Summing Up The Week

Inflation reports showed that disinflation is taking place – a good sign for the Federal Reserve’s fight against inflation – and, on Wednesday, while the Fed announced the pause the market was expecting, Chair Jerome Powell announced the Fed plans to raise rates twice more this year.

That didn’t stop the market from seeing an explosive rally, however.

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

Market News

CPI at 4% annual rate, lowest in 2 years

On Tuesday, the Consumer Price Index (CPI), the measurement generally accepted to gauge inflation, showed an increase of 0.1% month-over-month and 4% year-over-year, the lowest rate in 2 years, reported CNBC. All reported numbers were in line with consensus estimates.

As a result of the report being as expected, the market didn’t display any dramatic reaction to the report, with some economists expressing hopes that the downward trend in inflation would continue in the coming months. “The encouraging trend in consumer prices will provide the Fed some leeway to keep rates unchanged this month and if the trend continues, the Fed will not likely hike for the rest of the year,” said Jeffrey Roach, chief economist at LPL Financial.

PPI at 1.1% annual rate, cooler than expected

On Wednesday, the Producer Price Index (PPI) – the price wholesalers pay for components to make their products – dropped to 1.1% year-over-year, much lower than the 1.5% reading expected by economists, reported CNN.

With multiple readings of inflation showing that the economy is now seeing increased rate of disinflation, on Wednesday morning, many analysts believed – with certainty – that the Federal Reserve would pause or skip, not hike, when they made their decision later that afternoon.

Fed pauses rate hike but sees two more later this year

On Wednesday, the Federal Reserve announced that it would be pausing its rate hike – which markets were anticipating – however, the Committee projects two additional 0.25% rate hikes later in 2023, reported CNBC.

“We have raised our policy interest rate by five percentage points, and we’ve continued to reduce our security holdings at a brisk pace. We’ve covered a lot of ground and the full effects of our tightening have yet to be felt,” said Fed Chair Jerome Powell.

The Federal Open Market Committee (FOMC) continued to observe that “inflation remains elevated” in a statement released prior to Powell’s press conference. As a result, the market can expect two more rate hikes which was not exactly what the bulls were hoping to hear.

Next Week’s Gameplan

The trillions of sidelined cash thanks to conservative institutional and retail investors seems to be pouring into the markets, however given that I’ve been more than 2/3 invested, I’m using the rally to take profits and trim positions, not add to them.

Granted, sectors like gold and cannabis are continuing to experience selling pressure so there may be opportunities for me to add to certain positions. That being said, I’m peeling off a lot more profits than I’m adding capital into these frothy markets.

Next week will be telling: will the rally keep rallying or will there be a pause that refreshes… or something more nefarious and unexpected??

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

Bitcoin break down!

After seemingly ignoring last week’s news regarding the SEC suing crypto exchanges Binance and Coinbase, Bitcoin bounced on Tuesday to create a lower weekly high at $26,435.81. However, the crypto finally broke down – with no noticeable catalyst – on Wednesday, crashing through prior weekly support at $25,351.92 and not setting a new low until hitting $24,750.00 on Thursday.

If this new weekly low doesn’t hold, the next level of support is $23,931.01, and, while there may be a few stopping points on the way down, the next significant support is the March low at $19,568.52 so there may be a distance to fall.

The Bullish Case

Bulls claim that this week’s breakdown is a healthy pullback, offering buyers an opportunity to add to positions. Many Bulls point to a variety of technicals indicating that the $25K mark is strong support and suggest that the bounce off Thursday’s lows back above $25K is a sign of good things to come.

The Bearish Case

Bears warn that there’s no real good news in the Bitcoin space between SEC lawsuits, a tighter rate environment globally, and political concerns regarding altcoins and the cryptocurrency sector as a whole. Bears believe Thursday’s low is just a temporary reprieve before selling pressure reengages.

Bitcoin Trade Update

Current Allocation: 0.333% (+0.083% since last update)
Current Per-Coin Price: $23,741.13 (+2.01% since last update)
Current Profit/Loss Status: +7.43% (-6.37% since last update)

Prior to the selloff starting Wednesday, Bitcoin triggered my next buy order on Saturday which filled at $25,605.90. During the selloff, Bitcoin triggered a number of buys which left me with an average buying price of $25,264.77 (after trading fees).

The buys raised my per-coin cost +2.01% from $23,273.28 to $23,741.13 and increased my allocation +0.083% from 0.250% to 0.333%.

If Bitcoin continues selling off, I will continue adding, of course. My next sell target is just under the crypto’s recent high with me targeting around $27,335 to start taking profits.

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:

0.027% @ $24,757
0.027% @ $24,178
0.027% @ $23,805
0.027% @ $22,977
0.027% @ $22,535
0.027% @ $22,232
0.103% @ $21,017
0.201% @ $20,265
0.315% @ $19,444
0.597% @ $18,389

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.