Summing Up The Week

Volatility reached year-over-year highs this week as economic data and bad earnings slammed markets. Friday’s jobs report capped off the concerns with higher-than-expected unemployment triggering what’s called the Sahm Rule (read on to find out what this is and how it works).

Markets went into a full-blown panic on Friday, continuing Thursday’s selloff in an epic way as investors began asking: are we ALREADY in a recession?!

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

Market News

Consumer Confidence improved slightly in July

On Tuesday, the Conference Board’s Consumer Confidence Index (CCI) rose to 100.3  in July from 97.8 in June, reported FXStreet. The CCI survey gauges how optimistic or pessimistic consumers are about the economy’s current and future state specifically focusing on jobs, not inflation like the University of Michigan’s consumer sentiment survey.

The improvement in confidence was a welcome sign for the stock market, although concerns about inflation likely overwhelm those regarding the labor market, currently. Along those lines, the Present Situation Index has declined, and consumers are still concerned about elevated prices and interest rates. These factors will likely ensure we continue to experience stock market volatility which happened on Tuesday when stocks rolled over significantly before the end of trading.

Fed keeps rate steady, September “on the table”

On Wednesday, Federal Reserve Chairman Jerome Powell said that the central bank would consider lowering interest rates in September should the economic data remain favorable, reported CNBC. The Fed keeping rates steady in July and Powell’s commentary fell in-line with what the markets expected, so the intense rally which had been going on into the press conference finished the day unchecked. 

Wednesday served as an example of why it’s so important to be in the markets all the time; investors won’t know when a big day is about to happen. The S&P 500 finished the day up +1.58% and the Nasdaq added a whopping +2.64% in a single day.

Studies have shown that if investors miss just a few of the year’s biggest days, they can risk missing out on the vast majority of the entire year’s gains!

ISM Manufacturing PMI falls more than expected in July

On Thursday, the ISM Manufacturing Purchasing Managers Index (PMI) showed a surprise decrease to 46.8 in July versus the 48.8 estimate from economists, reported Seeking Alpha. The PMI is a gauge of growth in specific sectors, manufacturing, in this case. Any result under 50 indicates a contraction in the space, the deeper the result below 50, the bigger the contraction.

The surprise decrease in manufacturing caused the market to roll over after rallying significantly on Wednesday. ISM pointed to decreasing new orders as the cause for the decrease. “Demand was weak again, output declined, and inputs stayed generally accommodative,” said Timothy R. Fiore, chair of the ISM Manufacturing Business Survey Committee.

Jobs increase less than expected, Unemployment jumps to 4.3%

On Friday, the nonfarm payroll report showed an increase of 114,000 jobs in July and unemployment spiked to 4.3%, triggering the Sahm Rule which has a high rate of predicting recessions, reported CNBC. As a result, the selloff, which started Thursday, intensified on Friday sending markets tumbling.

The Sahm Rule, developed by Economist Claudia Sahm, triggers when the unemployment rate’s three-month average is half a percentage point higher than its 12-month low. When this happens, the Rule shows a high likelihood that the U.S. Economy is already in recession.

“My baseline is not recession,” Sahm said. “But it’s a real risk, and I do not understand why the Fed is pushing that risk. I’m not sure what they’re waiting for; the worst possible outcome at this point is for the Fed to cause an unnecessary recession.”

Next Week’s Gameplan

Volatility is never fun but it definitely seems like this price action has a high likelihood of continuing for some time. Next week, we get more earnings reports as well as a series of different economic datapoints.

On Monday, we get the ISM services index followed by consumer credit on Wednesday. There’s also some Fedspeak on Thursday from Fed President Tom Barkin where the Fed will likely try to cool markets if this week’s selling continues.

As always, downturns in the market are BUYING OPPORTUNITIES. You should never, ever sell into a marketwide selloff unless you absolutely, positively need the money and have no recourse. Otherwise, long-term investors should review each of their positions to make buying plans and add in stages to quality positions.

You’ll see over the weekend that the past week was particularly busy for me in both my Speculation in Play and Investment in Play portfolios.

As for next week, remember to stay calm and follow your plan. If the market volatility is making you nauseous, take a break and don’t look at your portfolio. This too, shall pass.

And, as always, I’ll see you back here next Friday, friends!

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Crytpo Corner

Bitcoin Price Action

Bitcoin was fine… until it wasn’t!

It looked like the Bitcoin Bulls had taken the reigns early in the week with the big orange crypto breaking through last week’s high at $68,495.00 and setting a new high at $70,000.00 (those weird, perfectly-round numbers strike again!).

Then, Bitcoin rolled over on no news and never looked back. When the rest of the stock market fell through the floor on Thursday, Bitcoin followed suit, breaking through the weekly low at $63,412.46 and the next level of support at $62,410.33, not creating a new level until $62,212.81 Thursday afternoon.

I continue to argue that I won’t have faith in this bull cycle and that the lows are in until Bitcoin makes a new all-time high or a low of $50,769 or lower. The prior shallowest pullback from an all-time high was -31.24% and Bitcoin has only pulled back -27.54% so far. Statistically speaking, it’s always possible that Bitcoin could make a shallower pullback this cycle, but that’s not something investors should bet on.

The Bullish Case

Some Bulls are accepting the fact that there’s a lot of work Bitcoin needs to do before we’ll see significant all-time highs, but there is a surprisingly-large number of them that tries to argue positively in spite of all the price action we’ve seen.

Maybe those Bulls will be right and this is just a horrendous consolidation period, but lower-lows and lower-highs on the big timeframes are typically NOT bullish for any asset class, particularly Bitcoin.

The Bearish Case

Bears once again maintain the upper-hand. Bitcoin keeps finding resistance at lower-highs and then crashing through to lower-lows. With our current low at $53,500, it’s hard to say why Bitcoin can’t crash lower. As always, have your buying plan ready (or a loss-cutting plan) in case we test that low and break through.

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.

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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.