Summing Up The Week
The outlook’s looking murky for the markets as global economic slowing concerns strengthen and the first inverted yield curve in 12 years appeared.
The Fed claimed they see nothing negative in coming months, however they suddenly became incredibly dovish in just three months, turning about-face from a hawkish stance of multiple rate hikes in 2019 to none. The Fed’s future plans do not suggest they view a strong economy.
Let’s look at the news that moved the markets this week…
The Fed stays Dovish, but is that a Good Thing?
The Fed announced they would not raise interest rates for all of 2019 and the balance sheet roll-off will be completed in September during Wednesday’s press conference following their monthly meeting. The indexes were mixed following the news, with concerns about the Fed’s uneasiness with the economy.
Although the old adage “Never Fight the Fed” indicates the market should have an easier time heading higher from here, investors need to keep in mind that the Fed said they would need two more hikes in 2019 just three months ago. What changed the Fed’s mind? Does the Fed see dark clouds coming for the future? Investors should take this new information into consideration when working on trading plans.
The Inverted Yield Curve Foretells Certain Doom
Many investors may hear the term “inverted yield curve” but not quite know what that means or why it’s significant. In short – an Inverted Yield Curve occurs when short-term yields are greater than long-term yields.
As an indicator, an inverted yield curve demonstrates that investors feel long-term growth may be slowing, and when the curve inverts, it’s been a reliable predictor of an incoming recession typically 6-18 months out.
Oh, and the yield curve inverted for the first time in 12 years on Thursday, so maybe that’s what made the Fed so dovish? Yikes!
Trump Administration – Misinformation Masters
Conflicting reports from the Trump Administration about the U.S.-China Trade Deal caused the markets to experience huge volatility early in the week, whipsawing from lows to highs. This kind of market volatility points to why Get Irked recommends long-term investors to limit how often we check our stocks and to never let emotions decide trading plans.
Turns out, Alzheimer’s is Tricky
Shares of Biogen (BIIB) tanked Wednesday after the company announced their Alzheimer drug was a complete failure in a press conference. BIIB’s drug trial results were so bad that they’re scrapping further development for the drug.
BIIB dropped $87.67 a share – nearly 30% – from $320 to $230 in trading Thursday.
These results punctuate the risks of biopharma investments – great drug trials equate to huge gains, however disastrous drug trials result in equally disastrous losses.
Next Week’s Gameplan
Analysts seem to be split 50/50 with half saying the market will head higher from here and half saying we’re due for a pullback.
As the adage goes, “if you don’t know what to do, do nothing at all.” We’re keeping all uninvested funds on the sidelines, for the moment, but we’re also not pulling anything out of the markets.
Bitcoin’s Road to Nowhere continues…
Bitcoin Technical Analysis
Bitcoin seems to have broken through The Line That Shall Not Be Crossed (solid red line in the chart). We’ve found a new trendline providing resistance (in dashed orange), but cannot judge the strength of its resistance until we see further price action.
In the meantime, The Support of Last Resort has not been tested since March 4 (solid green) so it seems to be holding up… for the moment.
Other lines of interest:
- The dashed red horizontal line at $4,239.37 shows Bitcoin’s high since its $3,128.89 December bottom (shown as the dashed dark-green horizontal line).
- The dashed light-green horizontal line at $3,655.00 shows Bitcoin’s most recent weekly low since February 18, 2019.
No Future (Contracts) for Bitcoin?
CBOE Global Markets announced Monday that the Chicago Exchange will no longer list Bitcoin futures due to a lack of interest, with the last future contracts expiring this June.
The elimination of the futures market removes even more credibility from the struggling cryptocurrency space leaving HODLer analysts with little fundamental response outside of “They’ll be sorry.” The CBOE stated they are still assessing its approach for how to continue from here.
CME Group, CBOE’s rival, continues to list futures for Bitcoin as their product has been more popular than their competitor’s, however CBOE’s withdrawal does not portend good things if CME decides to follow suit and pull their Bitcoin futures eventually, too.
Bitcoin’s Home on the Range
Bitcoin’s price action appeared promising this week, rising 5.44% from a low of $3,846.79 last Friday to hit a weekly high of $4,056.33. On Thursday, Bitcoin pulled back almost 3.5% to a new daily low of $3,915.14 where The Line That Shall Not Be Crossed appears to have provided support.
For the moment, Bitcoin remains in No Man’s Land. With no positive catalysts to provide confidence in further upward potential, we have to wait to see if Bitcoin’s headed to new levels or if the crypto is simply trading in the $3,128.89-$4,239.37 range first established in December 2018.
Since we do not have confidence Bitcoin will hold here and expect price to pull back to $3,600 at minimum in the coming days, weeks and months, we continue to wait for a trade setup.
Trading out of boredom is never a profitable course of action.