Summing Up The Week

The week kicked off with China telling the U.S. to calm down and not get too excited over the “phase 1 trade agreement.”

Things seemed to get rosy when JP Morgan (JPM) and the other banks reported good quarterly earning only to have the Commerce Department tell everyone the consumer is slowing.

The U.K. may have a hard Brexit, even in light of the E.U. offering a deal this week (parliament still needs to vote).

Then, on Friday, the FAA expressed concerns over Boeing’s (BA) 737-Max and whether the company was intentionally misguiding the government agency.

It was a crazy week – let’s look at what moved the markets…

Market News

China on Partial Trade Deal: “Not So Fast, U.S.”

The week kicked off quickly as Chinese state media warned Washington to “avoid backpedaling” regarding the partial U.S.-China trade deal, reported CNBC before trading on Monday.

The China Daily suggested restraint on celebration until the contracts are signed:

“While the negotiations do appear to have produced a fundamental understanding on the key issues and the broader benefits of friendly relations, the Champagne should probably be kept on ice, at least until the two presidents put pen to paper.”

With Chinese media owned and operated by the state (one of the “benefits” of being a communist country), messages released by Chinese media outlets can often be interpreted as coming from the ruling bodies of China.

Less than an hour before the markets opened, a source said China would want another round of talks before signing phase one of the trade deal, reported CNBC.

Given the market lukewarm reaction to the Phase One deal on Friday (the indexes pulled back substantially when the details of the deal were revealed), investors braced for Monday trading following China’s reluctance to embrace Phase One.

JP Morgan Posts Record Revenue

The earnings season doesn’t truly start until the banks report, and no bank is considered Best-of-Breed more than JP Morgan Chase (JPM) which reported a blowout quarter with record revenue on Tuesday, reported CNBC.

The increase in revenue was thanks to growth in home loans, auto loans, and credit card debt, reported JP Morgan. The record JPM earnings combined with a few other decent reports – including competitor Citibank (C) – caused the stock market to pop significantly as many analysts and investors expected to see a slowdown in earnings across the board, specifically in the financial sector.

Remember the Strong U.S. Consumer? Well, about that…

The U.S. Commerce Department said on Wednesday that retail sales dropped -0.3% in September versus an expected 0.2% increase, reported CNBC. This is the first decline in retail sales in seven months.

American households have started to cut back on buying building materials, slowed making online purchases, and stopped buying new cars.

Why is a decline in sales a problem?

Economists and market analysts have been pointing to the strength of an American consumer as evidence the economy is not headed into a recession. With consumers cutting back, concerns that the weakness in the manufacturing and industrial sectors could be spreading to the broader economy become more validated.

Can the U.K. Claim the Dog Ate its Brexit Homework?

As the October 31 deadline for a hard Brexit (Britain leaving the European Union (EU) with no deal in place) rapidly approaches, U.K. Prime Minister Boris Johnson met with the European Union and struck a new Brexit deal on Thursday, reported CNBC. 

Here’s the rub – U.K.’s Parliament still needs to approve the deal.

That’s right. If British lawmakers don’t approve the deal that Johnson has struck this weekend, Britain will need an extension or will be forced to exit the EU with no deal on October 31. To make matters worse, EU leaders are likely unwilling to extend the deadline.

Not only will this be an exciting weekend for Britain’s lawmakers, the next few weeks could get particularly spicy not just for the U.K. but for the stock market as a whole.

Was Boeing Misleading the FAA?

The Federal Aviation Administration (FAA) announced Friday that Boeing (BA) had withheld messages between employees for months, reported CNBC.

The report showed that Boeing withheld “concerning” messages between employees regarding the flight-control system of the 737 Max – the very system which was the cause of two fatal airline crashes in less than two years – back in 2016.

According to a simulator transcript, one pilot, Mark Forkner, said to a colleague, “Granted, I suck at flying, but even this was egregious.”

The 737 Max is Boeing’s best-selling plane and it has been grounded for 7 months. While the company made announcements that it planned to have the plane back in the air by the end of 2019, these additional revelations are far from positive and indicate the wait could be much, much longer.

Boeing is the U.S.’s largest exporter and analysts estimate the lack of the 737 Max sales could impact U.S. Gross Domestic Product (GDP) as much as 2%. As one might expect, Boeing’s shares sold off substantially on Friday.

Next Week’s Gameplan

Once again, the gameplan remains the same. China’s Trade Deal continues to drive the markets, although as we proceed further into primary season, some Democrat debate topics may affect different sectors of the market such as healthcare or technology.

I will continue to wait for opportunities to add to positions during selloffs and take profits on individual positive company news. Buying in Stages and Selling in Stages remain important strategies when dealing with volatility as extreme as the market has been showing in recent weeks and months.

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

Although down from last week, Bitcoin is continuing its sideways price consolidation since making its new $7701.00 monthly low a few weeks ago. Last week’s $8826.00 monthly high has yet to be broken, either, as both bulls and bears wait to see where Bitcoin’s headed next.

Some analysts continue to suggest that this most recent bull run to the high $13,000s will give way to a significant pullback with low price targets anywhere from $6000-7000 all the way down to $1400.

In my experience in Bitcoin, I find it’s always a good idea to be aware of the outlier predictions as the cryptocurrency space often exceeds expectations… in both directions. 

Bitcoin Gameplan

After getting positively destroyed in the cryptocurrency space in 2018, I learned a key valuable lesson when it comes to speculation with Bitcoin – exercising extreme patience. Most of the time, the best thing to do is nothing at all. 

Since my edge is long-term Buying-in-Stages, patience is my key weapon to minimize losses and avoiding FOMO. I hadn’t made a move in my Bitcoin position in more than two weeks, waiting to add a small amount when Bitcoin retested its lows on Thursday at $7867.57, lowering my per-coin cost to $8659.99.

I still only hold 5.18% of my desired allocation with my next buy target at $6,658.24 adding another 0.535% to my allocation. Since Bitcoin moves in wide, wide ranges, I’ve found that building a position painfully slowly is key to minimizing downside risk.

Granted, if Bitcoin bounces before my large buys begin (not until the $3200s), I won’t have significant exposure to the space. However, after enduring 2018’s massive 50% pullback, I’ve learned that I prefer less upside exposure to massively painful losses.

My only other open crypto position is the one I hold in Litecoin (LTC) at $88.09 which I started on August 7. Since then, I have reduced my per-coin cost -24.93% to $66.13 (I’m down about ~20%) and currently hold 15.285% of my entire desired allocation with my next buy target at $39.78 to add 6.215% of my desired allocation. For Comparison: my entire desired allocation in Litecoin is less than 1/10 of what I’m hoping to acquire in Bitcoin (a full allocation of Litecoin would represent 6.4% of my portfolio).

For now, we wait to see Bitcoin’s next move. If the space bounces, I’ll start taking profits when I see a 10% gain on my position or use stop-losses to reduce my allocation if consolidation happens above my per-coin price but below the 10% mark.

Patience may be boring, but boring is the best way to be risk-adverse.

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.