Summing Up The Week

The markets were relatively flat this week. While that can be disappointing to some, the lack of downward movement is significant given the amount of negative news stories involving the U.S. China Trade War.

What’s keeping the markets so steady?

Well, there’s a strong consumer, to be certain, but the real element powering the markets could be much more nefarious… greed.

Read on to find out more as well as the other stories that moved the markets this week.

Market News

Beijing Pessimistic About Trade Deal, Source Says

A “government source” told CNBC that Chinese officials were troubled by President Trump’s commentary that there was no agreement in phasing out tariffs, reported CNBC on Monday.

I’m not typically a conspiracy theorist, but the nearly-strategic, perfectly-timed release of news counter to the current market trends to temper both rallies and selloffs is fascinating. What I find truly odd is the fact that the markets react to these ongoing trade story rumors that contain little to no real substance or fact.

For the moment, it doesn’t matter whether there’s really a trade deal or not. The key is to take advantage of the volatility by selling into strength on good news and buying into weakness on bad.

Trump Threatens Tariffs, China Calls Interference

The Trade War returned to escalation on Tuesday with Trump threatening higher tariffs and China accusing the US of interference after the Senate passes bills in support of Hong Kong protesters, reported CNBC.

Both announcements came after trading closed Tuesday afternoon. The activities kicked off with President Trump saying, “If we don’t make a deal with China, I’ll just raise the tariffs even hgiher” following a Cabinet meeting on Tuesday.

Meanwhile, China’s foreign ministry criticzized the United States after the Senate unanimously passed a bill supporting Hong Kong protesters. The “Hong Kong Human Rights and Democracy Act” wiolll proceed to the House which already approved its own version of the bill in October. 

Currently, Hong Kong is treated as a separate region to China and is not subject to the same tariffs. If approved by Trump, the new act may cause tariffs equal to those currently affecting China to also affect Hong Kong.

No Phase One Deal in 2019?

The markets sold off on Wednesday following a Reuters’ report that the Phase One trade deal might not happen this year, reported CNBC.

Reuters news service cited several trade experts as well as personnel in the Trump administration who believe the partial trade deal could be pushed into 2020 as China desires a mutual rolloff of tariffs as part of the initial deal.

With the Federal Reserve acting dovish and no other pressing macroeconomic or global concerns, the trade deal is taking up all the air in the room so when bad news comes out, the markets get skittish.

And skittish they were as the Dow Jones Industrial Average (DJI) sold off 200 points immediately following the report.

U.S. Homebuilding Rebounded in October

The U.S. Commerce Department’s Housing Report showed permits for future home construction jumped to more than a 12-year high, reported CNBC on Tuesday.

Many market analysts and pundits use the housing report as a guide to the strength of the economy since houses represent the largest purchase most U.S. consumers will make in their lifetimes. If there is a demand for new homes, then the thought is that the economy must be strong with willing homebuyers at the ready.

The House of Representaives Gets Cannabis High

After what seemed like months of never-ending selling in the recreational cannabis sector, the U.S. House of Representatives passed a bill signaling the eventual legalization of recreational marijuana at the Federal level, reported MarketWatch on Thursday.

While congresspeople even warned that the Senate will likely take its time passing its own bill, the historic passage resulted in a significant pop in the downtrodden and dramatically oversold cannabis sector with some stocks, like Canopy Growth Corporation (CGC), popping more than 50% from its lows set just earlier this week.

Jobless Claims Unchanged at Five-Month High

The number of Americans filing for unemployment was unchanged at a five-month high last week, reported CNBC on Thursday. While the data suggests some softening in the labor market, many analysts pointed to the consistent results as evidence of a strong U.S. economy.

“Fear Gauge” says Investors are Fearless, Scares Analysts

The Cboe Volatility Index (VIX) is often referred to as “the Fear Gauge” because volatility is most closely associated with volatility. In other words, when the market goes higher, the VIX typically goes lower and when the market goes lower, the VIX typically heads higher – an inverse correlation.

Well, on Friday, CNBC reported that the VIX has been moving in tandem with the S&P 500 throughout November. This is not typically a good sign.

“People are looking at the stock market that’s going straight up and it’s making them greedy,” said Tom Essaye of Stevens Report Research in an interview with CNBC. “We’ve had a six-week rally where literally every piece of bad news is completely ignored and every whisper of possible good news causes a rally.”

Next Week’s Gameplan

With the markets heading higher seemingly nonstop and so many negative catalysts on the horizon, it can be tempting to sell everything to protect profits. In my experience, however, it’s better to practice moderation.

If I sell everything and the markets head higher, I may have to buy back in at higher levels and potentially miss a significant amount of upside.

If I keep everything and the markets head lower, I’ll lose my gains and not have the opportunity to add to positions at lower prices.

Instead, I keep cash on the sidelines and carefully manage my positions to ensure I’m taking a balanced approach.

In the meantime, we’ll get to see where the market takes us next week, right?

This Week in Play

Stay tuned for this week’s episodes of my two portfolios Investments in Play and Speculation in Play coming online later this weekend! 

Crytpo Corner

Bitcoin Price Action

Bitcoin spent the past week losing ground… a lot of it.

After hitting its weekly high of $8784.61, Bitcoin dropped on Saturday, Monday, Thursday, and followed through with another significant drop early Friday morning to create a new monthly low of $6775.47.

From here, many analysts don’t think Bitcoin will hold these levels with a potential price target of $6600 being a key point of support (in fact, it’s the “Support of Last Resort” trend line on the above chart).

Of course, there are no promises in the cryptocurrency market so there could be significantly further downside from here.

Bitcoin Gameplan

As I’ve mentioned before, the only predictable thing about Bitcoin’s price action is that it’s virtually unpredictable. Due to this, I stick to my trading plan of adding at key levels as Bitcoin works its way down, then closing my position when Bitcoin bounces high enough to hand me a decent profit.

Over the past week, I added a total of 1.6% to my position divided into buys at $8087, $7436, and $7116. I currently hold 5.33% of my desired allocation at a per-coin price of $8496.90, a reduction of -5.28% from last week’s $8970.61.

Here are my buying quantities and targets from this point:

1.07% @ $6787
1.60% @ $6228
2.29% @ $5231
3.65% @ $4625
6.91% @ $3876
7.49% @ $3421
5.87% @ $3190
11.89% @ $2828
22.88% @ $2087
31.02% @ $1476

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.