Summing Up The Week

Volatility’s a funny thing in the stock market. The market can be muted and calm for weeks, if not months, and, suddenly, volatility comes in like a wrecking ball, positively destroys a few key trades, and then swings back out of the market just as quickly.

After the “Black Monday” we saw two weeks ago, pundits and analysts were screaming for emergency rate cuts only to have the S&P 500 return to flat by the end of last week, and, then, rally higher throughout this week.

This real-life example provides an incredibly valuable lesson for long-term investors: it’s never the end of the world. When you’re in the middle of a volatile selloff, you should either add to positions or hold. You should never, ever sell into market panic.

Remember: It’s time in the markets not timing the markets that matters.

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

Market News

PPI rose 0.1% in July, less than expected

On Tuesday, the Producer Price Index (PPI) showed an increase of 0.1% in July versus the 0.2% expected by economists, reported CNBC. The cooler-than-expected figure could indicate that the Federal Reserve’s efforts to tamp down inflation continue to work. Additionally, on a year-over-year basis, the PPI increased 2.2% versus 2.7% in June, a significant decrease.

While any positive number indicates that prices continue to increase, it’s important to remember that the Fed isn’t trying to stop inflation, rather keep the rate of inflation to their taget goal of 2%. This fact continues to confound many American consumers who are rightfully reeling from the impacts of a cumulative inflation rate of more than 20% since 2020.

Regardless, the markets rallied on the back of this cooler-than-expected data on Tuesday.

CPI rose 0.2% in July, 2.9% year-over-year

On Wednesday, the Consumer Price Index (CPI) came in lower-than-expected, just like its PPI counterpart, at 2.9% year-over-year and 0.2% for the month versus economist expectations for 3.0% and 0.2%, respectively, reported CNBC. While stocks rallied on the news initially, the markets weakened quickly in the morning as investors appeared to realize that bad news may actually be becoming bad news once again.

Analysts also pointed out how inflation remains tricky in certain parts of the economy. “[Inflation’s] coming down, but the sticky areas continue to be sticky,” Liz Ann Sonders, chief investment strategist at Charles Schwab, said in describing the CPI report. “We have to keep a close eye on both the inflation data as well as the employment data.”

Consumer spending up 1% in July, much better than expected

On Thursday, the Commerce Department’s Retail Sales report showed a 1.0% increase in July versus economist expectations for an anemic 0.3% increase, reported CNBC. Additionally, there was also good news on jobless claims, coming in at 227,000, a drop of 7,000 from last week’s figures and lower than estimates for 235,000.

With a seemingly resilient labor market combined with consumers happy to spend, the fears that gripped the markets from the nonfarm payroll report for July and the unwind of the Japanese Yen-Carry Trade seemed to be far from the thoughts of market participants as stocks rallied on Thursday.

Next Week’s Gameplan

Next week will mostly revolve around the Federal Reserve’s annual retreat in Jackson Hole, Wyoming. While we will get a few economic datapoints such as flash services and manufacturing PMI on Thursday, the big event is Fed Chair Jerome Powell’s speech from Jackson Hole.

Last year, Powell was muted and his speech had little effect on the markets. However, in 2022, Powell came out aggressively hawkish, warning that inflation had to be tamed, and this speech was the catalyst for a -19.28% selloff from August’s peak to October’s bottom.

Which Powell will we see this year? Hawkish or dovish?

The consensus is Powell will come out and reiterate that the Fed will perform its first rate cut, likely a 0.25% cut, in September. This cut Isn’t intended to relieve any pain in the economy, but, instead, denotes the end of potential rate hikes. Removing the uncertainty as to whether or not the Federal Reserve could still hike interest rates this cycle has been a key message most analysts are watching.

Of course, Powell’s speech comes on Friday, so market participants will be walking on eggshells for the majority of the trading week once more.

And, then, I’ll meet you all back here for a recap of the week’s events. I hope you all have a relaxing week until we meet again, friends!

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Crytpo Corner

Bitcoin Price Action

The Struggle is Real for Bulls in Bitcoin

Bitcoin was making such a good progress last week, but lost it all pretty quickly after we went to print on Friday, cracking the weekly support at $60,171.62. Bitcoin bounced to make a lower weekly-high (lower-lows are bearish, unfortunately) on Sunday at $61,868.69 before losing that momentum and selling off.

The weakness continued on Monday until Bitcoin found a new weekly support level at $57,653.31. After bouncing briefly, Bitcoin broke through that new support, this time down to $56,120.00. While that’s higher than the current cycle-low down at $49,050.01, Bulls were hoping for more promising price action as this constant trend of making new lower-lows after significantly lower-highs is not bullish in any way.

The Bullish Case

The Bullish sentiment remains incredibly strong despite the lackluster price action in Bitcoin. Bulls try to argue that holding the $50K support was instrumental for Bitcoin, and while I agree that the bottom may be in now that Bitcoin has pulled back further than its historical shallowest pullback from an all-time high, the price action makes me think we’ll have more buying opportunities ahead.

The Bearish Case

Bears point out that Bitcoin is no longer correlated to risk-on assets which spent the week rallying. This is decidedly bearish for Bitcoin – if it can’t rally when tech stocks and other risk assets rally, what will it do if we see volatility re-enter the markets? Bears say a retest of the cycle low at $49K is nearly a certainty with most predicting new lows from there.

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 August, Bitcoin dropped -33% to a low of $49,050.01.

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.