Summing Up The Week
Despite continued reports of how badly the coronavirus will slow global economic growth, the markets continued to make record highs this week.
Household debt is the highest its been in 12 years plus the national debt added another trillion, but what’s a trillion between friends?
Will the markets continue to ignore negativity? Let’s check out the news that moved the markets (or didn’t) this week…
Consumer Sentiment Rises, Ignoring Coronavirus Fears
On Friday, CNBC reported that that the University of Michigan’s February consumer sentiment index rose to 100.9, up from what economists believed would lower to 99.5 thanks to coronavirus concerns.
“Current personal finances as well as evaluations of the national economy each posted large gains,” said Chief Economist for Surveys of Consumers Richard Curtin in a statement. “Net gains in household income and wealth were reported more frequently in early February than at any prior time since 1960.”
Curtin went on to note that the coronavirus is still not a major concern with only 7% of respondents mentioning it.
Corona – it’s bats, man! Plus, CDC discharges infected patient
Right from the start of the week, the coronavirus continued making headlines from Singapore predicting a 25%-30% drop in 2020 visitor arrivals to scientists expressing worries that the coronavirus could evolve into something worse than influenza.
However, despite all of the rampant fear-inducing headlines, the indexes shrugged off the concerns, once again making new all-time highs early in the week. Does the market know something we don’t or is it simply whistling past the graveyard, not noticing the undead rising from graves to come for it?
On Tuesday, word came out that the coronavirus likely came from bats where coronavirus are known to mutate. Meanwhile over in the U.S., the CDC admitted that it a mix-up led to the discharge of an infected patient.
On Thursday, the markets finally started reacting to the negative news when global coronavirus cases soared above 60,300. Less important, the WHO renamed the diseases COVID-2019 (a corona virus first identified in 2019) to remove stigma of giving it a name of a place or thing such as “Wuhan virus” or “Swine flu.”
Household Debt Jumps the Most in 12 Years
The Federal Reserve reported on Tuesday, and one of the key figures was household debt. Household debt rose by $601 billion in 2019, surpassing $14 trillion for the first time in history.
Given that many analysts point to a strong consumer as leading to a strong economy, combined with a new approach to credit scores coming this summer which may lead to less consumer credit, some are asking – is this economic boom starting to reach the end of the line?
Next Week’s Gameplan
Right now, there’s nothing going on in my Investments in Play portfolio as I already have more cash than I would like. There are no positions left to take profits on and nothing’s at levels where I’d like to add.
It’s hand-sittin’ time where I stare at the markets and do absolutely nothing at all.
Over in my Speculation in Play, I used this week’s unbelievable frothiness to take profits and close a number of positions in preparation of transforming Speculation in Play into something more… well… speculative with more catalyst-defined trades and less short-term investing.
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 continued to confound analysts this week with many calling for a substantial pullback, however, it keeps grinding higher, although slowly. Its weekly low is now $9653.47, made last Friday, and its high is now $10,522.51 made just 24 hours ago on Thursday.
From here, Bitcoin continues to ride close to overbought levels on its Daily Relative Strength Indicator (RSI), however, the crypto’s not even close to as overbought as it has gotten in the past.
If Bitcoin continues higher from here, expect to see resistance slightly over the $11,000 mark and then at key “mental” resistance points such as $11.5k, $12k, etc.
If Bitcoin pulls back, I would bet a test of the Line That Shall Not Be Crossed (might need a new name soon) would be in order right around $9400. If the line holds, expect further upside. If it fails, it’s time to try out the Support of Last Resort now coming up to meet us around $7900-$8000.
At this point, I haven’t seen any pullbacks interesting enough for me to want to add above my current per-coin cost basis of $9031.94 with a 0.769% allocation.
However, I did raise my first buy-target to pretty much break-even with my current per-coin cost, as the bullish action in Bitcoin has been strong of-late. That being said, I’m looking at a very small add at that level as I expect it not to hold if we pull back that far…
As of this update, my position is now up a little more than +14.3%. Although that’s starting to ripen, I’m not prepared to lock in profits unless I can set a stop-limit with 20% gains.
If we drop from here, then so be it… I’ll add more on the way down.
Bitcoin Buying Targets
Here are my next ten (10) target buying quantities and price targets from here:
0.389% @ $9023
0.967% @ $8182
1.062% @ $7933
1.062% @ $7622
1.062% @ $7286
1.062% @ $6667
1.062% @ $6169
1.447% @ $5710
10.577% @ $4052
15.370% @ $3227
Bitcoin Selling Targets
Just like the past few weeks, I have no upside targets at this time with such a small allocation. However, if Bitcoin continues to gain where I can lock in a 20% profit with some space between my stop price and the current levels, I may close out the position with a 20% stop-limit order.
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 dropped -53.64% to a low of $6430.00 in December 2019.
- Since December 2019’s low, Bitcoin has rebounded +52% from $6430.00 to $9779.02.
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 less than 2% 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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