Summing Up The Week

Sometimes, there’s so little news in the markets that nothing happens. This was not one of those weeks; there was almost too much news.

From the G-20 to the Fed with new actors entering the fray in the form of Iran and an east coast gasoline refinery explosion, it was a crazy week in the markets.

Let’s take a look at all the news that caused the volatility this week…

Market News

He Said, Xi Said: Trump will meet Xi at G-20

The markets rocketed higher on Tuesday after Trump announced he will be meeting with President Xi at the upcoming G-20 summit, reported CNBC. Trump went on to say that he expects to have an extended meeting with the Chinese president to discuss the ongoing trade war. Although ongoing talks are good news, we don’t think this indicates we’re that close to any kind of resolution anytime soon.

Trump to Jerome Powell: “You’re Fired…”

When asked if he would demote Fed Chair Jerome Powell after the market close, Trump simply replied, “Let’s see what he does” referring to Wednesday’s Fed meeting and eventual interest rate decision, reported CNBC.

While the U.S. President has always nominated the head of the Federal Reserve Bank, past presidents were extremely hesitant to enact “The Apprentice“-like tactics to the position, opting instead to allow the Fed to operate in complete autonomy. However, this is far from the first time Trump has expressed his criticisms over Powell’s approach to managing the Federal Reserve.

The Fed Votes to Hold Rates Steady

The Federal Reserve Bank voted to keep the benchmark interest rate in a target range of 2.25%-2.5% eyeing July for a potential rate cut, reported CNBC on Wednesday.

During his press conference, Fed Chair Jerome Powell stated that the committee will continue to remain patient while closely watching indicators of the economy and “act appropriately” to those changing indicators. “The economy has been running fairly well with inflation below our intended targets, but we expect that to pick up,” he said.

Despite many analysts claiming a rate cut was already priced into the markets which would have resulted in a selloff following the news that there was no rate cut, the markets traded relatively flat to slightly up for the remainder of the day which might indicate bullish strength for the current market conditions.

The markets roared higher into Thursday trading, with many analysts believing the Fed’s comments indicate a definite rate cut in July. Some on the sidelines expressed concerns that the subsequent rally may be the blow-off top that will result in a corrective selloff, especially if the Fed doesn’t cut rates as expected in a month.

Oil Prices Fly after Iran Shoots Down U.S. Drone

Oil prices rose sharply on Thursday following news that Iran had allegedly shot down an American drone on Wednesday night, reported CNBC.

Unrest in the Middle East historically causes oil prices to rise substantially as unknown situations always cause uncertainty in the market.

In an unusually diplomatic tone, Trump stated he believes Iran “made a big mistake” and that the shooting of the drone was likely an overzealous military commander, not the actions of the Iranian state itself. Trump’s comments caused an initial swoon in the markets to recover as the day continued.

On Friday morning, Trump ordered an air attack on Iran and then rescinded the order almost immediately causing the futures market to go crazy with volatility. Some pundits suggested that Trump’s attempting his “good-cop/bad-cop” approach with military tactics which could have unintended results.

The threat of warfare has historically caused a significant amount of price action in the market as some companies, such as defense equipment manufacturer Lockheed Martin (LMT), actually see stock price increases during times of war.

East Coast Refinery Explosion sends Gas Prices Higher

An explosion in a Philadelphia gasoline refinery Friday morning sents gas prices higher just as the busy summer driving season is starting, reported CNBC.

The combination of Iranian concerns mixed with gasoline shortages will certainly increase oil prices. Whether these two events will also increase the performance of oil services companies in the energy sector remains to be seen.

Beyond Meat crosses $200, up 800% in 8 weeks

This story isn’t really market-moving, but in case you haven’t been paying attention, Beyond Meat (BYND), the meatless meat company, had its IPO a few months ago and has been moving in a dramatically straight line ever since, crossing $200 a share on Tuesday after opening to the public at $45.00 just two months ago for a gain of +344.44%, or +800.00% from its $25 IPO price.

Beyond Meat has several products sold in supermarkets and restaurants including sausage and ground beef alternatives. Although a very exciting new sector, there are many competitors – both public and private – offering alternatives or working on products including the Impossible Burger and mega-food-conglomerate Nestle’s upcoming Awesome Burger.

Although BYND shows no sign of stopping, its move is very familiar, similar to notorious cannabis stock Tilray’s (TLRY) epic move from $150 to $300 and back again… in a single day.

While we enjoy watching BYND move, we’re not touching it from either the long or short side – it’s red hot.

Next Week’s Gameplan

The market’s been pricing in an interest rate cut with such certainty that we’re not putting new money to work at these levels, preferring to take small profits in just a few overbought positions.

With the increasing global uncertainty combined with the possibility of a negative outcome from next week’s G-20 meeting, we’re leaving the majority of our positions alone and keeping our powder dry until we see what happens next.

This Week in Play

Stay tuned for this week’s episodes of our Investments in Play and Trades in Play coming online later this weekend! 

Crytpo Corner

Bitcoin Price Action

Bitcoin saw yet another surge over the past week, working its way much higher and approaching the $10,000 mark, setting a new 2019 high at $9929.00 on Thursday.

Although analysts hate it when people say, “This time is different,” it truly feels as though the market action in Bitcoin is nothing like previous bull market cycles for crypto. Even during the 2017 rocketship flight to $20,000, Bitcoin would pull back 30-40% after each upward surge. That hasn’t happened this time (so far).

Perhaps thanks to reported institutional buying, 2019’s bull market is seeing Bitcoin surge to new levels, consolidate in a manner similar to other asset classes, and then continue higher.

Bitcoin Gameplan

Bitcoin’s strength has resulted in us taking a slightly more aggressive approach to our trading in the space.

That being said, we are always keeping the possibility of a 30-40% pullback as part of our trading plan as well as considering worse-case scenarios in case Bitcoin decides to make a further retracement toward its 50-Month Exponential Moving Average in the mid-$3000s, or worse, if it attempts to dive to its $3128 December 2018 low.