Summing Up The Week
The markets ended the week somewhat flat with a mixture of crazy news ranging from the summary of the Mueller Report; Brexit craziness, the potential return of the housing market, the “retirement” of Wells Fargo’s (WFC) CEO, cannabis’ pullback, Apple’s (AAPL) ShowTime announcement…
… oh, and Lyft (LYFT) went public!
Read on to get the details on what moved the market all around this week:
Brexit! Brexit! Brexit!
Brexit reared its ugly head yet again as Parliament voted to rip control of the Brexit process away from Prime Minister Theresa May on Monday.
On Wednesday, May announced she would resign, if need be. UK’s House of Parliament still couldn’t agree … on anything. Parliament failed to pass any bill with a majority. We wonder how they pick where they want to eat for lunch. (wait… they don’t all eat lunch together?!)
The Mueller Report came out on Sunday with the summary saying that Trump had done no wrongdoing in as far as the scope of the report. Critics – including the U.S. Attorney General – were quick to point out that this report doesn’t exonerate Trump from all of his activities – just the ones involving Russian manipulation of the 2016 Presidential Election. That didn’t stop Trump from declaring victory, however.
Housing Market Resurgence?
On Wednesday, CNBC reported that weekly mortgage applications surged nearly 9% based on lower interest rates. Although the weekly mortgage applications figure is a short-term indicator (the figure is based on new mortgage applications since the previous week), it is mildly positive news for the market as strong home demand correlates with a strong economy.
Although good news , the greater negatives of concerns over future growth thanks to the inverted yield curve kept the housing numbers from moving the market in a positive direction.
Cannabis Coming Down From Its High?
Many analysts have been warning that complacency in the cannabis space may lead to lower stock prices, and that forecast started coming into fruition on Thursday. The entire cannabis saw a rapid sell-off with market leaders such as Canopy Growth (CGC) and Cronos (CRON) reaching lower levels not seen since January.
Apple doesn’t fall far from its own tree
Apple’s (AAPL) big Showtime announcement was on Monday, and there were a lot of details left out – like pricing.
Apple announced Apple TV Plus – a TV subscription service coming this Fall 2019, Arcade – a video game subscription service coming Fall 2019, and AppleCard – a credit card partner to Apple Pay coming this Summer. No pricing details were available for TV+ or Arcade, and no real details about who would be eligible for AppleCard, their new credit card resulting from a partnership with Goldman Sachs (GS) and Mastercard (MA) – although you can bet “only well-qualified applicants need apply.”
The only product that Apple did announce pricing for was their new News Plus service which offers 300+ magazine subscriptions and newspapers for $9.99/mo. available now. We applaud the support of journalism but wonder how many people read enough printed media to make $120 a year worth it – that pays for a lot of individual physical magazine subscriptions, if that’s your bag.
We have to agree with CNBC – if Apple wants investors to take their new services focus seriously, they’re going to have to be less cryptic and cagey during their presentations (heck – less cryptic and cagey all the time, please).
“About Damn Time” -or- Bye, Bye Banker!
Tim Sloan, Wells Fargo’s (WFC) CEO, announced on Thursday that he is “retiring.” It’s always a bad sign for a CEO’s performance when his or her stock pops to the upside following a retirement announcement, as happened with Wells Fargo.
Senator Elizabeth Warren and other government representatives have been calling for Sloan’s termination/retirement since Wells Fargo was found opening fraudulent accounts to take advantage of retail customers including credit cards, bank accounts, and additional products that the customers didn’t approve and, in many cases, weren’t even aware were opened on their behalf.
When asked, Sen. Warren gave CNBC an uncharacteristically colorful quote, “About damn time.”
Will Sloan’s retirement help Wells Fargo recover? How about the removal of the government’s ban preventing the company from growing in size? Only time will tell, but it certainly isn’t a bad first step.
Lyft (LYFT) Beats Uber to the Markets with its IPO
Lyft (LYFT), the Uber ride-sharing competitor, beat the big guy to market with its Initial Public Offering (IPO) on Friday. Lyft’s initial price was for $72.00 a share, but opened at its daily high of $87.24. From there, LYFT collapsed more than 10.5% dropping to close its first day at $77.93 – a demonstration of why we never buy IPOs at the market opening price of their first day of trading.
LYFT’s IPO is a sign of the IPO rage coming to the market, potentially putting pressure on all non-IPO stocks. When IPOs come to market (there are more than 200 scheduled this year), traders calling it sucking the oxygen out of the market.
Just like any market, the stock market is about supply and demand. When new companies IPO, hedge funds and trading firms have to build up the money to buy them by selling everything else.
For the moment, Get Irked has no interest in Lyft. Beyond its incredibly high valuation, the company is not currently profitable and has announced it has no plan to become profitable at the present time.
Next Week’s Gameplan
The market seems to be leveling for the moment, either consolidating before another upside move or considering rolling over to pull back for awhile. Given its indecision, we’re holding on the sidelines until we get more price action.
The global economy needs to show signs of stabilizing and/or the U.S. needs to reach a trade deal with China so we can see further upside. If that happens, we will raise our price targets accordingly for the positions we’ve been eyeing. If the market rolls over, we have orders in place at lower levels.
For the moment, we’re keeping our powder dry and just watching the craziness that the market continues to demonstrate – it’s the best show not on Netflix!
Bitcoin’s capping off a great March, but what’s in store?
Majority of Bitcoin Trading Volume is Fake
Shortly after last week’s Week in Review went live, Bitwise – a company trying to legitimize a Bitcoin Exchange Traded Fund (ETF) – released a research report revealing that more than 95% of the $6 billion in trading volume reported by cryptocurrency exchanges is actually fake. Find out more about what this means for Bitcoin speculators in our feature story about Bitwise’s report.
Unfortunately, if there’s one thing that the cryptocurrency sector doesn’t need, it’s more negative news stories. Negative news further degrades the already record-low sentiment toward the cryptocurrency space.
Without some serious positive catalysts, there’s simply no way Bitcoin’s going to make a comeback anytime soon.
Bitcoin’s Weekly Price Action
Bitcoin has shown incredibly strong price action to close out March, holding a weekly low of $3,858.00 and reaching a higher-high than last week at $4,101.50. Although this price action is certainly bullish, it’s not enough for us to consider making a move, yet.
Here’s why we don’t trust this move:
- There have been no real positive catalysts. We know we sound like a broken record, but there’s been no good news in the space. Without any real catalyst, this price action could be algorithms or “bots” – automated computer trading – simply operating off of past levels. In fact, the only significant news story has been negative – 95% of Bitcoin’s reported trading volume has been found to be fake by a Bitwise study (see above).
- We haven’t broken the past monthly high. The high since the big drop that closed out 2018 is $4,239.37 and remains quite a bit higher than where we are. Until Bitcoin breaks through that high and – more importantly – closes above it, preferably on the weekly (if not the monthly), this move is simply consolidation – where an asset bounces between two levels to find its true price.
- Bitcoin is due for a pullback. Although technical analysis is more of an art than a science, this week’s move marks six weeks of positive price action. Expanding on that, there’s only been one down week in the past eight. Historically, there is a pullback in the crypto sector after this much bullish action and all indicators point to a decent-sized pullback if it happens this time – potentially as much as 50%.
- It’s that time of the month. Charts are determined on certain time intervals – 5 minutes, 15 minutes, 30 minutes, 1 hour, 4 hour, daily, weekly and monthly. As we approach the end of March, the entire month has been positive. Many traders will wait when an asset reaches the end of the month so they can see where the next month’s price action will lead – continuation or reversal. Since 2018, Bitcoin’s pattern has been magnified with reversals usually eliminating the previous interval’s gain or even sending the cryptos lower.
- Bitcoin’s Relative Strength Index (RSI) indicates bearish price action. Unlike stock equities where an overbought RSI can indicate higher-highs, Bitcoin’s RSI typically goes from fully overbought to fully oversold and vice versa – significant volatility. At the end of March, Bitcoin’s Daily RSI is near overbought levels (a bearish sign) and, worse yet, its Weekly RSI has nearly risen to the point where it dropped 50% in value back in November 2018. A similar drop from these levels could send Bitcoin down to key levels below its $3128 low of 2018 – $2,975; $2,650; $2,305; $2,050 or even $1,760.
As difficult as it can be to deal with the FOMO, we’re staying on the sidelines until we see Bitcoin make a significant pullback -or- we see Bitcoin’s Daily RSI level approach oversold conditions.
Although trading action can sometimes feel like an asset will never stop going up, Bitcoin’s historical price action demonstrates that its price can (and will) always head lower after a big move like this one.
There are only two certainties in trading – there will always be another opportunity to make money and there will always be another opportunity to lose money.