Summing Up The Week

Early in the week, stocks remained relatively uneventful, staying flat to slightly positive for the majority of the week until Thursday. At that point, signs of reigniting inflation spooked investors. Despite Nvidia’s absolutely outstanding earnings reports, stocks took a nosedive as investors tried to lock in gains.

However, the market continues to prove it’s incredibly resilient, with investors piling back in on Friday to buy the shallow dip.

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

Market News

Iranian President killed in helicopter crash

On Sunday, Iranian President Ebrahim Raisi was killed when his helicopter crashed amidst poor weather conditions, reported CNBC. Iran’s foreign minister, Hossein Amirabdollahian, was also killed in the accident. Given the current poor economic conditions of the country, discontent of the populace, and Iran’s support of the Hamas, Hezbollah, and Houthis, the sudden death of the president leaves a power vacuum.

Some analysts believe Raisi’s death will result in the Revolutionary Guard gaining more control. “This incident occurs against a backdrop of extremely high tensions in the region, which is already on edge due to the ongoing conflict in Gaza and recent military exchanges between Iran and Israel,” posted Sina Toossi, a longtime Iran analyst and senior fellow at the Center for International Policy, on X (formerly Twitter).

Toossi continued, “Furthermore, the aging Supreme Leader Khamenei’s succession is a significant factor in Iran’s political landscape, compounded by a crisis of legitimacy facing the Islamic Republic. Raisi’s death would contribute to an already volatile situation.”

Markets had no reaction on Monday, likely due to Raisi’s death not changing the geopolitical conditions in the Middle East one way or another.

The Fed’s growing more concerned over persistent inflation

On Wednesday, the minutes from the Federal Reserve’s May meeting were released and showed the Fed is growing more concerned about inflation, reported CNBC. The Fed minutes were supposed to be a non-story, but the consensus of FOMC participants that the benchmark interest rate will be head high for much longer sent stocks reversing in mid-day trading.

The Fed remains concerned over increases in the cost of both goods and services. “Participants observed that while inflation had eased over the past year, in recent months there had been a lack of further progress toward the Committee’s 2 percent objective,” the summary said. “The recent monthly data had showed significant increases in components of both goods and services price inflation.”

As a result, the Fed reaffirmed the higher for longer mantra, “Participants assessed that maintaining the current target range for the federal funds rate at this meeting was supported by intermeeting data indicating continued solid economic growth.” 

Nvidia reports +262% jump in sales, AI business booming

After the market closed on Wednesday, the big event everyone had been waiting for finally happened – Nvidia’s (NVDA) earnings report. Nvidia reported a 262% jump in sales and announced the stock would be splitting (again), this time 10 to 1, reported CNBC. It’s always worth noting that a stock split adds no value – existing Nvidia shareholders will receive 10 shares for every 1 share they hold, but the per-share cost will also be divided by 10.

However, despite not adding any intrinsic value, a stock split allows smaller retail investors to get into a stock. Despite fractional trading being available at nearly every broker, many retail investors would prefer to buy whole shares. As a result, when companies perform stock splits, the stock typically sees a significant rally which has happened in the past for cult favorites like Tesla (TSLA) as well as Nvidia, which itself has had many stock splits over the years.

Global Manufacturing PMI surprised to upside in May

On Thursday, the U.S. S&P Global Composite PMI improved to 54.4 in May, up from 51.3 in April, Global  Manufacturing increased to 50.9 from 50.0, and Global Services PMI increased to 54.8 from 51.3, reported FXStreet.

U.S. business activity growth accelerated sharply to its fastest for just over two years in May, according to provisional PMI survey data from S&P Global, signalling an improved economic performance midway through the second quarter,” said PMI in its release. “The service sector led the upturn, reporting the largest output rise for a year, but manufacturing also showed stronger growth.”

When reviewing PMIs, any amount over 50.0 indicates growth in the referenced economy. So, from a macroeconomic standpoint, Thursday’s PMIs were good news. Of course, good news is often bad news in this market as global growth means the chances for the Federal Reserve to cut the interest rate decreased.

The forward estimates for Fed cuts dropped from two in 2024 down to one in December 2024 and one in early 2025.

Next Week’s Gameplan

Next week is a shortened trading week thanks to the Memorial Day holiday on Monday. However, that doesn’t mean the week will be without its catalysts. On Tuesday, we get the consumer confidence survey results for May, followed by the first revision of the Gross Domestic Product on Thursday, with the granddaddy of all inflation reports, the Personal Consumption Expenditures (PCE) index – the Federal Reserve’s preferred gauge of inflation – on Friday.

So, yes. Next week stands to be pretty dramatic depending on how all the news falls. Naturally, I’m hoping the pullback started this week will continue. I did make a few buys toward the end of the week, but I have an absolute hoard of money sitting on the sidelines that I would like to put to work in all of my portfolios.

That being said, after Nvidia’s stellar earnings report, I also have sell targets for NVDA as well as every position in my portfolio. As always, if any of my positions hit those sell targets, it will be time to trim.

I hope everyone has a great week, and I’ll see you back here next Friday, friends!

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THANK YOU FOR YOUR ONGOING SUPPORT!

Crytpo Corner

Bitcoin Price Action

What do Ethereum ETFs mean for Bitcoin?

Bitcoin exploded higher on Monday following news that the SEC requested updated 19b-4 filings from all of the Ethereum ETF applicants, reported Coindesk. While this request was certainly bullish as it’s a similar request the SEC made during the Bitcoin ETF approval process, it wasn’t necessarily a guarantee that the Ether ETFs would be approved.

However, given that I was bearish on the ETF approval, I was incredibly happy to be wrong about the potential. I felt Ether was surely going to be identified as a security, not a commodity, and that the SEC was highly unlikely to approval the corresponding ETFs.

Bitcoin broke through last week’s high of $67,500.00 and followed through by breaking through the monthly high at $69,324.58, setting a new point of resistance at $71,980.00 on Tuesday.

On Thursday, the SEC announced that they approved key regulatory filings tied to the Ethereum ETFs, however the ETFs were not cleared to trade, yet, reported Coindesk. The SEC approved the 19b-4 forms tied to the ETFs but must still approve the S-1 filings before investors can buy them.

During trading on Thursday, both Bitcoin and Ether sold off fairly substantially, a move I predicted on X on Wednesday. For some reason, Bitcoin has sold off on the back of any new investment instrument’s approval. Typically, the selloff is short-lived and is, therefore, a buying opportunity, however the selloffs have been consistent.

Bitcoin did manage to find support above last week’s low of $64,588.50, creating a higher weekly-low at $66,259.00. The price action of higher weekly-highs and higher weekly-lows remains incredibly bullish heading forward.

The Bullish Case

Bulls argue that the Ethereum ETFs clearing this hurdle means crypto as a sector is becoming more mainstream and that even more buyers will be headed for Bitcoin. Bulls believe that Thursday’s pullback in Bitcoin is a temporary buying opportunity, with some predicting new all-time highs for Bitcoin before the end of May.

The Bearish Case

Bears believe that this selloff is the beginning of a much deeper pullback for Bitcoin. Some have argued that the selloff will have more in common with when the Bitcoin futures were approved in December 2017. From that point, Bitcoin sold off nearly -80% before bottoming nearly a year later in December 2018.

Bitcoin Trade Update

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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.
• In May, Bitcoin dropped -23% to a low of $56,500.00.

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.