Summing Up The Week

The week started flat until Tuesday’s report hinting inflation might not be dead, yet, sent the markets reeling… for a single day. On Wednesday, the buy-the-dippers came out in force and the markets felt as if nothing was wrong.

However, Friday’s data showed that inflation is, indeed, persistent, which once again sent the markets into a bit of a flux. It looks like the Bears might be getting off the mat after a record 15 weeks of straight gains in the S&P 500 halted due to the inflation data.

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

Market News

Inflation rose more than expected in January

On Tuesday, the Consumer Price Index (CPI) indicated prices rose 0.3% in January, more than the 0.2% expected by Dow Jones economists, reported CNBC. While that miss might not seem like much, just 0.1%, the markets had been priced for perfection,  and with all pundits expecting a rate cut coming shortly thanks to the Federal Reserve’s policies seemingly stomping out inflation, this CPI print was downright bad.

The stickiest part of inflation continues to be shelter prices. Shelter accounts for a third of the CPI and climbed 0.6% in January, resulting an astounding year-over-year rise of 6% in shelter costs. 

Despite the pop in inflation, some economists remain upbeat. “Inflation is generally moving in the right direction,” said Lisa Sturtevant, chief economist at Bright MLS. “But it’s important to remember that a lower inflation rate does not mean that prices of most things are falling — rather, it simply means that prices are rising more slowly. Consumers are still feeling the pinch of higher prices for the things they buy most often.”

As a result, stocks, Bitcoin, gold, and pretty much everything besides oil and other commodities pulled back significantly as investors re-rated their expectations for the coming months.

Producer Prices fell more than reported in December

The mixed inflation messages continued on Wednesday when the revised Producer Price Index (PPI) showed prices fell 0.2% in December versus the 0.1% initially stated, reported Reuters. The Bureau of Labor Statistics (BLS) attributed the revision to seasonal adjustment factors which the agency uses to strip seasonal fluctuations from the data. 

January Retail Sales dropped 0.8%, far more than expected

On Thursday, retail sales for January showed a drop of 0.8% in January significantly more than the Dow Jones estimate for a 0.3%, reported CNBC. With more than 60% of the United States’ Gross Domestic Product (GDP) made up from consumer spending, a consumer pulling back could potentially indicate weakness in the economy, too.

The combination of potentially re-igniting inflation from the recent CPI report combined with these figures have led some market pundits to believe the Federal Reserve’s attempts at a “no landing” scenario – where the economy remains strong throughout the entire rate tightening cycle – may have dropped to zero.

These pundits still believe a “soft landing” scenario – one where the economy experiences a mild recession, not a major recession – is still likely, however.

Wholesale prices rose in January… inflation’s not dead, yet.

On Friday, January’s Producer Price Index (PPI) made an about-flip from the December numbers that were revised down earlier in the week, with the PPI rising 0.3% in January versus economist expectations for an increase of just 0.1%, reported CNBC.

Markets recovered after Tuesday’s steep selloff following the release of the CPI data, however, Friday’s PPI showing persistent inflation caused the rally to hesitate with stocks slightly down in early Friday morning trading.

Next Week’s Gameplan

Next week’s another holiday-shortened week with markets closed on Monday for the President’s Day holiday. There’s also a distinct lack of any potential market-moving news catalysts, so all eyes will be on… wait for it… Nvidia’s earnings call after the market closes on Wednesday. {dramatic chords here}

Believe it or not, I’ve heard some market pundits claim that the entire rally rests on the back of Nvidia (NVDA), suggesting that if NVDA misses or simply comes in as-expected that the entire market will sell off. I’m not entirely sure what to think of anything as we head into Nvidia’s earnings call and I’ve stopped trying to make a play on what will happen.

I’ve been an investor in Nvidia since 2016 and it remains the largest position in my Investments in Play portfolio. In 2018, Nvidia rallied thanks to its GPUs being used in cryptocurrency mining, and although the company claimed crypto sales weren’t a significant part of demand, that turned out to be wrong so when Bitcoin crashed from to $3,130 by December 2018, it took Nvidia with it to the tune of nearly a 60% selloff!

Could that happen again? Potentially, but there are no guarantees. I’ve already taken some of my position off the table as Nvidia’s rallied spectacularly just since the start of 2024, but I won’t be doing any more profit-taking until after earnings.

In the meantime, I’ll see you all 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

There was a ceiling at $50K? What ceiling?! -Bitcoin

Bitcoin blew right through the previous resistance without any question, flying through the weekly resistance at $47,723.78, then the next point at $47,901.00 and barely hesitated at the previous yearly high at $49,000 before shooting to $52,890.00 on Thursday. Our new weekly support is $47,590.30 followed by a bit of an air gap until $42,228.01.

As always, there’s no real explanation for what caused the sudden bull rally in Bitcoin, but there rarely is. Maybe there are more inflows coming in due to the reignited inflation, maybe it’s just the introduction of the spot ETFs bringing in more institutional and retail investors?

In the end, it doesn’t matter. The bull market is definitely still on in Bitcoin.

The Bullish Case

Bulls rejoiced this week as the renewed fervor for Bitcoin sent the crypto rocketing to make higher-highs for the year, a true bull sign if there ever was one. Over the short term, the Bulls predict the next stop for Bitcoin will be $57,000 with some going so far as to say that we will see a new all-time high more than double the previous at $69K by the end of 2024.

The Bearish Case

Bears must once again go back to licking their wounds. While the initial call that the launch of the Bitcoin ETFs was a “sell-the-news” event, many Bears didn’t capitulate when they should have.

Yes, going into the ETF launch, HODLers should either trim or, at least, not add, but when Bitcoin pulled back -20%, that was a buying opportunity, not a time to press shorts. For the moment, the Bears must go back to the drawing board as there’s no bear scenario to play right now.

Bitcoin Trade Update

*Trade Reset* Locked in +15.85% in gains in 6 weeks, +137.34% Annualized**

With Bitcoin blowing through the $52,000 mark, I decided it was time to reset the trade.

After trading Bitcoin for more than seven years (!!!), I’ve learned that rather than sell my allocation, get my USD back, and hope for lower levels to get back in, my mindset is better if, instead, I reduce the size of my current trade’s allocation to a level I’m comfortable with, raise the cost-basis to wherever I think is reasonable, and withdraw  to cold wallets the difference in Bitcoin as profits from the trade.

As a result, I decided to reset the trade on Thursday with a new cost basis at $52,799.98. I made 21 sales using stop-loss limit orders and standard limit orders which left me with an average sale price of $52,114.16 (after trading fees).

I locked in a gain of +15.847% on a trade that opened on January 8, 2024 and closed on February 15, 2024, more than +137% annualized. As always, I never take my profits in fiat. Rather, I keep the profits in the crypto I was trading at the time (usually Bitcoin but sometimes Ether and, rarely, altcoins).

By keeping my profits in the crypto, I have nearly quadrupled my winnings since I started using this technique in 2019. In other words, since I’ve been keeping crypto as profit back at incredibly low levels, that crypto is now worth +370% more than it would be had I just sold it for USD at the end of each trade. 

If that doesn’t demonstrate the power of Bitcoin to protect against inflation, I’m not sure what does!

In order to manage risk for the new trade, my sales reduced my allocation -21.37% from 2.967% to 2.333% so the new trade can start in earnest on the slightest pullback (see details below).

Current Allocation: 2.333% (*New Trade*)
Current Per-Coin Price: $52,799.98 (*New Trade*)
Current Profit/Loss Status: -0.83% (*New Trade*)

Given how powerful the bull rally has been, it was most definitely time to reset the trade. Accordingly, my next ten (10) buying targets are much higher than last week.

Additionally, I’ve doubled my smallest buy. I’m simply not getting the allocation I want before Bitcoin rockets higher. Sure, this is a high-quality problem, but it’s made me realize that I actually need to loosen my risk management strategies as they have obviously been far too tight (seriously, I never achieved more than 3% of my desired allocation in this last down-round… that’s preposterous!).

So, below are my next ten buying targets with increasing quantities…

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% @ $51,888
0.027% @ $51,453
0.027% @ $51,129
0.027% @ $50,032
0.027% @ $49,928
0.054% @ $49,059
0.054% @ $48,759
0.054% @ $48,328
0.054% @ $47,617
0.054% @ $46,934

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 my Gemini referral link to open an account.

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.
• In February 2024, Bitcoin rallied +37% to a high of $52,890.00.

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.