Summing Up The Week

Early in the week, the market sold off a bit prior to the release of the Consumer Price Index (CPI) on Wednesday and then really pulled back when the CPI came in hotter than expected.

However, thanks to Thursday’s Producer Price Index (PPI) coming in a bit cooler than expected (despite still showing year-over-year inflation), the market once again shrugged off Wednesday’s selloff and rallied!

On Friday, however, came JP Morgan’s (JPM) earnings call, and the company threw such a gutter ball that it caused a market-wide selloff!

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

Market News

CPI comes in hotter than expected

On Wednesday, the Consumer Price Index (CPI) showed a year-over-year increase of 3.5% versus expectations for 3.4%, reported CNBC. The reason this hotter-than-expected figure carried a bigger impact than January’s and February’s is because inflation is typically higher in the first two months of a year as consumers spend so much during the holidays. By March, however, disinflation, a decrease in the rate of inflation, should have returned.

As a result, the possibility of the Federal Reserve cutting rates in June was taken completely off the table, and it’s questionable whether they’ll even cut rates before September or later. “There’s not much you can point to that this is going to result in a shift away from the hawkish bent” from Fed officials, said Liz Ann Sonders, chief investment strategist at Charles Schwab. “June to me is definitely off the table.”

Wholesale prices rose less than expected in March

On Thursday, the Producer Price Index (PPI) provided a little relief to inflation concerns, showing wholesale price increases of 0.2% in March versus the 0.3% estimated by Dow Jones economists, reported CNBC.

Whereas the CPI measures the prices consumers pay for end products, the PPI measures the prices that producers pay for the building blocks of those products. The general theory is that PPI leads CPI, in other words, since PPI is coming down, we should be able to expect CPI to come down soon, too.

JPMorgan beats earnings, provides disappointing guidance

On Friday, JPMorgan (JPM), the U.S.’s flagship bank, blew away earnings but gave such poor forward guidance that the company singlehandedly started a selloff in the entire market, reported CNBC.

In its guidance for 2024, the bank said it expected a net interest income of around $90 billion which, while unchanged from previous messaging, appeared to disappoint investors who expected JPM to raise its guidance by $2 billion to $3 billion for the year.

Despite his letter to shareholders seeming quite dour, CEO Jamie Dimon was relatively even-handed during the earnings call. “Many economic indicators continue to be favorable,” he said. “However, looking ahead, we remain alert to a number of significant uncertain forces” including overseas conflict and inflationary pressures.”

Next Week’s Gameplan

Now that we’ve officially kicked off earnings season, it’s about to get exciting, stocks fans! While we can be pretty certain the vast majority of the big companies will meet or beat their guidance for this quarter, the big question is what will their forward guidance look like now that we’ve seen a rekindling in inflation?

There are a variety of other potential market catalysts coming next week in the fore of housing data, a lot of Fed-speak (shocker, I know), retail sales, business inventory, and more. It could be a very busy week.

With the market remaining so resilient, I’ve been revisiting my buying plan to determine whether I need to raise my next buy targets for each position. Sometimes, I’ve bumped up my next buy. Sometimes, I’ve left them alone. We’ll see what happens!

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

Bitcoin’s back on its “Road to Nowhere…”

While Bitcoin did rally to a new weekly high at $72,777.00 on Monday, it pulled back pretty quickly on Wednesday, setting a new weekly low at $67,463.07… until Friday when all hell broke loose. Bitcoin broke straight through the low like butter and careened toward the monthly low at $64,500.00, finding support slightly above at $65,110.31. The price action completely destroyed the higher weekly-high, higher-weekly low bullish trend that had been building.

Additionally, after my research last week showing Bitcoin’s never had seven consecutive green months before, I am more than a little apprehensive that the next big move could be significantly to the downside… to the tune of -37% to -75% or more!

The Bullish Case

Bulls tout the higher-low, higher-high pattern as significant. Bulls continue to make the argument that buying through the ETFs has been strong, indicating there’s a huge appetite among investors to continue adding to their stacks.

The Bearish Case

Bears point to Bitcoin’s failure to break through its all-time high with any significant momentum as the reason the crypto needs to sell off and consolidate. Respectable Bears have been keeping their downside targets reasonable (for Bitcoin, at least) with many agreeing that JPMorgan CEO Jamie Dimon’s prediction for a selloff to $42,000 after the halving could be very possible. Of course, there’s always the odd Bear screaming that $15,000 isn’t the bottom for the cycle, but you have to toss that one out like the score from the German judge.

Bitcoin Trade Update

Current Allocation: 0.767% (-68.91% since Last Update)
Current Per-Coin Price: $65,850.98 (-4.03% since Last Update)
Current Profit/Loss Status: +1.88% (+2.87% since Last Update)

After my analysis last week showed Bitcoin has never had 7 consecutive green months, and, whenever it’s had 5 or 6 in a row, it’s crashed (read my analysis on Substack for free), I decided it was time to eat my own cooking and dramatically reduce my allocation.

On Saturday, Bitcoin’s sudden rally above my cost basis which meant that it was time to take profits, once again. Over the course of the week, I made a total of 53 sales for an average selling price of $69,735.19 (after fees).

Long-time readers will know that, whenever I make sales like this, it’s a risk mitigation technique more than it is a profit-taking technique in order to reduce my exposure in case Bitcoin rolls over.

That being said, the sales did lower my per-coin cost -3.88% from $68,619.29 to $65,955.60. The sales also substantially reduced my allocation -71.63%, from 2.467% down to a much more appropriate 0.700% given my expectations for Bitcoin’s moves this week. 

Friday’s sudden drop was so explosive that it ended up triggering my first buy order which filled at $64,771.03. The buy added +9.57% to my allocation, raising it from 0.700% to 0.767% and lowered my per-coin cost just -0.16% from $65,955.60.

Like I said in my analysis, there’s no guarantee that Bitcoin pulls back this time like it has in prior bullish consecutive sequences, but, if it does, the pullback could be substantial, anywhere -37% to -75% or more, and those pullbacks were during Bull Market cycles, not Crypto Winters! 

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:

0.067% @ $64,558
0.167% @ $63,503
0.167% @ $62,507
0.167% @ $62,012
0.167% @ $61,326
0.167% @ $60,057
0.167% @ $59,259
0.167% @ $57,835
0.167% @ $56,463
0.167% @ $55,090

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 March, Bitcoin rallied +92% to a new all-time high of $73,835.57.
• Later in March, Bitcoin dropped -18% to a low of $60,771.14.

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.