Summing Up The Week

A deluge of market-moving news both on the bullish and bearish side really made this week volatile. The week kicked off with a bank failure and a warning the debt ceiling is closer than previously thought.

Then, the Fed raised rates and came out hawkish, except Apple (AAPL) blew away expectations by reporting good earnings when analysts were expecting a disappointment.

Finally, the jobs report came on Friday and surprised to the upside, showing that the U.S. economy is still resilient enough to shrug off the Federal Reserve’s rate hikes.

*Whew!*

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

Market News

JP Morgan takes over failing First Republic Bank

On Monday morning, the FDIC announced that JP Morgan Chase (JPM) would be taking over the First Republic Bank, which the FDIC had put into receivership over the weekend following more than $70 billion in deposits fleeing the ailing bank over the past month, reported CNBC.

Unlike Silicon Valley Bank, which failed in March and was purchased by First Citizens’ Bank based in North Carolina, First Republic’s slow-motion train wreck permitted much of the rest of the financial industry to prepare, so even though the bank was taken over by JP Morgan, the entire stock market didn’t so much as shrug, with the S&P 500 and NASDAQ rallying Monday.

Jamie Dimon, CEO of JP Morgan, tried to reassure regulators, bank employees, and the markets that this purchase represents the end of the regional financial banking crisis in a call to analysts shortly after the deal was announced, “There are only so many banks that were offsides this way; there may be another smaller one, but this pretty much resolves them all – this part of the crisis is over.”

Yellen warns debt ceiling could hit June 1

On Monday evening, U.S. Treasury Secretary Janet Yellen warned that the “extraordinary measures” undertaken by the Treasury will run out June 1, a deadline more than two months earlier than some experts expected, reported CNBC.

Yellen pointed to a drop in tax receipts – likely due to inflationary issues – resulted in the Treasury having less funding than was initially expected from preliminary plans. The Congressional Budget Office (CBO) revised its estimates as a result. “Because tax receipts through April have been less than the Congressional Budget Office anticipated in February, we now estimate that there is a significantly greater risk that the Treasury will run out of funds in early June,” wrote CBO director Phill Swagel.

With Congress on recess for two weeks, President Joe Biden spoke to the four leaders of all parties in Congress and arranged for a debt ceiling summit on May 9 where the politicians will try to hammer out a deal. 

The United States has never defaulted on a debt payment, though it did come close in 2011 when the debt ceiling debate caused ratings agencies to lower the U.S.’s credit rating as a result. While expectations are Congress will once again come to an agreement, the market could sell off up to -19% or more before a deal is reached (the same selloff it saw within a few weeks in 2011).

Job openings fall to lowest level in nearly two years

On Tuesday, the Labor Department’s Job Openings and Labor Turnover Survey (JOLTS) showed job vacancies totaling 9.59 million in march, below expectations 9.64 million, reported CNBC. The surprise decrease in available positions caused stocks to sell off as investors became more concerned about economic weakness.

Despite the data, analysts believed the Federal Reserve would continue hiking interest rate following the completion of its two-day meeting on Wednesday. “The Fed should gain some comfort from the gradual decline in this ratio, but also is likely to see this data as reaffirming the need for another rate hike tomorrow,” said Ronald Temple, chief market strategist at Lazard.

Fed raises 0.25%, Powell signals Higher for Longer

On Wednesday, Federal Reserve Chairman Jerome Powell did exactly what markets should have expected: he raised the benchmark rate +0.25%, signaled a pause, but warned that inflation isn’t going anywhere so the rates will stay high for a long time, reported CNBC. As I expected, the markets did not have this priced in, and while stocks rallied on the release of the hike, they sold off substantially into the close and investors realized “higher for longer” actually does mean “higher for longer.”

“Inflation has moderated somewhat since the middle of last year, nonetheless inflation pressures continue to run high and the process of getting inflation back down to 2% has a long way to go,” Powell told reporters.

Apple beats on earnings thanks to iPhone sales

After the market closed on Thursday, Apple (AAPL) released better-than-expected earnings thanks to stronger-than-anticipated iPhone sales, reported CNBC. Many analysts believed Apple would disappoint with its quarterly report based on reports that Mac sales had dropped by -40%, however, computer units have come to represent a smaller and smaller portion of Apple earnings over the year.

iPhone revenue generated $51.33 billion versus $48.84 billion expected, and even Mac sales didn’t disappoint to the tune that was projected, bringing in $7.17 billion versus $7.80 billion expected.

“We expect our June quarter year-over-year revenue performance to be similar to the March quarter assuming that the macroeconomic outlook does not worsen from what we are projecting today for the current quarter,” Maestri said on a call with analysts. 

Job market stronger than expected with 253K new jobs in April

On Friday, the nonfarm payroll report for April showed the economy added 253,000 new jobs in April, far beating Wall Street estimates for just 180,000, reported CNBC. Analysts and pundits had expected the job market to weaken in light of the Federal Reserve Bank’s ongoing rate interest rate hikes to fight persistent inflation.

“It is encouraging to see a strong jobs report amid recession concerns, instability in the banking sector and ongoing layoffs,” said Steve Rick, chief economist at CUNA Mutual Group. “We are hopeful the continued strength of the jobs market and signs of slowing inflation will ease market volatility in the coming months.”

Contrary to the typical “good news is bad news” approach the market has been taking lately, stocks rallied on Friday following a bit of a rout for much of the rest of the week.

Next Week’s Gameplan

Now that we’ve gotten through the Fed meeting and the majority of earnings, many investors were originally expecting smooth sailing throughout the rest of May. However, thanks to Yellen warning everyone that the debt ceiling may come into play in a matter of a few weeks, May promises to be as volatile as it has been in the past few years.

As always, I’ll have a plan for both directions: what will I do if stocks go up tomorrow and what will I do if stocks go down tomorrow?

See you here next Friday, everyone!

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

Bitcoin doesn’t know where to go…

After a quick pop after last week’s update followed by a quick drop to set a new higher weekly low at $27,664.31, Bitcoin can’t seem to decide where to go in light of all the crazy news about inflation, jobs, and interest rates.

Either the crypto breaks through its new low with support following at $26,965.14 and $26,525.00 or it breaks through its current high up at $31,050.00. Until any of those breaks happen, Bitcoin will remain rangebound.

The Bullish Case

Bulls points to Bitcoin rallying off its weekly low as evidence that investors are seeing Bitcoin as a hedge against inflation, as Bitcoin rallied in correlation with the precious metals this week on the back of the Fed report.

The Bearish Case

Bears believe it’s only a matter of time before Bitcoin crashes – claiming that its ongoing correlation to Big Tech and risk assets makes it less of an inflation hedge and more of a play on growth and potential higher prices in the stock market.

Bitcoin Trade Update

Current Allocation: 0.100% (+0.083% since last update)
Current Per-Coin Price: $20,138.27 (+4.70% since last update)
Current Profit/Loss Status: +44.90% (-6.94% since last update)

With Bitcoin’s erratic moving continuing since last week, I took more profits at $29,526.44 (before fees) on Sunday before reversing course and adding back in at $27,841.50 (before fees) on Monday, leaving me with a combined sell-buy price of $26,225.77.

The orders raised my per-coin price +4.70% from $19,234.62 to $20,138.27 but also increased my allocation a small 0.017% from 0.083% to 0.100%. This per-coin price still represents a -25.45% discount from where I started this trade at $27,013.59 back on March 19, 2023.

Since Bitcoin’s been bouncing around like a jumping bean, I will continue to take profits and/or add to the position wherever it lands next. 

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:

0.014% @ $27,821
0.014% @ $27,227
0.014% @ $26,958
0.028% @ $26,441
0.041% @ $25,841
0.055% @ $24,481
0.083% @ $23,750
0.083% @ $23,315
0.110% @ $22,032
0.138% @ $21,259

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.
• In April 2023, Bitcoin rallied +101% to a high of $31,050.00.

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.