Summing Up The Week

Between Nvidia’s (NVDA) earnings report on Wednesday evening and Federal Chairman Jerome Powell speaking from Jackson Hole, Wyoming on Friday, there were already at least two very large catalysts this week before trading even started on Monday.

Things just got wilder from there.

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

Market News

S&P Global downgrades U.S. financial sector

Not to be outdone by competitor Fitch’s ratings downgrade a few weeks ago, on Tuesday, S&P Global lowered ratings on several U.S. banks, citing a “tough” climate for lenders, reported TheStreet.

“The decline in deposits has squeezed liquidity for many banks while the value of their securities — which make up a large part of their liquidity — has fallen,” S&P Global said, adding that many U.S. bank depositors have “shifted their funds into higher-interest-bearing accounts, increasing banks’ funding costs.”

While not necessarily market-moving, many market pundits believe that bull market rallies are often led by the banks. With the banks downtrodden after repeated ratings downgrades, it’s unlikely we’ll see the financial sector regain its strength for at least a little while.

Nvidia blows investors’ minds… again

The idea that a company once known for making video game graphics cards is now (seemingly) the most important stock in the entire market may sound outlandish, but that’s what happened to Nvidia (NVDA) this week when all every analyst on CNBC or FinTwit could talk about was NVDA’s earnings coming up on Wednesday after the market close.

Nvidia did not disappoint. On Wednesday, Nvidia reported a record-breaking $6.7B in net income for the quarter, a 422% increase of the same time last year, and once again raised guidance, reported CNBC. 

However, if you ever wanted to see the perfect example of a “Sell the News” event, this was it. After the markets initially popped at the open on Thursday, the rally quickly rolled over and started to sell off. Buyers had already gotten into Nvidia before earnings and assumed the report would surprise – which it did – but that meant there were no buyers left on Thursday. Instead, traders and investors started taking profits (including me, actually).

As a result, Nvidia’s rotation dragged down momentum for the entire market. Add in the looming speech from Federal Reserve Chairman Jerome Powell from Jackson Hole, Wyoming on Friday, and you got a recipe for a selloff.

Fed Chair Powell calls inflation too high, warns of rate hikes

On Friday, Federal Reserve Chairman Jerome Powell spoke from Jackson Hole and warned that inflation “remains too high” and that the Fed is “prepared to raise rates further, if appropriate,” reported CNBC. Although his comments may have been slightly more hawkish than bullish analysts had hoped for, Powell really didn’t say anything unusual for what the majority of market participants thought he would.

Powell did acknowledge that inflation has moved down from its highs and that the Fed needs to walk a tightrope between doing too much and doing too little. “Doing too little could allow above-target inflation to become entrenched and ultimately require monetary policy to wring more persistent inflation from the economy at a high cost to employment,” he said. “Doing too much could also do unnecessary harm to the economy.”

Since Powell didn’t really say anything unexpected, the markets remained relatively flat following his speech, not moving significantly in either direction. This wasn’t a particular surprise as Thursday’s reversal and subsequent selloff on the back of Nvidia’s earnings was pretty substantial.

Next Week’s Gameplan

It’s official – next week is the end of August! If you’re a long-time reader, you’ll likely remember last year when I warned that the S&P 500 typically sells off at least 4% from its last high from August into October as hedge funds and investment firms take losses and rotate their portfolios.

Last year, the S&P 500 actually sold off nearly -20% from its August high to its October low, and given that the S&P 500 is already more than 4% off its most recent high, I do believe we can expect a lot more selling pressure over the next month or two.

As a result, we’re headed into Buying Season. That means making plans for where I’m going to add to each of my positions. These price targets won’t be my last buy, they’re simply my next buy as I create entire plans with buying targets at lower and lower lows.

As always, remember to keep calm, and keep investing on. I’ll see you all back here next Friday to see where we went from here!

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’s found a new range to trade along…

Bitcoin rallied off its low to a high of $26,818.28 on Wednesday before pulling back. While a decent pop, since Bitcoin failed to break the high from last Friday, this is definitely the new point of upward resistance for the crypto.

On the downside, Bitcoin found new support on Tuesday when it dipped to $25,350.00, slightly above the low of $25,234.76 made last week. If the new low doesn’t hold, it’s highly likely Bitcoin slices through last week’s low, leaving $24,750.00 as the last line of defense before substantially lower levels below $24K.

The Bullish Case

Bulls continue to desperately point to Blackrock’s desire to create a spot Bitcoin ETF as the savior for the space, claiming that Blackrock will need to accumulate the crypto for its ETF. The reality is that even if Blackrock does buy a lot of Bitcoin, it will likely do it Over-The-Counter (OTC) and not on the exchanges to prevent its purchases from upwardly affecting the price of Bitcoin (naturally, Blackrock would like to accumulate Bitcoin at the lowest possible prices so further downside would be a positive for the company, not a negative).

The Bearish Case

Neither the new weekly high nor the new weekly low instill a lot of confidence for the Bulls. Instead of recovering from last week’s epic rout, Bears point out that all the technicals indicate further downside ahead for Bitcoin.

Bitcoin Trade Update

Current Allocation: 1.567% (+0.140% since last update)
Current Per-Coin Price: $28,253.58 (-0.91% since last update)
Current Profit/Loss Status: -7.25% (+0.80% since last update)

With Bitcoin down around $26,000, I’ve become more aggressive with my buy price targets while keeping my quantities under control in order to mitigate risk in case the crypto decides to sell off with more enthusiasm.

My buy orders started filling on Sunday when Bitcoin’s relief rally reversed with my first buy at $26,088.90 and my lowest buy of the week at $25,726.70. The combined buys gave me an average buying price of $25,847.11 (after trading fees).

The buys lowered my per-coin cost -0.91% from $28,514.10 down to $28,253.58 and raised my allocation +0.140% from 1.427% to 1.567%. 

If Bitcoin continues to trade within this range, I will continue to make small buys to build up my position, but if Bitcoin cracks through to new lows, those quantities will increase in a hurry to take advantage of lower prices.

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% @ $25,903
0.027% @ $25,461
0.027% @ $25,226
0.027% @ $24,806
0.038% @ $24,260
0.103% @ $24,005
0.239% @ $23,467
0.244% @ $22,991
0.174% @ $22,708
0.266% @ $22,301

Not Your Keys, Not Your Crypto…

In light of brokerage failures in 2022, I no longer keep any of my crypto on an exchange and I only keep enough USD on the exchanges I use 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.

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, Bitcoin crashed -54% to a low of $6430.00 in December 2019.
• In February 2020, Bitcoin rallied +64% to $10,522.51.
• In March , 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 2021, Bitcoin dropped -32% to a low of $28,732.00.
• In February, 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 , Bitcoin rallied +51% to a new all-time high of $64,896.75.
• In June , Bitcoin crashed -56% to a low of $28,800.00.
• In November, 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.
• In June, Bitcoin dropped -20% to a low of $24,750.00
• In July, Bitcoin rallied +29% to a high of $31,862.21.
• In August, Bitcoin dropped -21% to a low of $25,234.76

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.