Summing Up The Week

As I’ve been warning since August, September and October are notoriously volatile, and the past week was no different as the markets were positively slammed with selling for much of the week.

Despite the significant downside pressure, there were no specific news catalysts causing the selloff, leaving many market participants bewildered and questioning why strong economic reports and other good news wasn’t stopping the selloff.

Those of you who have been reading my blog know that I have been paying close attention to Michael Gayed, one of my favored analysts, who had been saying for weeks that the conditions he observed favored a selloff sometime near the end of October. He was dead-on correct with his observations.

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

Market News

Mike Johnson elected Speaker of the House

After weeks with seemingly never-ending stalemates in Congress’s House of Representatives, the House elected Republican Representative Mike Johnson of Louisiana on Wednesday, reported CNBC. With no Speaker, the House has been unable to review legislation as the parliamentary process requires bills be introduced by the Speaker for review.

Johnson was elected unanimously by all 220 voting Republicans. “It has been an arduous few weeks, and a reminder that the House is as complicated and diverse as the people we represent,” Johnson said in a post on X. “The urgency of this moment demands bold, decisive action to restore trust, advance our legislative priorities, and demonstrate good governance.”

The markets were in the middle of selling off as a result of rising interest rates on the U.S. 10-Year Treasury and the Speaker news did nothing to stem the tide of selling.

U.S. GDP grew at 4.9% annual pace in Q3

On Thursday, the Commerce Department released the Gross Domestic Product (GDP) showing that it had increased at a 4.9% annualized pace from July through September, a substantial acceleration from the 2.1% pace in the second quarter, reported CNBC. This figure slightly beat the estimates from Dow Jones which had been expecting a 4.7% increase, adjusted for inflation.

According to the report, consumer spending, increased inventories, exports, residential investment, and government spending were the categories responsible for the GDP’s increase.

While a strong economy helps support the Federal Reserve’s goal of achieving a “soft landing” (i.e. taming inflation with a slight-to-no recession), the markets continued to sell off as they had for much of the week.

“This report confirmed what we already knew: The consumer went on a shopping spree in the third quarter,” said Michael Arone, chief investment strategist for U.S. SPDR Business at State Street Global Advisors. “I don’t think anything in this report changes the outlook for monetary policy. That’s why I don’t think you’re seeing an overreaction from markets.”

Key inflation gauge rose 0.3% in September

On Friday, the Commerce Department’s Personal Consumption Expenditures (PCE) index showed a rise of 0.3% in September, in-line with Dow Jones’ estimates, but higher than the 0.1% increase for August, reported CNBC.

While consumer spending increased more than expected, analysts expect the consumer spending to moderate over the coming weeks and months. “Although consumer prices rose faster than expected from a month ago, core inflation continues to lose speed and this report will not likely change the Fed’s view that inflation will slow in the coming months as demand slows,” said Jeffrey Roach, chief economist at LPL Financial. “Eventually, spending will moderate after several months of consumers spending more than they earn.”

Next Week’s Gameplan

The big question now is – will the volatility and selling continue into next week and into November?

While many pundits such as Tom Lee from Fundstrat claim that seasonal factors and the historical positive nature of the a president’s third year (regardless of party affiliation) favor a rally into the year-end, there are so many macroeconomic and geopolitical conditions that I think the more prudent approach is to remain incredibly wary.

Regardless, my discipline works in all conditions – simply have a plan for both directions. For me, that means having buying targets where I will add to my positions if the selloff continues, and selling targets where I will take profits if my positions rise high enough.

While, personally, I would actually prefer lower prices so I could put additional capital to work at lower prices, I let the market show me where it wants to go rather than try to make guesses that could be wrong and leave me on the wrong side of an investment.

As always, stay calm and keep investing on, friends. I’ll see you 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

Epic Bear Defeat – Bitcoin rallies through $35,000!

In an epic defeat of the Bears’ thesis, Bitcoin broke all upside resistance targets by a significant margin, flying through $30,248.00; $31,050.00; and $31.862.21 in a single day, not finding resistance until reaching a high of $35,157.23 on Tuesday.

This means support levels have risen dramatically.

Since the upward move was so strong, the first significant support (although additional support levels may be made on a pullback) is now the psychological level of $30,000, followed closely by the low of last week at $29,475.06. After that, there should be substantial support around $28,477.00, followed by $26,521.32, and, finally, $24.900, the low Bitcoin saw in September.

The Bullish Case

Bulls continue to rejoice as swirling rumors continue to support the idea that BlackRock’s Bitcoin ETF approval may be imminent. Additional rumors also indicate that  famous investor Cathy Wood’s ARK Bitcoin ETF may also be nearing approval.

Bulls believe that these ETFs will need to accumulate as much Bitcoin as they can before going public which will further push up the leading cryptocurrency’s price.

The Bearish Case

Bears had to admit defeat last week. Most slinked away with no comment about Bitcoin’s undeniable bullish run, but a few of the more reputable analysts I follow apologized to their audience for getting the call so very, very wrong. The Bears are trying to come up with downside arguments against Bitcoin, but I have yet to hear any that are worth mentioning here; the Bears are, quite simply, wrong right now.

That being said, as investors, we need to be wary of getting overconfident, so, as you’ll read in my trade update below, I am cautiously adding to my position in small quantities until we see where Bitcoin heads from here.

Bitcoin Trade Update

**Trade Reset: Closed w/ +13.11% Gain**

Current Allocation: 2.067% (+0.150% since trade opened)
Current Per-Coin Price: $34,932.61 (-0.18% since trade opened)
Current Profit/Loss Status: -2.88% (*New Trade*)

Once Bitcoin crossed over $29,000, I decided to “close” my trade at $34,995.00 with a 20.67% gain over the course of four months which annualizes to 62.02%… not bad.

Unlike stock trades where I would actually sell the position to close it out, with Bitcoin, I always want to have a trade on. Bitcoin’s tendency to be incredibly volatile on the way down – and on the way up – means I always want to have some exposure. Not to mention, seeing how I only currently have a 1.917% allocation, I didn’t see any need to sell the position, even at these relatively higher prices.

Instead of closing the trade, I reset it.

What this means is I pull the profit off the exchange (leaving it as Bitcoin, I never take my profits in USD, only in crypto) and reset the cost basis where I would have sold, effectively keeping the same allocation exposure except now at a higher cost basis, in this case, my new cost basis is $34,995.00, where I “closed” the trade.

Since resetting my trade, Bitcoin has pulled back and filled a series of trades which left me with an average buying price of $34,154.56 (after fees). These buys lowered my per-coin cost -0.18% from $34,995.00 to $34,932.61 and raised my allocation +0.150% from 1.917% to 2.067%.

Given the bullish nature of Bitcoin, you’ll notice that all of my buying targets have been raised significantly, although I will continue using relatively small quantities until/unless Bitcoin breaches $30K to the downside as we’re in extremely volatile times right now.

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% @ $33,817
0.027% @ $33,410
0.027% @ $33,106
0.027% @ $32,402
0.027% @ $31,726
0.027% @ $31,050
0.027% @ $30,401
0.027% @ $29,767
0.027% @ $29,139
0.075% @ $28,525

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 September, Bitcoin dropped -22% to a low of $24,900.00.
• In October, Bitcoin rallied +41% to a high of $35,127.53.

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.