Summing Up The Week

Before Thursday’s cooler-than-expected inflation report, stocks rallied significantly throughout the week on the back of no positive catalysts. On Wednesday, the S&P 500 saw a gain of more than one percent, again, with no real reason.

That story changed on Thursday when the CPI report showed a surprise decrease in inflation, yet stocks rolled over and sold off, anyway. The Bulls returned on Friday, however, causing stocks to regain the rally into the week’s end.

That drop on Thursday did leave many professional investors and traders asking, “Has volatility returned?” Typically, the summer months can be more volatile thanks to lower trading volume since many people are taking vacations. As a result, a move that could have been absorbed by normal trading volume during the rest of the year can be magnified when fewer are there to trade it.

My approach is simple – I focus on each of my positions and have buying and selling targets for each. As long as there isn’t a fundamental reason my stock is selling off, I want to add to all of my long-term positions as they are all stocks of quality companies whose models I believe in for a 20+ year time horizon.

With that, let’s take a look at the news that moved markets this week…

Market News

CPI fell 0.1% in June from prior month, lower rates incoming?

On Thursday, the Consumer Price Index (CPI) showed a drop of -0.1% in inflation in June from May beating expectations for flat month-over-month, furthering the potential for the Federal Reserve to cut interest rates sooner rather than later, reported CNBC. The 0.1% put the 12-month rate of inflation at 3.0%, its lowest level in more than three years.

While the Personal Consumption Expenditures (PCE) index is the Fed’s preferred gauge of inflation, there’s no question that the CPI carries a lot of weight with it, and any negative (or positive) surprise will send stocks moving. Initially, stocks rallied before the market opened, but, in an uncharacteristic move, rolled over and sold off to end the day down, perhaps an indicator of buyer exhaustion.

Wholesale prices rose 0.2%, more than expected

On Friday, the Producer Price Index (PPI) showed prices increased 0.2% in June versus the 0.1% expected by economists, reported CNBC. This small surprise bump left the PPI up 2.6% year-over-year. Additionally, the May figure was also revised higher.

“The hotter-than-expected PPI reading runs counter to recent data that shows inflation declining,” reported CNBC. “Although economists and investors tend to put more weight on the consumer-focused inflation readings.”

Despite the surprise inflation bump, the prior day’s cooler-than-expected CPI print combined with good earnings from the banks meant stocks returned to rallying rather than continuing the selloff from the day before.

Bank earnings beat, but pour water on guidance

The big moneycenter banks like JP Morgan (JPM), Citibank (C), and Wells Fargo (WFC) kicked off earnings season on Friday, and while the banks all beat expectations, their forward guidance was far from what investors were hoping for causing the financials to sell off, reported CNBC.

CEO Jamie Dimon noted in his JP Morgan’s earnings release that his firm was wary of potential future risks, including higher-than-expected inflation and interest rates, even while stock and bond valuations currently “reflect a rather benign economic outlook.”

“The geopolitical situation remains complex and potentially the most dangerous since World War II — though its outcome and effect on the global economy remain unknown,” Dimon said. “There has been some progress bringing inflation down, but there are still multiple inflationary forces in front of us: large fiscal deficits, infrastructure needs, restructuring of trade and remilitarization of the world.”

The rest of the market continued to rally despite the disappointing guidance from the banks, which, I must say, completely surprised me. Usually, these banks serve as bellwethers for the rest of the market, and the market typically falls their lead. 

Next Week’s Gameplan

Next week’s key market-moving news catalysts include the Empire State manufacturing survey on Monday followed by retail sales and the home builder confidence index on Tuesday. 

On Wednesday, we get housing starts, building permits, industrial production, and the Fed Beige Book (the latter of which should get a lot more attention than it actually does, in my humble opinion). On Thursday, we get initial jobless claims and the Philly Fed manufacturing survey. Naturally, there’s some fedspeak sprinkled throughout the week, too, with Fed Chair Powell speaking on Monday and other Fed governors speaking on Tuesday and Friday.

And, of course, it’s earnings season, so there’s plenty that could shake the markets up next week. From my own portfolios, I’ll be keeping a close eye on Morgan Stanley (MS) on Tuesday before the market open; and Johnson & Johnson (JNJ) on Wednesday before the market open with Crown Castle (CCI) after the market close.

After all that, I’ll see you back here for a market recap next Friday, friends!

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Crytpo Corner

Bitcoin Price Action

Bitcoin Doesn’t Know Where To Go…

Bitcoin seemed to stabilize this week, making a higher weekly-low at $54,278.93 on Monday and setting a new high at $59,533.06 on Thursday. While higher-highs and higher-lows could be a sign of recovery for the Bulls, it’s important to remember that the amount of technical damage done to Bitcoin over the past few weeks cannot be overstated – the situation remains precarious for the Bulls.

The Bullish Case

With the SEC dropping its case against Binance Coin as a security on Thursday, many Bulls thought the news would provide an upside catalyst to Bitcoin, but that didn’t pan out. Many Bulls argue that the current levels remain an excellent buying opportunities with notable technicians like Carter “Chart Master” Worth saying on CNBC that he believes Bitcoin is a buy at these levels.

The Bearish Case

Bears argue this cooling-off period is just Bitcoin burning off oversold conditions before the weak-handed ETF holders send the big orange crypto to new lows. The most bearish Bears last week predicted a $50K mark this week, but that did not come to pass. These Bears now argue this will happen before the end of July.

Personally, I remain on the bearish side simply due to the historical nature of pullbacks in Bitcoin. With the shallowest pullback from an all-time high being -31.24% in January 2021 and Bitcoin having “only” pulled back -27.54% so far, I will expect further downside from here. I’ll be happy to be wrong, but my buying plan is always prepared!

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 July, Bitcoin dropped -28% to a low of $53,500.00.

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.