Summing Up The Week

Stocks spent the first three days of the week waffling between slight gains and slight losses while market participants waited Nvidia’s (NVDA) earnings after the close on Wednesday. 

Nvidia did beat both the quarter and raised guidance… but it wasn’t good enough. The markets tried to shrug it off, but rolled over on Thursday. Then, on Friday, the Personal Consumption Expenditures (PCE) index came out and reinforced the need for the Federal Reserve’s rate cut.

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

Market News

Consumers confident but pessimistic…?

On Tuesday, the Conference Board released their consumer confidence index which increased to 103.3 from 101.9 in July, however the study revealed consumers worried about the labor market, reported Yahoo! Finance.

“Compared to July, [consumers] were more positive about business conditions, both current and future, but also more concerned about the labor market,” said Chief Economist Dana Peterson in a release. “Consumers’ assessments of the current labor situation, while still positive, continued to weaken, and assessments of the labor market going forward were more pessimistic. This likely reflects the recent increase in unemployment. Consumers were also a bit less positive about future income.”

Naturally, the survey revealed that consumers had grown concerned about the stock market, too, following the one-day crash on August 5th. Less than half of respondents expect stock prices to rise in 2025.

Given that investors were focused on Wednesday’s big event with Nvidia (NVDA) reported earnings after the close, the reaction to the better-than-expected consumer confidence index was muted with the indexes rallying but closing up less than +0.20% on the day.

Nvidia reported good earnings… but not good enough

Wednesday evening brought the event everyone seemed to be waiting for – Nvidia’s (NVDA) earnings, and while Nvidia beat expectations for earnings-per-share and revenue and gave good guidance, the street wanted more, and Nvidia sold off in after-hours trading, reported CNBC.

Nvidia said its gross margin had slipped in the prior quarter, dropping from 78.4% to 75.1%, but that’s still a 5.0% increase from last year’s 70.1%. Additionally, the company announced a $50 billion share buyback program.

However, none of it seemed to be enough for the Bulls who wanted yet another blowout quarter. This just goes to show how while the market isn’t an efficient pricing mechanism over the short-term, if you give it long enough, market participants will eventually figure out how to value a company (it took nearly two years in this case).

On Thursday, it looked like the S&P 500 and even the Nasdaq were going to shrug off Nvidia’s earnings even with Nvidia’s stock down more than -6%. This changed within the last hour of trading when the indexes rolled over and finishing the day flat. Still, with some Bears claiming Nvidia could crash the market, it was impressive to see the breadth hold up against Nvidia’s selloff.

PCE increased 0.2% as Expected

On Friday, the Personal Consumption Expenditures (PCE) index showed an increase of 0.2% in July and 2.6% year-over-year, slightly softer than the 2.7% estimate, reported CNBC. Despite many Bears claiming the markets had already priced in the Federal Reserve’s announced rate cut in September, stocks rallied following the PCE release on Friday.

Prices changed very little over the past month with the Bureau of Economic Analysis reporting that prices for goods fell by less than 0.1% while services increased 0.2%. As long as inflation continues to come in as-expected or better, there is little doubt that the Fed rate cutting cycle will begin in a few short weeks.

Next Week’s Gameplan

Next week kicks off with being another shortened trading week thanks to Monday’s Labor Day holiday and all the markets being closed. However, this doesn’t mean next week will be uneventful. In fact, next will likely be the opposite.

On Tuesday, we get manufacturing ISM and PMI ; on Wednesday we hear about the job openings report (JOLTS) and factory orders; Thursday sees initial jobless claims and services PMI and ISM; but the big event comes on Friday, of course, the nonfarm payrolls report for August.

If the jobs report for August comes in too strong, markets will get nervous about the frequency of the Federal Reserve’s rate cuts. While Chair Jerome Powell’s speech from Jackson Hole last week makes the September rate cut a virtual certainty, the market’s still trying to price in the frequency and depth of each cut. A strong jobs report could mean the Fed will take the “one-and-done” approach while waiting for more data.

However, an overly weak jobs report might not be good for markets, either. If unemployment comes in higher than last month (economists are expecting unemployment to come in at 4.3%), the markets could head into a tailspin worrying that the economy’s weakening too quickly and the Fed was too slow to start cutting rates.

So, yes, shortened week or not, next week promises to be an exciting one, and I’ll see you back here to talk about it next Friday, friends!

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Crytpo Corner

Bitcoin Price Action

Bitcoin’s falling down the waterfall once again…

Since Bitcoin’s rally, I’ve made 25 sales in my current trade, bringing the allocation down -7.35% and reducing my cost basis -0.21%.

Does this mean I’ve lost faith in Bitcoin? NOT AT ALL!

However, I’ve been in Bitcoin for multiple cycles and I’ve learned never to trust the breakout. Often, Bitcoin will make false breakouts – some that are incredibly large – only to turn around and crash below its current-cycle lows. Accordingly, whenever Bitcoin breaks out above my cost basis, my discipline requires that I trim the position and take profits.

Obviously, I don’t trim much – I still have the largest allocation trade on in Bitcoin in more than 2 YEARS, but I must trim.

I love Bitcoin, but I don’t trust her at all.

Many investors and traders say your perspective on the markets or an asset class depends where in the cycle you first started trading it. For me, I didn’t start my adventure into Bitcoin at the beginning of a bull cycle. No, I started at the VERY end.

I started trading Bitcoin in December 2017, shortly after it had pulled back from its then all-time high near $20,000. After crashing to $6,000 and trading between $6K and $8K for much of the year, all the Bulls were screaming that the next bull market cycle was right around the corner.

They pointed to the technicals, the fundamentals, and described bullish breakout patterns forming on the charts. Then…

Bitcoin crashed another ~50% down to $3,130!

Some of these analysts disappeared and haven’t seen since. One, in particular, Carter Thomas, ran a daily crypto YouTube channel. On November 19, 2018, the day Bitcoin broke down below $5,000 for the first time since its run to $20K, Thomas disappeared.

Unlike other permabulls who had the self-respect to stay out of the space forever, Thomas made a resurgence in May 2019, shortly after Bitcoin recovered $9K, claiming that he left the space because he had “just gotten married” and “he needed a break.” I got married in 2012. I run a small business. I didn’t disappear when I got married – I took a week off.

Fortunately, Carter’s fans did not forgive him when he reappeared, ridiculing him for being a “fair-weather fan” of Bitcoin, only interested in the crypto when he could proudly predict the next bullish move. Since Bitcoin tends to move from the lower-left to the upper-right, it’s an incredibly easy space for permabull analysts to claim they’re “unbiased.”

Notice how many of analysts, particularly on Fintwit, completely missed the crash to $49K on August 5th? In fact, I’m the only investor in Bitcoin I know who was objective enough to pound the table since March declaring that $53,500 wasn’t the bottom for this cycle.

I’m long-term bullish on Bitcoin. I have been since 2018 when I developed my Trade2HODL strategy. However, that doesn’t mean I’m always bullish. You need to change your minds when the facts change, even if you’re hopeful for higher-highs; always be prepared for lower-lows.

Bitcoin made a spectacular rally after last week’s update went out, making a new weekly high on Sunday at $65,050.08 before rolling over and undoing all that good work. On Tuesday, Bitcoin crashed through $60,000 and didn’t find support until $57,851.62, only a bit higher than last week’s low, once again showing that the crypto isn’t done messing with investors, yet.

The Bullish Case

Bulls continue to argue that Bitcoin is in bullish consolidation despite evidence to the contrary. One Bull I follow has the widest range for a consolidation pattern I’ve ever seen in any asset – at a certain point, investors must concede that their asset has flipped into a bearish pattern, but this guy’s refusing to budge. Over a long enough time horizon, I, too, agree that Bitcoin will reach higher-highs, but, for the moment, the price action simply isn’t bullish.

The Bearish Case

Bears once again have the upper-hand. After the Bulls thought the bottom was in and Bitcoin was off-to-the-races, Tuesday’s substantial dump proved the “bull pennant flag” was, in reality, what it appeared – a series of lower-highs and lower-lows leading to yet another selloff. Naturally, the Bears are screaming that $49,259.00 isn’t the low for the cycle, and, while they may be proven right, I contend that the low may be in; we’ll have to see what happens next.

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.