Summing Up The Week
Despite all the naysayers and bear analysts claiming otherwise, the market finished the week higher, yet again. Each week feels like we’re at higher and higher overbought levels, but the indexes show no sign of quitting.
Let’s take a look at the news that drove the markets this week…
The Market’s on fire – Up for 10 straight weeks!
The market closed out its 10th up week in a row since December lows, and this has some raging bulls predicting we haven’t seen the end of 2019’s gains by a long shot. CNBC reported historical data compiled by LPL Financial on Friday showing that the S&P 500 posted gains in the final 10 months of the year in 25 of 27 times where the year started with monthly back-to-back gains in January and February. Analysts point to a large number of investors leaving the market during the downtrend in Q4 of last year as the reason for what’s being called “the pain trade” where investors experience significant FOMO over missing 2019’s gains and have started putting more money to work.
Trump stands firm with North Korea
Trump met with North Korea’s Kim Jong Un who promptly demanded an end to sanctions against North Korea before any negotiations about their nuclear program. Trump refused to negotiate and the talks with North Korea ended with no settlement. Although the markets viewed this result negatively, Trump made the correct decision in ending the talks from a geopolitical perspective – North Korea needs to learn to act like a part of the global community, not like a spoiled child who’s been misbehaving for years. The market was disappointed.
U.S-China Trade Deal – Will they or won’t they?
The Trump administration continues its strategy of mixed-messages when Trade Representative Robert Lighthizer hinted that there’s more work to be done on the trade deal on Wednesday, according to CNBC. Later in the week, news reports indicated a trade deal might be nearing. The markets flip-flopped accordingly.
Cannabis returns to form… as a (prescription) drug.
While the consumer cannabis space continued its sideways action this week, the cannabis pharmaceutical company GW Pharmaceuticals (GWPH) exploded to the upside after reporting a blowout quarter. GWPH specializes in prescription drugs derived from cannabis such as a recent success used to treat children with epilepsy.
Housing market rebounds… sort of.
The Real Estate market reported pending home sales rebounded 4.6% in January, however since they’re still lower than 2018, the market wasn’t pleased with the results. A slowing housing market indicates a slowdown in growth in the U.S. economy.
Next Week’s Gameplan
When markets rage to the upside after a big bear trend, investors who didn’t catch the rally can be tempted to go all-in as they experience significant FOMO over missing huge gains. How can you protect your capital against a sudden sell-off while still exposing your portfolio to the upside? Make a plan and stick to it.
Developing a trading plan in advance can help you remember to keep money on the sidelines, watch for good buying opportunities, and avoid stocks or funds that may be about to turn over. Learn how to develop your own investing plan with our feature “Don’t Gamble with your Portfolio.”
A significant bullish trendline – the Support of Last Resort – formed this week, battling the Line That Shall Not Be Crossed and causing very tight pricing.
The Battle of the Trendlines
Last week, we warned speculators in the crypto space that Bitcoin was on a collision course with the Line That Shall Not Be Crossed, a significant bearish trendline that Bitcoin has been unable to break through since the crash started in January 2018.
We warned that we expected Bitcoin to meet the line and then reverse direction, crashing to the $3,400 level and potentially further.
On Sunday, Bitcoin hit a high of $4188, touching Line That Shall Not Be Crossed, before crashing more than 10% to $3718.
For the past week, there has been very little to no price action in the space as a significant support line, the Support of Last Resort, has everyone wondering which direction crypto will head. Bitcoin’s price has held between a low of $3655 and a high of $3910.
Our gameplan? Do nothing.
There’s no indication that Bitcoin should head higher from these levels – no catalysts, no positive news, and no new speculators in the space. That being said, stranger things have happened.
“When you don’t know what to do, the best thing to do is nothing at all.”
We expect Bitcoin will break one way or the other significantly in the coming week, maybe as early as this weekend, and we will be able to determine which way the space wants to move after that point.