Summing Up The Week
Despite weakening economic signals and even a unemployment, stocks shrugged off any negativity and continued to rally in a big way over the past week.
Even companies who had been beaten down for weeks got back on their horses with Tesla (TSLA) rocketing spectacularly going into the Independence Day holiday.
Let’s look at the news that moved markets this week…
Market News
U.S. PMI saw increase in June, but less than expected
On Monday, the United States Purchasing Managers Index (PMI) for Manufacturing saw an increase of 51.6 in June versus 51.7 expected, up from 51.3 in May, reported Seeking Alpha. PMI measures the growth or contraction in certain sectors, manufacturing in this case, and a figure over 50.0 indicates that the sector is growing, a positive sign for a strong economy.
However, since the increase was slightly less than expected, some analysts argued this could be the start of a negative trend. “[The] survey shows US manufacturers struggling to achieve strong production growth in June, hamstrung by weak demand from domestic and export markets alike. Although the PMI has now been in positive territory in five of the first six months of 2024, up from just one positive month in 2023, growth momentum remains frustratingly weak,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.
Despite economists feeling negative about the PMI, the markets continued to rally on Monday with the S&P 500 finishing up +0.27% and the Nasdaq up +0.83%.
Powell says Fed has made progress, not ready to cut
On Tuesday, the Federal Reserve has made “quite a bit of progress” reducing inflation but needs more evidence before cutting, Chair Jerome Powell told a central banking forum audience in Portugal, reported CNBC.
“We’ve made quite a bit of progress and in bringing inflation back down to our target,” Powell said at a central banking forum in Sintra, Portugal. “The last [inflation] reading and the one before it to a lesser, lesser extent, suggest that we are getting back on the disinflationary path. We want to be more confident that inflation is moving sustainably down toward 2% before we start the process of reducing or loosening policy.”
Given that Powell’s comments simply reiterated the messaging the Fed has been saying for months now, the U.S. stock market had little to no reaction following his speech.
ISM Services saw a substantial drop to 48.8% in June
On Wednesday, Institute for Supply Management’s (ISM) Services Index showed a significant drop to 48.8% in June from 53.8%, much lower than estimates for 52.8%, reported MarketWatch. Just like the PMI Manufacturing Index released Monday, a figure greater than 50% indicates the economy is growing while a figure less than 50% indicates contraction.
Not only is a downside surprise like this a potentially bad sign, the U.S. economy has thrived on services which have been driving growth since the pandemic. “High interest rates and lingering inflation have put a bigger strain on family budgets,” reported MarketWatch. “Households have used up most of their pandemic savings, and have to rely on their incomes for most of their spending now.”
Additionally, economists believe the ISM Services could remain weak for some time. “Alongside a decline in the ISM manufacturing index, these surveys suggest that GDP growth will remain weak in the third quarter,” said Olivia Cross, North American economist at Capital Economics. “They also add to evidence that labor demand is softening, and inflation will remain on a downward trend.”
Oddly, the stock market didn’t react to the bad news with the S&P 500 and Nasdaq both rallying on Wednesday. Perhaps the rally was due to low liquidity due to the holiday week or maybe the market’s looking through the weakness, but the positive performance struck me as strange.
U.S. added 206K jobs in June, but unemployment rose to 4.1%
On Friday, the nonfarm payrolls report showed jobs increased to 206,000 in June, better than the 200,000 expected, but unemployment climbed to 4.1%, higher than the 4.0% predicted, reported CNBC. The markets weighed the strong jobs figure over unemployment and stocks continued to rally on Friday.
In fact, despite unemployment rising – a distinctly negative sign – economists remained optimistic. “It’s a soft landing kind of report,” Jan Hatzius, chief economist at Goldman Sachs, said on CNBC’s Squawk on the Street. “This does support the idea that [the Fed] will cut relatively soon, and we continue to think September is the most likely.”
Should unemployment rise further or, worse, spike unexpectedly, that would certainly derail the bull market, but, barring that, stocks continued to head higher.
Next Week’s Gameplan
Next week brings more economic data signals. On Monday, we get the consumer credit report, and with many credit card companies reporting increasing credit card delinquencies, this report could provide interesting insights into the health of the consumer. On Thursday, we get the Consumer Price Index (CPI) once more. While not the gauge of inflation that the Federal Reserve looks closely at, the CPI has moved markets many times since inflation reared its head in 2021. Depending which way the index has gone since June, we may see a market reaction. On Friday, we get the Producer Price Index (PPI) which has typically followed the CPI in terms of direction, but it’s always possible it could deviate. Then, the big event – again, always on Friday – Earnings Season kicks off once more when the big banks like JP Morgan (JPM) and Citibank (C) report their quarters. (I honestly can’t believe time has flown so fast that we’re already back into another earnings season!) Typically, the banks are considered bellwethers, so their earnings reports could color the next few weeks of price action heading forward. One of the reasons I have such a passion for investing and the stock market is there’s always something to look forward, to get your buying and selling plans ready, and I’ll meet you back here next Friday to cover the action!Check out Get Irked Premium on Substack!
After nearly six years of providing FREE content, the time constraints of producing Investments in Play, Speculation in Play, the Pandemic Portfolio, and Stock Shopping List have become too much to continue doing for free. On Substack, you can subscribe for FREE to have the Week in Review and Crypto Corner, now separate newsletters, sent to your email inbox at no cost. The portfolio updates and Stock Shopping List will be moving to a paid premium subscription. I hope you will join me on Substack as I continue on this exciting journey!THANK YOU FOR YOUR ONGOING SUPPORT!
Crytpo Corner
Bitcoin Price (in USD)
%
Weekly Change
Bitcoin Price Action
The Bears Have Sunk Their Fangs into Bitcoin…
Initially, it looked as though Bitcoin was recovering over the past week, rallying to a new weekly high at $63,801.26 on Monday which looked incredibly bullish. All the bulls had to do was hold the low set last Friday at $59,868.00 and we could have had a strong series of higher-highs and higher-lows on the Weekly Timeframe.
Unfortunately, it was not meant to be…
On Wednesday, Bitcoin really broke down, breaking through that new weekly low, the prior low, and destroyed May’s low before creating new support at $53,499.90. This devastating crash invalidated any and all progress the Bulls had made and has sent Bitcoin into a severe consolidation pattern.
As I’ve been saying since the end of March, the shallowest pullback Bitcoin has made since making a new all-time high was in 2021 when it pulled back -31.24%. Even with its low at $53,499.90, Bitcoin has only pulled back -27.50%. I think it’s highly likely there’s even more pain in store for the Bulls…
The Bullish Case
Bulls continue to point to the elusive launch of the Ethereum ETFs as a reason Bitcoin and the other major cryptos are about to run to new all-time highs. Despite Bitcoin having severely damaged a myriad of key technical and fundamental supports, some Bulls seem to be pulling blindfolds over their eyes rather than acknowledge there’s a lot of repair needed on Bitcoin’s chart.
The Bearish Case
Bears continue to maintain the upper hand. While the higher high on the weekly looked promising for the Bulls, the lack of momentum and follow-through plus the complete collapse of support nearly immediately after Bitcoin set that high is certainly bearish. Bears believe Bitcoin will continue to break down lower, with some predicting Bitcoin will test $50,000 within the week!
Bitcoin Trade Update
Premium subscribers to Get Irked get access to all the moves I’ve made in my Bitcoin trade over the past week as well as my next thirty (30) … yes, 30 … buys in Bitcoin including price levels, quantities, and a full layout of my ongoing long-term trade in the world’s biggest crypto.
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?
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.
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Studies show that economic recessions cause an increase in suicide, especially when combined with thoughts of loneliness and anxiety. If you or someone you know are having thoughts of suicide or self-harm, please contact the National Suicide Prevention Lifeline by visiting www.suicidepreventionlifeline.org or calling 1-800-273-TALK. The hotline is open 24 hours a day, 7 days a week.