Summing Up The Week

Up until Friday, volatility had decreased substantially this week as the major market-moving event, the Federal Reserve Bank’s summit in Jackson Hole, Wyoming, wouldn’t yield any real fruit until the very end of the week on Friday when Fed Chief Jerome Powell spoke to the media… and didn’t say what Trump wanted to hear.

Up until that point, we did see some interesting news as business leaders transformed the major priorities for corporations and earnings reports from Lowe’s (LOW) and Target (TGT) proved the consumer actually isn’t dead.

Of course, all that was thrown out the window once Trump unleashed his Twitter Tirade.

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

Market News

The Boy Who Tweeted “Deal”

Over last weekend, Trump continued his attempts to reassure the market using Twitter, claiming that he and President Xi of China were making good progress, reported CNBC on Monday morning.

Like The Boy Who Cried Wolf, however, there is likely only a limited number of times where Trump can tweet that he thinks progress with China is being made without also providing… you know… actual progress.

A Kinder, Gentler Capitalism?

The Business Roundtable – a group of more than 200 chief executives from major U.S. companies – issued a statement on Monday definining the new purpose of a corporation, replacing shareholder interest as their primary value, reported CNBC.

Instead, companies will now focus on their stakeholders, investing in employees, delivering value to customers, dealing ethically with suppliers, and supporting outside communities as their most important goals.

Are we closer to a Star Trek utopia envisioned by Gene Roddenberry decades ago? I guess time will tell, but I definitely appreciated the optimism of this outcome!

B of A CEO: Economy’s Safe, Consumers Love Consuming

In a statement that should surprise no one, Bank of America (BAC) CEO Brian Moynihan told CNBC that he’s not worried about a potential U.S. economic slowdown as the American consumer is still in a strong place on Wednesday.

Moynihan’s statement came shortly after Target (TGT) reported a blow-out quarter on Wednesday, far exceeding Wall Street’s estimates and causing shares to pop nearly +20% during the day’s trading. TGT went on to raise full-year estimates, predicting a good remainder of 2019 for the company and the consumer.

Should we be worried that our entire economy relies on your neighbors’ ability to spend beyond their means? It definitely doesn’t give me the soft fuzzies to depend on Americans spending to keep stocks in a Bull Market, but who am I to argue the new
Shared Stay-At-Home Subscription Gig Millenial Economy?

And The Fed Says… “We’ll Act as Appropriate”

As the markets waited with baited breath, Federal Reserve Chairman Jerome Powell’s speech on Friday reinforced the Fed’s intention maintain economic expansion, acknowledging that the trade war is causing growth to slow, reported CNBC on Friday.

Given the even-handed comments, the markets remained relatively flat following Powell’s comments from Jackson Hole, since Powell gave no real direction to where the Fed plans to head next when it comes to the trade war.

At least, that’s what it appeared until Trump combined the Fed meeting with China’s announcement of new tariffs to make a Twitter Tantrum that doomed the end of the market’s week (see next story). 

China Retaliates, Adds its Own Tariffs

On Friday, China announced it would implement tariffs on $75 billion worth of U.S. goods including autos, with implementation dates in two batches on September 1 and December 15, reported CNBC. Much like the reaction to the Jackson Hole speech, the markets didn’t exhibit any obvious reaction to the Chinese tariffs.

The markets had no reaction, that is, until Trump tweeted “….My only question is, who is our bigger enemy, Jay Powell or Chairman Xi?” He continued, ordering American companies to find an alternative to China.

At that point, the selloff began, this time with even more gusto… with the Dow Jones (DJI) ending the day down more than -600 points or -2.37% and the S&P 500 Index (SPX) down a total of -75.84 points or -2.59%.

Next Week’s Gameplan

There was no news this week to make me feel any different than I did last week when it comes to my gameplan: I’ve sold what I want to sell and I have significant capital on the sidelines waiting to go to work.

As this selloff continues, I plan to Buy in Stages on the way down. Weeee…

This Week in Play

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

Crytpo Corner

Bitcoin Price Action

Bitcoin is an asset of its own making, and this week was another demonstration of that concept as the crypto couldn’t drum up enough energy to break the $11,000 mark. After bouncing off last week’s $9,470.00 low, Bitcoin rebounded to $10,953.00 before making an about-face on Tuesday to head back below the $10,000 level.

For the rest of the week, Bitcoin has remained in a tight trading range right around $10,000 – a point of consolidation leaving many analysts to suggest that whichever way Bitcoin heads next, the move will be a big one.

Most assets make higher-lows and higher-highs during an upswing. However, throughout its history, Bitcoin has been notorious for needing to paradoxically make lower lows on the weekly and monthly time-frames before it can break through its previous highs, a counter-intuitive trend when compared to other asset classes.

While there are profits to be made for the nimble trader who can take advantage of the volatility, Bitcoin’s ability to ignore traditional Technical Analysis (TA) can make it an incredibly frustrating asset class to trade or speculate in.

September may be a rough month for Bitcoin as it may crash through its $9,071.00 low made in July and head down to lower levels. From there, it may consolidate to regain strength in order to make an effort to break through $13,868.44, its 2019 high.

Some analysts are even predicting a crash similar to Q4-2018 when Bitcoin lost nearly 85% of its value from its 2017 high, which gives us a worst-case scenario target far below 2017’s lows at around $2,100 (85% loss from its 2019 high of $13,868.44).

The entire consolidation process could easily take weeks or even months, however, as I’ve said before: the only predictable thing about Bitcoin is its unpredictability.

Even though everyone has their own prediction for what Bitcoin will do when it breaks free from its current weekly consolidation, no one really knows.

It’s fun to watch, though!

Bitcoin Gameplan

I closed out the trade I had open last week (initially started on August 14) over the weekend at the $10,600-$10,700 level when Bitcoin’s Dead Cat Bounce discussed in last week’s Week in Review started to lose steam. Initially, it looked like I may have left the party early until Bitcoin’s bottom fell out and it plummeted lower, dropping more than -8% during Tuesday’s selloff alone.

I find the most challenging part of trading Bitcoin is figuring out when to make that first buy. Although many professionals will rightly say it’s not where you make your first buy, but how much you choose to buy, Bitcoin truly tests the concept of “wait until you see the whites of their eyes,” a reference to ensuring American soldiers during the Revolutionary War hit their mark since old rifles used in the time required several minutes to reload and often only afforded a single shot.

For me, the whites of Bitcoin’s eyes start to show when it sells off into oversold conditions on the 4-hour time-frame of its Relative Strength Indicator (RSI).

While this was a reliable indicator of oversold conditions during 2018’s Bear Market, last week’s selloff proved that 2019 is not 2018 as Bitcoin entered oversold territory in the 4-hour time-frame and rather than bouncing, it proceeded to become more oversold in the 4H time-frame than it ever has in the entire history of the cryptocurrency.

My strategy is accumulation over time. That means waiting for “the fat pitch.” If the move shaping up is not an easy (or relatively easy) homerun, I won’t swing at it, even if that means missing a huge upward move. My long-term goal with Bitcoin is to accumulate as much as possible by keeping my profits as Bitcoin while not risking my capital.

I’m not speculating in cryptocurrency to make a living and then there are no awards for being a hero by taking on huge risk and the crypto market doesn’t call a “strike” on traders who don’t make a play. If it’s not an easy scenario, just keep your bat on your shoulder and wait for the sure thing.

“The past does not predict the future” in any asset class and this adage rings particularly true when it comes to the cryptocurrency sector.

Always, always, always plan for any possible scenario when trading, speculating, or investing in any sector, but definitely when it comes to Bitcoin.

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.