Summing Up The Week
Despite negative news stories, the markets continue to pay attention to one thing and one thing only – the U.S.’s Trade War with China and when (if) a trade deal will be reached and, more importantly, signed.
Trade Deal rumors swirled all week causing the markets to be incredibly volatile until Trump capped them off on Thursday with an announcement that a trade deal was near and China announcing Friday that it approves the text of the agreement and all that is left is to sign.
Other stuff happened this week, too… Articles of Impeachment, NAFTA 2.0… nothing too significant, right?
Let’s look at the news that moved the markets this week…
Dems Announce Articles of Impeachment, Market Shrugs
On Tuesday, House Democrats announced they would be going forward with Articles of Impeachment, reported CNBC. The House Dems found enough evidence from the Ukraine Aid conversation released by the White House of impropriety on the part of President Trump that they feel impeachment is the proper course of action.
So, why didn’t the market sell off?
Impeachment is one of the types of events that follows the stock adage: sell the rumor, buy the news. In other words, the worst thing for the market is the unknown. When news isn’t confirmed – such as whether or not impeachment will happen – the markets experience volatility as Bulls and Bears fight over the potential outcomes.
Once the outcome solidifies, the markets focus on other news events – in this case, rumors about the U.S.-China Trade Deal – and ignore what would otherwise seem like a significant news story.
House Dems & White House Move Forward with USMCA
Despite all the news regarding the Articles of Impeachment, House Democrats and the White House announced that they would be moving ahead with the USMCA trade agreement, replacement for NAFTA, reported CNBC on Tuesday.
House Speaker Nancy Pelosi said the new agreement is “a victory for America’s workers” and “infinitely better” than what the administration originally proposed. President Trump tweeted that he felt it was “looking like very good support for USMCA. That would be great for our Country!”
I’m sure grammar experts cringed over Trump’s incorrect capitalization of “country.”
The Fed Meeting: No News is Good News
Wednesday’s Federal Reserve Bank meeting left rates unchanged with the bank members indicating no changes throughout 2020, reported CNBC.
While a benchmark rate range of 1.5%-1.75% isn’t helpful for consumers looking to earn some interest in their savings accounts, a low rate usually motivates the stock markets to head higher as cheap debt helps companies capitalize on investments.
The lack of plans to hike rates indicates that the Federal Reserve sees current economic conditions as stable, but not strong enough to support an increasing interest rate.
Markets took this positive news in stride without much upward (or downward) movement as investors and traders eye Saturday’s potential tariff hike as the big event that will move the market one way or the other.
Lucy Asks Charlie Brown to Play Football… Again…
Rumors swirled all week as to whether the United States and China would come to a phase one trade agreement, demonstrated by just one of the reports released on Tuesday by CNBC causing stocks to turn positive.
Then, on Thursday, President Trump once again tweeted that the United States is “very close” to a China trade deal, reported CNBC. Despite Trump having tweeted this very same thing many times in the past only to have no trade deal finalized or approved, the markets rocketed to new highs on Thursday.
On Friday, China held a press conference announcing that they approved the text of the deal with signing as the next step. The trade deal will cut tariffs on Chinese goods in phases with sections addressing intellectual property, technology transfers, agricultural goods, financial services, and expansion of trade.
While these are all good things, the ongoing trade negotiations remind me of the genius satire of Charles Schulz’s Peanuts comics where Lucy would once again find some convoluted reason to convince Charlie Brown to try and kick a football only to pull it away at the last second, causing Charlie Brown to fall on his butt.
No matter how many times both the Trump Administration and China release statements about how close the two countries are to a trade deal (or not), the market falls for them every single time, rocketing to new highs or plummeting in death dives making every investor – bull or bear – feel like their face could be ripped off.
While it seems that we’re finally nearing a Phase One Trade Deal or even an entirely new trade agreement addressing all issues, the opera’s not over until the fat lady sings, or, in this case, the flabby old men sign.
Next Week’s Gameplan
Until we actually have a deal signed, the coming days, weeks, and months will continue to focus on the trade war with China, however, the irrational exuberance of the news has some analysts questioning whether or not we’ve entered a blow-off top in the markets.
A blow-off top occurs when the markets become extremely overbought and is often followed by a significant sell-off.
Will it happen this time?
While 2019 has been an amazing year with the S&P 500 up more than 25%, it’s important to remember that 2018 was not a good year, so on a relative basis, the markets aren’t that much higher than the beginning of 2018.
That being said, there are a lot of catalysts on the horizon – both good and bad. Will end-of-year profit-taking lead to a selloff? Will positive news cause the markets to head even higher? Only time will tell where the market wants to head next.
Get Irked contributors are not professional advisers. Discussions of positions should not be taken as recommendations to buy or sell. All investments carry risk and all readers must accept their own risks. Get Irked recommends anyone interested in investing or trading any asset class consult with a professional investment adviser to determine if an investment idea is suitable to them and their investment goals.
Bitcoin Price (in USD)
Bitcoin Price Action
Bitcoin’s price consolidation tightened even more over the last week with a weekly high marked at $7,659.38 and a weekly low at $7,075.01 just breaking the previous low of $7,080 by about $5.
What does it mean?
Like any asset, Bitcoin will go through periods of price consolidation from time-to-time, typically followed by significant volatility in one way or another.
Often, the next big move is nearly impossible to predict, however, if the Support of Last Resort holds and repeats its pattern from earlier this year, the move could be to the upside. That being said, Bitcoin’s unpredictability is its only constant and its claim to fame is to often surprise and shock both Bulls and Bears.
For the moment, I’m holding pat with my current position having neither bought nor sold over the past week, so I have the same ~6% allocation as last week at a $8,199.77 per-coin cost.
Here are my quantities and buying levels from this point:
0.30% @ $6862
0.30% @ $6578
1.18% @ $6176
1.89% @ $5826
3.91% @ $5271
6.61% @ $3607
10.99% @ $2537
18.45% @ $2187
14.97% @ $1788
18.70% @ $1426
Why the differing quantities at each level instead of a flat percentage?
Rather than buying an equal percentage, I change my buying quantity at each stage as a reflection of how possible I feel it is that Bitcoin could bottom and rebound from each point. The more Bitcoin pulls back, the more likely a rebound becomes. Therefore, higher price points have a lesser likelihood of rebounding than lower price points and deserve a smaller quantity buy.
No price target is unrealistic in the cryptocurrency space – Bullish or Bearish.
While traditional stock market investors and traders may think the price targets in the cryptocurrency space are outlandish due to the incredible spread (sometimes a drop of near -90% or a gain of up to +1000% or more), Bitcoin has demonstrated that, more than any speculative asset, its price is capable of doing anything.
Here are just a few recent price movements over the past couple of years:
- Bitcoin rose 2,707% from its January 2017 low of $734.64 to make an all-time high of $19,891.99 in December of the same year.
- Then, Bitcoin crashed nearly -85% from its high to a December 2018 low of $3128.
- In the first half of 2019, Bitcoin rebounded 343% from $3128.89 to $13,868.44.
- Since June 2019, Bitcoin has dropped -52.94% to a low of $6526.
Where will Bitcoin go from here? Truly, anything is possible.
What if Bitcoin’s headed to zero?
The only reason I speculate in the cryptocurrency space is I truly believe Bitcoin isn’t headed to zero. I am prepared for that possibility, however, by knowing I could potentially lose all of the capital I’ve allocated to this speculative investment. Professional advisers recommend speculating with no more than 5% of an investor’s overall assets. Personally, I’ve allocated about 1.8% of my assets to speculating in crypto.
I feel that anyone who doesn’t believe in the long-term viability of cryptocurrency would be better served not speculating in the space. On a good day, this asset class isn’t suitable for those with weak stomachs. On volatile days, the sector can induce nausea in the most iron-willed speculator.
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.
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