Summing Up The Week

The markets positively skyrocketed early in the week following positive comments from Federal Reserve Chairman Jerome Powell over the weekend and optimistic news from Moderna (MNRA) on its potential vaccine candidate released Monday.

Later in the week, the markets calmed down, if only slightly, as over-exuberant optimism and traders piling with FOMO over missing the recent rally seems to hold up the markets.

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

Market News

Moderna Reports Positive Vaccine Results – Markets Surge

The markets took off Monday after biopharma company Moderna (MRNA) reported positive results in its early-stage COVID-19 vaccine trial, reported CNBC.

According to the company, all 45 participants in the study produced antibodies against the virus. Two weeks following the second dose (day 43 after the first dose), blood samples in the participants showed the same number of antibodies as those generally seen in people who have recovered from the disease.

Moderna expects phase 3 drug trials to begin in July. Naturally, its stock price popped – up nearly 40% in pre-market trading Monday morning.

CBO projects 38% GDP drop – Markets Tank

The markets were relaxing for the majority of Tuesday trading until the Congressional Budget Office (CBO) released a report projecting a 38% drop in the Gross Domestic Product (GDP) in the second quarter, reported CNBC.

The CBO’s report caused the market to make an immediate and rapid downturn, selling off into the close (typically, a bad sign for the next day’s trading).

With 26 million Americans still unemployed and a federal budget deficit expected to swell to $2.2 trillion in 2020, the GDP projection should have been priced in, however, the markets have seemingly been ignoring bad news ever since the Fed announced it would buy everything.

Now, the markets return to trading in a range with the S&P 500 has been bouncing between 2700-3000 since the rebounding off March’s low.

Homebuying Sees Remarkable Recovery – Markets Pop

If you experience motion sickness, this week definitely made you queasy as the Mortgage Bankers Association (MBA) said mortgage applications rose a whopping 6% last week from the week prior, reported CNBC on Wednesday.

Not only have the homebuyers come out in droves to apply for mortgages, purchase volume was down only -1.5% from a year ago.

“Hey, it’s a pandemic – why not buy a house?”

The MBA pointed to the record low 30-year fixed rate mortgages with rates of 3.41%-3.43% as driving a lot of the demand as homebuyers seek to take advantage.

The markets fully recovered from Tuesday’s sell-off, testing Monday’s highs.

Jobless Claims Total 2.4 Million, Declining Pace

The Labor Department reported jobless claims totaling 2.44 million in the past week versus 2.4M expected, still elevated but a declining pace of recent weeks, reported CNBC on Thursday.

Thursday’s report brings the total filings during the pandemic to an astronomical 38.6 million, however analysts pointed that the total has fallen for seven straight weeks from its record peak.

Markets didn’t really move either direction due to this news, which is somewhat surprising since the weekly job report has been a consistent negative market mover for the past few months.

April Home Sales Drop, But So Does Existing Inventory

The National Association of Realtors (NAR) reported a drop of existing home sales of 17.8% month-to-month from March and 17.2% lower than April 2019, reported CNBC on Thursday.

Somewhat counterintuitively, the supply of homes for sale fell 19.7% during April, dropping the existing inventory to 1.47 million units – the lowest April inventory figure in its history. This drop in inventory pushed prices to new record highs.

However, experts still pointed to signs indicating a remarkable recovery in housing from earlier in the week with mortgage applications that were down just 1.5% last week compared to the same week a year ago. Six weeks ago, applications for mortgages were down 35% annually.

Fauci Confident U.S. could have Vaccine by December

Dr. Anthony Fauci said it is “conceivable” the U.S. could begin to roll out a coronavirus vaccine by December on Friday, reported CNBC.

Facui went on to warn that any timeline for a vaccine is “never a promise.” We also pointed out that the possibility for unanticipated setbacks could push back a vaccine’s deployment as well.

Facui described Moderna’s (MNRA) drug trial data from earlier in the week as only partial data, reinforcing other medical experts who prefer the general public curb their enthusiasm. While all are optimistic, there’s still a lot to do before we’re anywhere close to having a vaccine.

The markets were expectedly relatively flat on the news.

Next Week’s Gameplan

The markets are most certainly trading in a range as the S&P continues to bounce between 2750 and 3000. As such, all trading plans should be made accordingly – take profits in overbought positions and consider adding to weak positions with the potential to thrive during a global pandemic (think technology, cloud stocks, and Work From Home plays).

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

After being unable to break its new weekly high of $10,079.00 since the Halvening on May 12, Bitcoin’s second attempt over the past week failed, resulting in the crypto losing support Tuesday and Wednesday to make a new weekly low of $8800.00.

However, the Support of Last Resort seems to have gone back to work, offering support which Bitcoin seemingly bounced off, unable to close below the line on Thursday.

Bitcoin is currently off -10.61% from its $10,079.00 high leaving the crypto quite the space to work with if this is a new trading range.

The Bullish Case

Historically, Bitcoin pulls back significantly following each halving process (which I’ve nicknamed “the Halvening”). With the most recent halving only just happening a week ago Tuesday, bulls are suggesting this -8.6% two-week drop is just Bitcoin resting before heading for all-new parabolic highs.

The Bearish Case

Bears also point to the historic post-halving selloff, suggesting that the past few days are just the beginning, with the next round of selling capable of pushing the crypto down to the Next Support of Last Resort (?) line near $6650 or even the Some Support of Any Resort line currently hovering at the $4000-$4050 mark. 

Just like the bulls, there are extreme analysts claiming Bitcoin could drop as low as $1750 before it bounces again.

Bitcoin Gameplan

Current Allocation: 3.663%
Current Per-Coin Price: $8,647.23
Current Status: +5.382%

I made no movements with my current trade over the past week, preferring to experience the pullback rather than close the trade and potentially risk missing Bitcoin’s next parabolic move.

Truly, I’m neither bullish nor bearish on Bitcoin right now. If it goes up, I’ll close the trade when I have a profit I am satisfied with. If it goes down, I’ll continue increasing my allocation in preparation for the crypto’s next big bounce.

Bitcoin Buying Targets

Using Moving Averages and the $3858.00 monthly low as guides, here’s my plan of buying quantities and prices:

0.407% @ $7539
0.452% @ $6452
2.212% @ $5857
3.214% @ $5166
6.242% @ $4369
5.745% @ $3989
7.416% @ $3659
16.244% @ $3163
15.466% @ $2636
21.289% @ $2089

Bitcoin Selling Targets

If Bitcoin starts another price consolidation where I can lock in gains of 20-25% without setting stop-losses too close to the price, I may end up closing this position and starting a new one, but, for the moment, I’m curious to see where we’re headed.

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. Rather than increasing my quantity on the way down, I’m used a fixed amount of money, so I’m basing how much I buy by how likely I think Bitcoin will drop to a certain level. In this case, I don’t think it’s likely Bitcoin will be able to break its $3128 low, so my quantities under that price point are less to account for the chances it will get to them.

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.
• From June 2019, Bitcoin dropped -53.64% to a low of $6430.00 in December 2019.
• From December 2019’s low, Bitcoin rebounded +64% from $6430.00 to $10,522.51.
  
• In March 2020, Bitcoin dropped -63.33% to a low of $3858.00, mostly in 24 hours.
• From $3858.00, Bitcoin has rebounded +161.25% to $10,079.00 in May.
• 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.