Summing Up The Week

While the markets didn’t see a significant amount of movement this week, the price action was surprisingly bullish early in the week until a Chinese delegation in town to discuss trade cut their visit short on Friday.

Following the attacks on Saudi Arabian oil fields last weekend, many pundits believed we would see the markets sell off significantly on Monday. In reality, Monday’s price action demonstrated resilience as the markets took historically critical news in stride.

Later in the week, the Federal Reserve Bank gave us an as-expected 0.25% cut to the interest rate with the same messaging as before and the markets continued steady.

However, when Chinese trade officials cut out on Friday, the S&P 500 gave up 0.4% and the Dow Jones Industrial Average lost 100 points.

Basically, this week’s news served as a good reminder – it’s the Trade War that drives the markets right now. Let’s look at what moved the markets this week…

Market News

Saudi Oil Fields Attacked – Historical Oil Spike

Oil prices spiked more than 10% on Monday – the biggest increase in history – after Saudi Arabia’s oil processing facility at Abqaiq was attacked on Saturday, reported CNBC.

The attack cut Saudi oil production by half knocking out 5.7 million barrels in daily oil production, and causing Brent crude oil futures to rise as much as +19.5% at the market open on Monday. While Houthi rebels in Yemen claimed responsibility for the attack which used nearly a dozen drones to coordinate fire on the refinery, the U.S. and Saudi governments believed Iran may have had something to do with the attack over the weekend and through Monday.

Despite the rise of alternative fuels and electric vehicles, much of the world continues to run on fossil fuels, so such an attack could be devastating to global economic conditions. Markets traded slightly down on Monday, but many analysts believe the first reaction was understated as investors waited for additional information.

On Tuesday, the Saudi government reported they would have production back online by the end of September, calming markets and causing the oil prices to settle. Both the U.S. and Saudi government claimed to have found additional evidence pointing to Iran as the party responsible for the attack.

Fed Cuts Rate 0.25-Point, Divided on Rest of Year

As expected, the Federal Reserve cut interest rates by 0.25% during their September meeting, however, the bank chairs are divided as to whether there should be additional cuts this year, reported CNBC on Wednesday.

In addition to the rate cut, the Fed cut interest paid on excess reserves by 30 basis points as a result of a breakdown in the overnight purchase lending market earlier this week.

CNBC reporters point to a statement in Fed Chair Jerome Powell’s press conference as a potential rebuff to the President:  “I do believe our shifting to a more accommodative stance over the course of the year has been one of the reasons why the outlook has remained favorable.”

Shortly after the release, President Trump tweeted, “Jay Powell and the Federal Reserve Fail Again. No ‘guts,’ no sense, no vision! A terrible communicator!” Trump would like to see the Federal Reserve continue to cut rates in order to make the U.S. economy more comparable to the European Union.

China Cuts Short Trade War Talks 

The markets sold off on Friday following news that Chinese trade officials cut short their visit to the U.S., reported CNBC.

The delegates had planned to visit U.S. farms in Montana, but told National Affairs that they were headed back to China earlier than planned.

This week’s meeting represented the first face-to-face talks over trade in nearly two months, and the premature cancellation has led some investors to believe the two countries aren’t any closer to reaching a reasonable agreement.

Next Week’s Gameplan

I revisit my shopping list and potential strategies every week. In fact, I make a practice of spending 1-2 hours every Saturday reviewing my current holdings, looking at stocks I’d like to add, and adjusting buy and sell targets based on the previous week’s price action.

Overall, my gameplan still hasn’t changed: remain in the markets with a significant cash position on the sideline prepared to put more money to work by Buying in Stages should we see pullbacks as the market continues moving through the fourth quarter.

The markets continue to float near record highs with bullish undertones, however, that also means we have a long way to fall should news go south.

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

Surprisingly, one of the biggest challenges of speculation in the cryptocurrency space isn’t the extreme volatility – it’s when the volatility goes away.

Bitcoin and its crypto friends are known for periodic bouts of drawn-out consolidation, much like the past few weeks, where the sector – known for its regular 20-50% swings – sees a multi-week stretch where the distance between the high and low price is under 15% (just under 12.5%, in this case).

For traders used to earning 20% on a daily basis, these slow periods can be excruciating, but one of the most important rules of discipline is: “never trade a dull market.”

As hard as it can be, when an asset isn’t hitting your targets, you wait. You sit on your hands. You make no trades. You wait.

Over the past week, Bitcoin’s recent weekly high of $10,939.34 has held and in the past few days, it’s made a weekly low of $9,585.86.

Bitcoin Gameplan

Analysts continue to remain split on Bitcoin’s next move. Many point to the grand opening of new crypto exchange Bakkt launching on Monday, September 23, 2019 as a potential positive catalyst while others believe the waning interest in the space could lead to another -85% drawdown. 

As always, my gameplan is cautious and conservative. I have a trade opening target around $9,600.00 should Bitcoin retest its weekly low, but then my next buying target is just above Bitcoin’s 50-Week Exponential Moving Average (EMA) at $7850-7900, a nearly -20% difference between my first buy and second buy (with another 8 targets following).

As I’ve said, I’m extremely conservative and cautious with this space ever since Bitcoin dropped from the low $6000s to the low $3000s within a matter of weeks in 2018. While it appears that the $9000 mark is holding for Bitcoin right now, there’s no reason it can’t be floating around $4500 (or $20,000, for that matter) in a month.

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.