Summing Up The Week

The buying from the lows in October hasn’t ceased with many bullish analysts believing that the Federal Reserve is done hiking and that means it’s time to buy.

On the flip side, a lot of bears are warning not to get complacent on the stock market right now. Between the looming potential government shutdown and the possibility of an escalation of the war Israel-Hamas war, bears believe that a sudden Black Swan Event in the form a credit crisis could cause this rally to turn into one of the most severe crashes the market has ever seen.

The dichotomy of the opinions of the bulls and bears is so extreme right now that this serves as an explanation for why my discipline has always been: have a plan for both directions – what will you do if stocks go up tomorrow and what will you do if stocks go down?

If I fully subscribe to either the bull or bear thesis and I’m wrong, I’ll be incorrectly positioned for the move in the markets. However, by always remaining in the markets and reacting to what the market actually does and not what I think it should do, I’ve been able to maximize my returns for years while mitigating my risk.

The markets were incredibly calm for much of the week, until, that is, Federal Reserve Chairman Jerome Powell gave his speech on Thursday.

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

Market News

The Fed speaks… and speaks… and speaks…

It felt like every Federal Reserve governor and their siblings were making speeches this week. On Tuesday, Chicago Fed President Austan Goolsbee sided with the soft landing crowd, saying the economy’s on a “golden path” for a significant drop in inflation without a recession, reported CNBC.

“Because of some of the strangeness of this moment, there is the possibility of the golden path … that we got inflation down without a recession,” Goolsbee said on CNBC’s “Squawk Box” morning show. “If that happened … it would just be a continuation of what we’ve already seen this year, which is unemployment up very modestly, while inflation has come down a lot. … That’s our goal.”

Goolsbee went on to compare the potential drop in inflation to one seen in 1982. “The fastest drop in the inflation rate in any year was 1982,” Goolsbee said. “We’ll see what happens over the next couple of months. We might equal the fastest dropping inflation in the last century. So we’re making progress on the inflation rate.”

U.S. Treasury auction breaks bad

On Thursday, the U.S. Treasury attempted to issue debt in 30-Year Bonds and the auction did not go as planned with buyers sitting it out, reported Barrons.

“The Treasury’s auction of 30-year bonds on Thursday went about as badly as it could, indicating investors are reluctant to own long-dated government securities,” reported Barrons. Given that investors were able to lock in rates of greater than 5% on the 30-Year Treasurys just a few weeks ago, it’s hardly surprising appetites for 4.7% were not robust.

Primary dealers buy up any Treasurys not purchased by investors, and they had to accept 24.7% of the debt on offer, more than double the average 12% over the past year. “Today’s 30 yr auction was outright bad,” Peter Boockvar, chief investment officer at Bleakley Financial Group, said in a research note.

The poor Treasury auction set the stage for a selloff into the end of Thursday trading, a selloff that was only exacerbated when Federal Reserve Chairman Jerome Powell took the stage that afternoon.

Powell brings the smackdown; says the Fed is not done

On Thursday, Fed Chair Jerome Powell once again smacked down the markets, commenting that he is “not confident” the Fed has done enough to bring down inflation, reported CNBC.

His comments prevented a 9-day win streak in the S&P 500 and a 10-day win in the Nasdaq as the indexes rolled over during his speech. “The Federal Open Market Committee is committed to achieving a stance of monetary policy that is sufficiently restrictive to bring inflation down to 2 percent over time; we are not confident that we have achieved such a stance,” he said in his prepared speech. “My colleagues and I are gratified by this progress [we’ve seen so far] but expect that the process of getting inflation sustainably down to 2 percent has a long way to go.”

Powell once again reiterated that the Fed may continue to hike the benchmark interest rate. “If it becomes appropriate to tighten policy further, we will not hesitate to do so,” he said. “We will continue to move carefully, however, allowing us to address both the risk of being misled by a few good months of data, and the risk of overtightening.”

(Not really important, but when climate protesters tried to storm the speech, the organizers ended the speech early but forgot to turn off Powell’s microphone. Powell can be clearly heard saying, “Just close the f***ing door” in recordings, much to the amusement of many on X/Twitter and elsewhere)

Next Week’s Gameplan

Despite the record rally we’ve seen over the past week and a half, there are still many analysts warning that the combination of macroeconomic and geopolitical events favor a potential crash, with some claiming that even a triggering of the stock market’s circuit breakers could be imminent.

Additionally, Powell’s speech on Thursday just proves the point that the underlying market is incredibly jumpy and prone to selling off on a single negative catalyst.

During all of this volatility, I’ve been doing a combination of buying and selling. Some of my positions have triggered profit-taking targets where I’ve felt it appropriate to reduce allocation and trim profits given the run we’ve had. In the meantime, some sectors – oil and gold, particularly – have come under extreme weakness and have offered buying opportunities.

Whenever the market expresses extreme volatility, I find it useful to have my head on a swivel, finding sectors that are too overbought where I should take profits, but also finding sectors that are too oversold and are worth buying. We’re in neither Buying Season or Selling Season right now – we’re in both.

As always, keep calm and keep investing on, and I’ll see you back here next Friday, 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

Can Nothing Stop the Bitcoin Bulls?

Bitcoin continued its epic bull run this week, blasting through last week’s high at $35,997.80 before setting a new high at $37,999.00. The rally also established new support levels with the new weekly support at $34,530.67 followed by potential support levels at $33,400.00; $28,477.00; and $24,900.00.

Long-time readers may notice that it also blew through the Next Support of Last Resort trendline, one of a few trendlines I’ve had in place since first starting Get Irked back in 2018. If Bitcoin can now use that line as support rather than resistance (as it has been acting since the 2022 breakdown), there could potentially be even more upside ahead.

The Bullish Case

Bulls continue to maintain the upper-hand, explaining the epic rally as excitement over the imminent approval of several spot ETFs. Additionally, some bullish pundits believe Bitcoin has finally fully de-correlated with risk assets and achieved “safe haven” status.

The Bearish Case

Bears remain in disbelief. Some continue to stubbornly hold on to the thesis that this move is simply sucking in weak hands before an epic flush that will take Bitcoin back below $30K and lower. At this point, I truly hope they’re right because sub-$30K would be an amazing buying opportunity, but I truly see no reason to be bearish at this time.

Bitcoin Trade Update

Current Allocation: 2.167% (-0.167% since last update)
Current Per-Coin Price: $34,762.00 (-0.27% since last update)
Current Profit/Loss Status: +6.73% (+7.87% since last update)

While Bitcoin had been bouncing around my cost basis over the past week, I had been performing a series of buys and sells, picking up Bitcoin below my cost basis and then trimming tiny profits above my cost basis.

When Bitcoin broke out, it triggered a number of small sell orders I had in place. I intend to hold the vast majority of my position, however my discipline requires me to take small profits at key points of resistance on the way up.

The total of my buying and selling resulted in me lowering my per-coin cost -0.27% down from $34,854.93 to $34,762.00 and decreased my allocation -0.133% from 2.300% to 2.167%.

Depending how much higher Bitcoin goes, I may “reset my trade” yet again, pulling profits out of the position and thereby raising my cost basis, but I haven’t quite decided to do that, yet. If Bitcoin pulls too far away from my next buying target, I will go ahead and reset the trade at that time.

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% @ $34,259
0.027% @ $33,707
0.027% @ $33,313
0.054% @ $32,603
0.054% @ $32,258
0.054% @ $31,926
0.081% @ $31,236
0.108% @ $30,602
0.135% @ $29,932
0.135% @ $29,332

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 +53% to a high of $37,999.00.

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.