Summing Up The Week

Some investors may have been confused as to why the markets rallied this week despite generally bearish overtones on the macroeconomic and geopolitical scale. Why would stocks rally when the banking crisis might not be over, Russia is potentially preparing tactical nuclear warfare, China is looking to invade Taiwan, and inflation is raging?

Simple – it’s the end of the month and the end of the first quarter.

Wait – why would the end of the quarter mean stocks should rally?

Many professional money managers and institutional hedge funds have been sitting on the sidelines throughout March, expecting stocks to head lower.

Since most of these agencies provide quarterly reports to their clients showing what stocks they’ve held, these companies don’t want to make it look like they didn’t own all of the big performers (namely, the biggest tech names in the NASDAQ), so they buy them all up at the end of March.

I know that it sounds absolutely idiotic, but these investment institutions buy up all of the highest-performing stocks at the end of March so their reports to their clients will show they owned all the best companies… and not that they were sitting on their hands waiting for the next selloff.

Outside of that, the biggest news event this week was the Personal Consumption Expenditures (PCE) report released Friday, which happens to be the Federal Reserve’s preferred gauge of inflation, so let’s get right to it, shall we?

Market News

Consumer confidence improves, defies expectations

On Tuesday, the Case-Shiller Consumer Confidence report showed an increase from 102.90 to 104.20 in March, defying expectations of decline to 101, reported FXEmpire. With all of the regional banking scares, inflation data, an increase in Fed rates, and more, pundits had expected consumers to become more wary of spending money, not more confident in the economic outlook.

Despite the positive news, the consumer confidence report rarely moves the markets in either direction, and that was the case here, too. The markets remained flat on the back of the report as investors await the Personal Consumption Expenditures (PCE) report, the Federal Reserve’s favorite gauge of inflation, which would be coming out Friday.

PCE rises 0.3% in February, less than expected

On Friday, the Personal Consumption Expenditures (PCE) index showed an increase of 0.3% in February, less than the 0.4% estimate, reported CNBC. The PCE shows where consumers are spending their money each month, excluding food and energy, and the result of rising slower than expected may indicate inflation is slowing.

“The inflation trend looks promising for investors. Inflation will likely be below 4% by the end of the year, giving the Federal Reserve some leeway to cut rates by the end of the year if the economy falls into recession,” said Jeffrey Roach, chief economist at LPL Financial.

Between the cooler PCE and the combination of the end of the month and the end of the quarter, stocks continued their rally on Friday.

Next Week’s Gameplan

Now that March is behind us and we’ve had a pretty amazing kickoff to the new year, it’s time to get serious: Michael Gayed, one of my absolutely favorite market technicians who was right about volatility in March, says that conditions are favoring even more volatility in April – potentially serious bearish moves to the downside.

It bears repeating that I look at market-wide or systemic selloffs as buying opportunities where all of my favorite stocks go on sale, so I actually look forward to massive selloffs (I’m a freak of nature, I know). 

I do realize most investors don’t relish the thought of a 20% selloff in stocks, which is why I always plan in advance. I review all of my stocks and ETFs, look for key levels of support where I want to add more, and keep track of my plan. That way, I don’t get nervous and hold back when we do see a big selloff – always prepare in advance so you know exactly what to do if we see a negative catalyst.

Oh, and remember to keep calm and keep investing on.

I’ll see you all 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

The Long Government Knives are out for Bitcoin

On Monday, Bitcoin stopped its price consolidation sequence and broke down through support after news broke that the CFTC had sued Binance CEO and Co-Founder, Changpeng Zhao, for allegedly violating trading rules by pursuing ‘VIP’ customers, reported CNBC.

Between Binance getting hit by the CFTC and Coinbase (COIN) being sued by the SEC, some crypto “news websites” like one Coindesk editorial have gone as far as to claim the U.S. is out to kill crypto.

I think that sentiment is more than a little hyperbolic, however the news around Bitcoin and cryptocurrency has been quite bearish of late. As a result, Bitcoin dipped below last week’s low at $26,678.16 to set a new low at $26,525.00 before bouncing.

On Thursday, Bitcoin saw a particularly strange spike of bullish activity, breaking through last week’s high of $28,937.73 to set a new high at $29,190.04, before retreating substantially all within the course of about an hour.

The Bullish Case

Bulls point to the break into the $29,000 as reason to still have faith in the rally. The exuberance has become very evident with one of my favorite Twitter analysts (who’s usually quite rigorous) to make the more-than-a-little-obvious observation that, “there are more buyers then sellers which means Bitcoin’s headed higher.” 

Um… yeah… every single asset on the planet increases in price when there are more buyers than sellers. That’s not even Economics 101, that’s just common sense.

The Bearish Case

Bears make the legitimate argument that the triumvirate of (1) oddly erratic price action combined with (2) the negative news catalysts rolling out and (3) Bitcoin’s overbought conditions means the crypto needs a pullback.

In fact, Bitcoin hasn’t pulled back even 10% since this rally started back on March 10 with a +49.12% run from its March 10 low to its high this past Thursday… significantly overbought.

Bitcoin Trade Update

Current Allocation: 0.300% (Unchanged since last update)
Current Per-Coin Price: $26,898.27 (-0.90% since last update)
Current Profit/Loss Status: +5.62% (+3.24% since last update)

When Bitcoin broke down following the news of the CFTC suing Binance’s CEO, it started to trigger my buy orders with an order filling at $26,834.10. When Bitcoin bounced on Thursday, I used stop-limit sell orders to capture profits at $28,215.82.

The combination of buys and sells lowered my per-coin cost -0.90% from $27,143.75 down to $26,898.27 and left my allocation unchanged week-over-week at 0.300%(Obviously, I’m continuing to use small quantities as I feel a more substantial pullback may be drawing near).

As always, I have buy targets all the way down from here, and, of course, will start taking profits if Bitcoin breaks through its recent high at $29,190.04.

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% @ $26,586
0.028% @ $25,958
0.055% @ $24,067
0.055% @ $23,529
0.137% @ $21,507
0.137% @ $20,810
0.377% @ $20,534
0.579% @ $19,527
0.819% @ $18,906
1.093% @ $18,113

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.