” indicating that we have no idea how many other crypto institutions are on the verge of collapse. Some go as far as to suggest we’ll not just see a test of the $15,460.00 line in the coming weeks (a few extreme cases suggest “days,” which is highly unlikely), and that a target of $10K or below is very much in the cards for 2023.

Bitcoin Trade Update

Current Allocation: 2.035% (Unchanged since last update)
Current Per-Coin Price: $20,514.93 (Unchanged since last update)
Current Profit/Loss Status: +9.177% (-6.975% since last update)

Since Bitcoin never broke through above its $25,288.88 high where I might take more profits over the past week and isn’t remotely close to my next buy, I sat on my hands for the entire week and watched the price action unfold.

While I’m not so bearish as to entirely believe the lows of 2022 won’t hold, I’m not so bullish to think those lows won’t be tested. Accordingly, I’ve scheduled my buys in a pyramid fashion where the quantities increase as Bitcoin sells off.

I have a key amount of Bitcoin I want to procure if Bitcoin tests its 2022 lows, however you’ll noticed the quantities rest if Bitcoin breaks through. My belief is if the low of 2022 doesn’t hold, Bitcoin will head much lower, but since I don’t know for sure, I want to buy some on its way down in case it bottoms higher than the sub-$10K targets some bears project.

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:

0.157% @ $20,307
0.138% @ $19,610
0.277% @ $18,734
0.553% @ $18,175
1.107% @ $16,988
2.767% @ $16,367
3.874% @ $15,829 <– Slightly above the current Crypto Winter 2022 low
0.830% @ $14,366
1.107% @ $13,607
1.959% @ $12,806 

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.