Summing Up The Week

While some argue that we’ve exited the season of volatility typically seen in September and October, this week certainly didn’t feel like it. While stocks rallied significantly following the Federal Reserve’s announcement on Wednesday, the markets felt doomed on Monday.

Analysts point out that this kind of sudden whipsaw action is typically emblematic of a bear market rally and not of a new bull market, with more bearish analysts warning investors to be on their toes, particularly in light of the huge inflows into U.S. Treasurys seen later in the week.

Investors and traders typically pick up Treasurys as a hedge against potential downturns in the equity markets. Often the bond market is referred to as the “smart money,” however there hasn’t been a typical correlation between the bond market and the stock market for nearly all of 2022 and 2023.

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

Market News

Treasury to borrow $776B in final quarter of 2023

While most Americans don’t look at Monday’s announcement from the Treasury Department that it would borrow $776 billion in the final three months of the year as good news, the reality is that many analysts were expecting a larger number, reported CNBC. Estimates were that the Treasury would need to borrow a number similar to the $1.01 trillion it borrowed in the July-to-September period.

This news actually came as a relief to markets as the yield on the 10-year U.S. Treasury finally started to retreat below the psychologically-important 5.00% mark.

IRS increases 2024 retirement account limits

While not at all market-moving, I felt it was worth doing a Public Service Announcement to my readers after the IRS announced the contribution limits for retirement accounts in 2024 as reported by CNBC on Wednesday.

Contributions for individual retirement accounts as Traditional and Roth IRAs have been increased to $7,000 for those under the age of 50 and $8,000  for those 50 years of age and older. 401(k) plan contribution limits will allow employees to defer up to $23,000 into their plans starting in 2024.

Remember: It’s never too late nor too early to start saving for retirement!

Fed pauses and holds rates steady for 2nd time in a row

In a move that should surprise absolutely no one, on Wednesday, the Federal Reserve chose to hold rates steady in the target range between 5.25%-5.50% where it has been since July, reported CNBC.

The post-meeting statement revealed that the Fed will continue to closely monitor economic data as the strong activity expansion in the third quarter and stable employment market could result in a return of inflation.“The Committee will continue to assess additional information and its implications for monetary policy,”the statement said.

Job market weakening with higher unemployment

On Friday, the nonfarm payrolls report showed jobs increased by 150,000 for October versus the 170,000 expected by analysts and the unemployment rate rose to 3.9%, against expectations it would hold steady, reported CNBC. Bad news continues to be good news as stocks rallied on the back of the report, believing that these softer numbers mean the Fed’s job of hiking interest rates is done.

Other analysts aren’t so secure in a bullish forecast. When the job market weakens, it typically does so quickly, and it usually does so even more rapidly from historically levels which is where unemployment has been for an unusually long time.

Additionally, analysts point out that billions of dollars has been pouring into the U.S. Treasury market. While, on the short term, that causes stocks to rally as the yield on the Treasurys decreases. However, the bond market is often referred to as the “smart money” and Treasurys are considered “safe haven” assets where you put money in times of crisis.

Accordingly, you must ask yourself, “Why is the smart money pouring out of the stock market and into safe assets?”

Analysts suggest there remains a credit event or other Black Swan Event looming out there. Maybe it’s nothing, but I, personally, lean toward the bearish camp. It feels a little too eerie that everyone’s bullish in light of noted macroeconomic and epic geopolitical headwinds facing all markets.

Next Week’s Gameplan

The week’s volatility helped the three major indexes rally into the weekend, so many bullish analysts believe stocks are out of the woods and we will see the seasonally-typical rally into the end of the year that’s historically on-point for the third year of a presidential cycle.

Other analysts are not so certain. With a weakening job market, signs that the U.S. economy could be joining the rest of the globe in recession, two wars overseas, and billions piling into safe-haven assets, some bearish pundits believe a serious credit event or other kind of Black Swan Event may be looming.

For investors, the approach remains the same – make a plan for both directions: what are you going to do if stocks head higher and what are you going to do if stocks head lower?

And, as always, keep calm and keep investing on! I’ll see you next week, friends!

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

Has Bitcoin finally become a “Safe Haven” asset?

Bitcoin’s bull rally didn’t stop this week, with the world’s biggest cryptocurrency crashing through its $35,157.23 weekly high from last week, not finding resistance until setting a new high at $35,997.80 on Thursday.

Oddly, Bitcoin, typically correlated to stocks and risk-on assets like tech, in particular, pulled back on Thursday when the stock markets were rallying. This inverse-correlation has led some Bitcoin pundits to wonder if Bitcoin has finally transitioned to a “Safe Haven” asset similar to gold and Treasurys; a place where investors move their money in times of concern.

Bitcoin’s new weekly low appears to be $33,400.00, set last Friday followed by $29,417.14; $26,521.32; and $24,900.00.

The Bullish Case

Bulls continue to point the tailwinds of imminent spot ETF approvals and strong interest globally as reasons the rally will continue. Some of the more bullish analysts predict Bitcoin will make a new all-time high (above $69,000) prior to the end of this year.

The Bearish Case

Bears argue that Bitcoin’s pullback on Thursday isn’t a sign of it becoming a safe haven asset. Instead, Bears suggest that Bitcoin is a leading indicator of what they expect to happen in all markets. With Treasurys seeing significant inflows on Thursday and Friday, the “smart money” in the bond markets seems to be suggesting an imminent recession or even a looming credit event. Only time will tell on this one.

Bitcoin Trade Update

Current Allocation: 2.300% (+0.233% since last update)
Current Per-Coin Price: $34,854.93 (-0.22% since last update)
Current Profit/Loss Status: -1.14% (+1.74% since last update)

During Bitcoin’s pullback over the past week, it filled a series of trades which left me with an average buying price of $34,243.89 (after fees). These buys lowered my per-coin cost just -0.20% from $34,932.61 to $34,861.48 and raised my allocation +0.233% from 2.067% to 2.300%.

When Bitcoin rallied above my per-coin cost on Wednesday, it was time to start taking profits with a small sell order which filled at $35,189.12 on Thursday. Then, on Friday, Bitcoin retreated once more and filled my next buy order, replacing the Bitcoin I just sold on Thursday with an order that filled at $34,155.00, lowering my per-coin cost a fraction down to $34,854.93 and leaving my allocation unchanged at 2.300%.

While it may appear to the outside that I am overly micromanaging my Bitcoin trades, I use tiny orders so I can experiment with Bitcoin’s price movements to develop semi-predictive patterns. On the most basic level, Bitcoin respects bullish and bearish channels, it’s… odd.

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:

0.013% @ $33,893
0.013% @ $33,541
0.027% @ $33,224
0.027% @ $32,478
0.027% @ $32,154
0.027% @ $31,837
0.027% @ $31,160
0.027% @ $30,519
0.027% @ $29,863
0.027% @ $29,256

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 November, Bitcoin rallied +45% to a high of $35,997.80.

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.