Summing Up The Week

It was a wild week with the indexes bouncing hard off of last week’s coronavirus-induced sell-off.

The markets calmed down on Friday, pulling back despite a good jobs report, a possible indication that fears over the virus still linger.

In addition to the economic reports and coronavirus fears, it was a busy week with the end of President Trump’s impeachment trial, a completely botched Iowa Democratic Caucus, and much more.

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

Market News

January Jobs Stronger-Than-Expected, Market Sells Off

The Labor Department report showed nonfarm payrolls grew 225,000 for January, above estimates for a 158,000 gain, however, the market, which had ignored bad news from the coronavirus earlier in the week to head higher, sold off on the strong jobs report, confounding analysts, reported CNBC.

Some analysts believe that investors took profits due to coronavirus fears and following the epic rally off of last week’s selloff lows.

Coronavirus Worsens, Market Doesn’t Care (At First)

Despite China growing more isolated as airlines canceled more than 46,000 flights amid the coronavirus epidemic (CNBC) the markets didn’t appear to care as the indexes made more record all-time highs this week.

Wilbur Ross, Secretary of Commerce, said in an interview that China’s coronavirus epidemic could potentially be good for U.S. jobs and manufacturing as Chinese factories remain closed.

Finally, on Friday, investors started to pay attention and the markets sold off over concerns the coronavirus will dramatically slow China’s economy, reported CNBC.

U.S. Weekly Jobless Claims drop to 9-month low

The U.S. Labor Department’s report released Thursday showed the number of Americans filing for unemployment dropped to a 9-month low last week and that initial claims for state unemployment benefits also fell, reported CNBC.

Although a questionable figure given the limited time-frame unemployment benefits pay out, the figure is often used as an indication of a strong economy as fewer unemployed Americans means more money potentially going toward spending.

Impeachment Verdict: Acquittal of Both Charges

The Senate voted to acquit President Donald Trump of both charges in the impeachment trial on Wednesday, reported CNBC. The vote marks the end of the impeachment proceedings and the conclusion of a two-week trial.

Senator Mitt Romney was the only Republican to break with his party to vote to convict Trump for abuse of power. The markets did not react to the impeachment trial in either direction since many analysts believed Trump’s acquittal was a foregone conclusion thanks to the overwhelming majority held by Republicans in the Senate and the need for a supermajority to impeach Trump.

Private Payrolls Soar

Private payrolls rose by 291,000 in January, the best month since May 2015 according to ADP and Moody’s Analytics, reported CNBC on Wednesday. The reported figure was nearly twice the expected gains.

Increasing private payroll figures indicate that the job market is still quite a way fom full employment even with the jobless rate at its lowest level in 50 years.

Even more positively, growth in employment came from a variety of industries including leisure and hospitality; education and health services; along with professional and business services. Construction rose as well while manufacturing, the smallest grower, still saw its biggest monthly gain since last February.

Iowa Democratic Caucus Chaos

The Iowa Democratic Party held its caucus to decide the Democrat presidential nominee on Monday… except that it didn’t. A “technological glitch” prevented the Democratic Party from being able to identify the winner of Monday’s caucus, reported CNBC.

Following the botched caucus, many observers believe it’s time for Iowa to scrap its unusual system and sacrifice its status as the first-in-the-nation site for the presidential selection process.

The party stated there was no evidence that hackers caused the failure and it would use paper ballots to verify any results reported electronically.

Figures finally started rolling in later on Tuesday, with results showing the following standings of the Democrat candidates with only 60% of the results (from CNN):

1. Buttigieg with 26.9%
2. Sanders with 25.1%
3. Warren with 18.3%
4. Biden with 15.6%
5. Klobuchar with 12.6%

On Thursday, Tom Perez, Chair of the Democratic National Committee (DNC) called for a “recanvass” of Iowa as the public trust vaporized over the integrity of the state’s results, reported CNBC.

Next Week’s Gameplan

It’s a strange time in the markets right now.

On the one hand, some analysts think the market’s overbought as it makes new all-time records, however, investors and traders seem to be anxious … almost desperate… to buy any dip.

Maybe this is the return of the retail investor – either Gen X’ers who were scared out during the sell-offs of 2000-2010 or maybe it’s millenials coming in.

On the other hand, the market hasn’t seen a pullback of even 5% in quite a long time, with analysts predicting a pullback of at least that amount – or even worse – is on its way.

At any rate, I continue to follow my gameplan by Buying in Stages starting with small quantities during 1-5% pullbacks and increasing should the sell-offs worsen.

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 seemed to be slowly losing ground after last Friday until it reversed course on Wednesday, breaking through the Line That Shall Not Be Crossed and even closing above it on the Daily time frame.

Although a Bullish sign, it’s still far too early to tell if this is a true breakout as Bitcoin’s price action seemed to lose momentum.

If Bitcoin can close its Weekly candle above the resistance trend-line, there might be more upward movement ahead, otherwise, a test to the weekly low of $9078 may be in store.

If $9078 doesn’t hold, Bitcoin could be headed for a potential test of the Support of Last Resort now rising to the $7700-7800 level.

Bitcoin Gameplan

Since Bitcoin never pulled back below my position per-coin price of $9032, I didn’t add any more to my 0.87% allocation.

As of writing of this update, my position is up +8.272%; a bit of a limbo zone as it’s neither close enough to my per-coin price to add nor is it enough of a gain (for this asset class) for me to use stop-losses to protect it.

Once again, it’s time to sit on my hands and wait to see where Bitcoin heads next.

Bitcoin Buying Targets

Here are my next ten (10) target buying quantities and price targets from here:

0.452% @ $8938
0.601% @ $8336
0.601% @ $8156
1.201% @ $7767
1.201% @ $7457
1.201% @ $7156
1.201% @ $6194
2.239% @ $5267
10.337% @ $4077

Bitcoin Selling Targets

Since I wasn’t able to accumulate more than a 0.87% allocation, I won’t be using a designated selling target, rather waiting until I can capture a minimum 25% gain using stop-loss orders when Bitcoin heads much higher or adding to the allocation if Bitcoin loses support.

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 likely Bitcoin could bottom and rebound from that stage. The greater the pullback, 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 in order to practice conservative risk management, a requirement for the sector.

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 $3128.89.
• In the first half of 2019, Bitcoin rebounded 343% from $3128.89 to $13,868.44.
• Since June 2019, Bitcoin has dropped -53.64% to a low of $6430.00 in December 2019.

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 only 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.