Summing Up The Week
Good economic news sent the major indexes rocketing through their all-time highs this week as manufacturing and GDP are exceeding Bullish expectations. The Bears hopes for a January selloff appear to be all but in the rear view as we head into the final trading days of the month.
Let’s take a look at the news that moved the markets this week…
Market News
PMI comes in better than expected
On Wednesday, the Manufacturing and Services PMIs both came in significantly higher than analysts were expecting, 50.3 vs 47.9 and 52.9 vs 51.0, respectively, reported Seeking Alpha. The markets reacted extremely positively on the news with the S&P 500 popping more than 0.75% and the Nasdaq jumping more than 1.50% before both indexes retreated substantially by the end of trading.
“New orders inflows have now picked up for three months, buoyed in particular by improving sales to domestic customers, helping lift business confidence about the year ahead to the most optimistic since May 2022,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.
What is PMI and why is it important?
The Purchasing Managers’ Index (PMI) tracks the level of activity in different sectors across the global economy. A higher figure indicates greater activity, so, in general, analysts are looking for improving PMIs to indicate that a specific economy, the United States, in this case, is expanding and getting stronger.
U.S. economy grew at 3.3%, faster than expected
On Thursday, the release of U.S. economy’s Gross Domestic Product (GDP) for Q4 2023 showed growth at 3.3% versus 2.0% expected, reported CNBC. On the whole, this is actually good news, showing that the U.S. economy isn’t just holding up under stricter interest rate policy, it’s thriving.
Of course, there are Bears out there who are making the argument that this kind of strength indicates that the Federal Reserve will have to maintain its tight interest rates for longer.
However, it’s worth remembering that our current interest rates are historically in-line with what they’ve been for decades. The years from 2009-2021 were the unusual time period of wildly low interest rates, not the norm.
PCE shows inflation continues to cool
On Friday, the Federal Reserve’s favorite gauge of inflation, the Personal Consumption Expenditures (PCE) index, showed inflation increased 0.2% in December and 2.9% on a yearly basis versus analyst expectations for 0.2% and 3.0%, respectively, reported CNBC. Given the strength exhibited by the U.S. economy in Q4, this relatively in-line result is actually spectacular news, showing that the economy can remain resilient and the interest rate policy can cool inflation at the same time.
“Inflation dynamics inside the metric that the Fed uses to formulate policy strongly imply that the central bank will hit its inflation target in the near term,” said Joseph Brusuelas, chief economist at RSM. “This will create the conditions in which it makes [its] policy pivot and begins a multiyear campaign in which it reduces the policy rate towards a range between 2.5% and 3%.”
Stocks did not rally spectacularly on the back of the PCE release, likely due to the rally that occurred throughout earlier in the week.
Next Week’s Gameplan
The rubber hits the road next week as Earnings Seasons continues with the big daddies reporting – Alphabet (GOOGL), Advanced Micro Devices (AMD) and Microsoft (MSFT) all report on Tuesday after the market closes. Then, on Thursday, the monsters Amazon (AMZN), Apple (AAPL), and Facebook(META) all report.
As if those aren’t enough potentially market-moving catalysts, on Tuesday, we get the Consumer Confidence survey results. Wednesday brings Chicago PMI as well as the Federal Reserve’s interest-rate decision. Then, ISM manufacturing on Thursday and the nonfarm jobs report on Friday.
Next week will be a wild one, and that’s just if everything goes as expected! No worries, though, as I’ll see you all back here next Friday to review the week’s events, 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 (in USD)
%
Weekly Change
Bitcoin Price Action
Is this the pause that will refresh Bitcoin’s Bull Market?
As I warned last week, if Bitcoin broke through its last support above $40,000, there was a bit of an air gap underneath before the lead crypto would find its next support level, so when it did break down on Monday, it really broke down.
Bitcoin didn’t find support until $38,501.00 on Tuesday. Bitcoin bounced on Wednesday, but after falling through the Next Support of Last Resort trendline, it turned support into resistance, rolling over and reversing after trying to break back above it.
Then, on Friday, Bitcoin broke out and through the trendline, not finding resistance until $41,567.00 (as of writing). From here, if Bitcoin can turn the Next Support of Last Resort back into support, this breakout could continue much higher from here.
The Bullish Case
Bulls believe the price consolidation Bitcoin has seen since the approval of the spot ETFs is healthy, and that the support will hold as new investors pour money into the space. Wild upside predictions for what the ETFs will mean for Bitcoin headed forward are already flowing with some predicting $250K by the end of 2024.
The Bearish Case
Bears believe the current price consolidation is simply a pause before the next drawdown. With Grayscale’s Bitcoin Trust (GBTC) seeing massive outflows, Bears argue that the price action is indicative of the entire space and that will Bitcoin will head much lower from here.
Bitcoin Trade Update
Current Allocation: 2.433% (+6.57% since Last Update)
Current Per-Coin Price: $45,569.23 (-0.87% since Last Update)
Current Profit/Loss Status: -9.50% (+1.73% since Last Update)
As I said last week, my plan for this week was to add to my position with very small buys as I expected the support at $40,000 to break, which it did. I had seven (7) additional buys fill which left me with an average buying price of $40,252.61 (after fees).
The buys lowered my per-coin cost -0.87% from $45,968.09 to $45,569.23 and increased my allocation by +6.57% from 2.283% to 2.433%.
From here, thanks to Bitcoin’s big bull breakout on Friday, you’ll notice that I’m repeating buys at higher support levels, starting with my first buy just above the Next Support of Last Resort trendline. If the trendline holds, I may add even more buys above that trendline to increase my allocation.
Additionally, if that support breaks, I will continue to add at past levels of support and then increase my quantities the lower Bitcoin goes.
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% @ $40,903
0.027% @ $39,910
0.027% @ $39,158
0.027% @ $38,654
0.027% @ $38,012
0.082% @ $37,336
0.125% @ $36,915
0.240% @ $36,177
0.223% @ $35,563
0.223% @ $35,011
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 January 2024, Bitcoin rallied +97% to a high of $49,102.29.
- Later in January, Bitcoin dropped -22% to a low of $38,501.00.
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.
