Summing Up The Week
The shortened four-day trading week thanks to Presidents Day started off higher until negative news about existing home sales hit on Thursday.
On Friday, optimistic news from China brought the averages back up which resulted in the 9th straight week of positive movement in a row – a historical anomaly which often indicates a downward trend coming soon to a stock market near you…
Market News
How rare is a nine-week streak? How about 0.2%?
Carter Worth, a noted technical analyst who regularly visits CNBC’s Fast Money, performed some research about our nine-week run. In the entire history of the Dow Jones Industrial Average, this kind of run has only happened 13 times (a 0.2% probability of occurrence).
Worth’s research shows an average decrease of 2.5% over the two months following each of the previous occurrences. Is this market a trap?
Homework delay – U.S. / China trade talks extended
The big news Friday came when China’s President Xi delivered an optimistic message stating that U.S. and China should work together to resolve trade disputes. Trump gave mixed signals during interviews, however he did say he felt there is a “very good chance a deal could be made.”
The Fed sees “risks and uncertainties”
The minutes from the January meeting of the Federal Reserve reassured the markets as Fed officials reinforced their desire to be patient when it comes to raising rates.
In fact, the Fed also discussed ending the sale of bonds on the bank’s balance sheet before the end of 2019 thanks to “risks and uncertainties.”
Given the market’s huge run since December, is the Fed’s report actually good news or just the calm before the storm?
Existing home sales fall to 3-year low
Remember how CNBC thought there was a spike in housing demand just a few short weeks ago? Yeah, turns out CNBC was wrong.
On Thursday, the National Association of Realtors announced existing home sales fell to a 3-year low in January. Housing demand is directly correlated to consumer behavior, so, naturally, the market fell on the news.
Next Week’s Gameplan
As we rapidly approach the end of February, all eyes focus on Trump’s negotiation of the U.S.-China Trade War with the deadline for raised tariffs on March 1.
The market’s already priced in a delay of the additional tariffs and with a complete trade deal unlikely, will the delay be a sell-the-news event? Watch your step.
Internationally, we’re seeing weak economic data globally and with the U.S. economy also slowing, this is not good news.
At this point, we’ve adjusted our positions by taking profits and we’re not putting any new money to work, preferring to keep our powder dry in case the market begins to retrace some of the substantial gains we’ve seen since December 2017.
(Click the charts to enlarge)
The “Line That Shall Not Be Crossed” has prevented Bitcoin’s return to prominence since early 2018.
Crytpo Corner
Bitcoin approaches The Line That Shall Not Be Crossed
Bitcoin rallied more than 15% from the $3,350 level to nearly $4,000 over the past three weeks causing many HODLers to claim the end of crypto’s longest Bear Market, lasting for more than a year.
We don’t agree.
Our charts of The Line That Shall Not Be Crossed (see the charts above updated from our feature story, Bitcoin’s Road to Nowhere) show a bearish trend-line Bitcoin has been unable to break throughout all of 2018 rapidly approaching at the $5,000 price point on the logarithmic scale which charts percentage moves (technical analysts typically use logarithmic charts).
However, the exponential scale, which charts price-per-dollar moves, shows the line at only $4,450 and dropping quickly to meet Bitcoin’s current levels. The last time we saw Bitcoin try to break through this trend-line on the exponential scale was in November 2018 and Bitcoin crashed more than 50% in a month!
When this happened last, we warned speculators to get out of the space when the cracks started showing on November 15, 2018 at the $5,500 level after an initial ~15% drop from $6,400 before Bitcoin spiraled downward more than 40% lower to a low of $3,128.89!
At this point, we have no reason to believe Bitcoin will break through The Line That Shall Not Be Crossed as there are no catalysts or positive news events that would indicate otherwise. We expect to see the price retreat to the $3,400 level and lower in the coming days after a possible pop to meet the line.
The worst case scenario? If Bitcoin breaks through its current low of $3,128.89, Bitcoin could see new lows of $2,975 or even $2,403 before it finds support again.
We continue to avoid speculating in the space at this time for nothing more than short-term oversold trades.
This Week in Play
Stay tuned for this week’s episodes of our Investments in Play and Trades in Play coming online later this weekend! There’s a lot to talk about!
Disclaimer: Eric "Irk" Jacobson and all other Get Irked contributors are not investment or financial advisers. All strategies, trading ideas, and other information presented comes from non-professional, amateur investors and traders sharing techniques and ideas for general information purposes.
As always, all individuals should consult their financial advisers to determine if an investing idea is right for them. All investing comes with levels of risk with some ideas and strategies carrying more risk than others.
As an individual investor, you are accountable for assessing all risk to determine if the strategy or idea fits with your investment style. All information on Get Irked is presented for educational and informational purposes only.
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