Summing Up The Week
The market’s becoming bipolar, playing good-cop/bad-cop with negative reactions to good news and positive reactions to bad news causing the indexes to whipsaw up and down all week. Plus, it looks like there’s no end in sight to this volatility.
Let’s look at the news that moved the markets this week…
Acquisition in Semiconductor Space Kicks Off the Week
Outside of typical trade news worries, the week kicked off with good news in the semiconductor space as German firm Infineon Technologies announced plans to acquire Cypress Semiconductor (CY) for $10.1 billion or $23.85 a share according to CNBC. The news caused CY to skyrocket 27% to $22.55 in trading Monday morning.
We bought CY back in April 2016 for $8.23 based on a recommendation from Jim Cramer of CNBC’s Mad Money fame, a gain of 273.9% from $8.23 to $23.85 in just over 3 years. If listening/watching Mad Money isn’t part of your investing gameplan, it should be.
The Claws are out for FAANGThe FAANG stocks – Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX) and Google/Alphabet (GOOG) – were under fire following an announcement that Congress would be launching a probe to investigate antitrust allegations on Monday. The FAANG stocks have been viewed by analysts as the leaders of the NASDAQ, and, in some cases, the reason the market continued higher. All five sold off on Monday, and while the NASDAQ plummeted, the Dow and S&P 500 held remarkably stable.
China says, “Words Not War.”
The markets rose into Tuesday trading following a release from the Chinese Commerce Ministry indicating that China would like to resolve the trade dispute through talks rather than action.
The statement read, “The Chinese side always believes that the differences and frictions between the two sides in the economic and trade field will ultimately need to be resolved through dialogue and consultation.”
Relief Rally on Rate Cut Rumbling – 2nd Best Day of 2019
Tuesday’s rally took off following Fed comments that an interest rate might be coming, typically a catalyst for higher stock prices as companies can afford to take loans in order to spur growth.
The positive news combined with the oversold condition of the stock market caused the Dow to jump more than 500+ points with the S&P 500 and Nasdaq both seeing gains in excess of 2.0%+.
Job Growth Slows, Market Accelerates
The market rally ended abruptly Wednesday when the monthly private payroll report showed an increase of only 27,000 when Dow Jones expected 173,000, reported CNBC.
Slowing job growth indicates a weakening economy and while this makes an interest rate cut from the Fed more likely, it brings concerns for overall market performance.
On Thursday, the market started picking up again on hopes that … wait for it.. the official job report released Friday would show negative job growth after investors digested the idea that a slowing economy might make the Fed cut interest rates, potentially spurring company spending.
On Friday, investors hopes were realized as the jobs creation report showed just 75,000 new jobs in May, which was worse than expected, reported CNBC.
The good-cop bad-cop nature of the news lately has made for incredibly volatile trading action, and demands both investors and trades to plan accordingly.
Next Week’s Gameplan
As the market continues to grind higher, we’re preparing to take profits in key positions as they reach particular levels.
Many analysts and professionals predict that we’ll see this kind of volatile trading deep into the summer, so taking on more trading techniques to protect positions’ profits will be beneficial… if one can be nimble enough.
Here’s hoping we are…
Get Irked contributors are not professional advisers. Discussions of positions should not be taken as recommendations to buy or sell. All investments carry risk and all readers must accept their own risks. Get Irked recommends anyone interested in investing or trading any asset class consult with a professional investment adviser to determine if an investment idea is suitable to them and their investment goals.
Bitcoin Price (in USD)
Bitcoin Price Action
Bitcoin slipped up this week, dropping more than 10% from its briefly-hit $9090 high from last week into the $7000s, creating a weekly low of $7427.00 and falling below our Line That Shall Not Be Crossed (maybe not so poorly named after all?).
Historically, when Bitcoin pulls back from a recent bull run, the momentum doesn’t return quickly even during a Bull Market, often taking days or weeks of consolidation or even lower-lows in order to recover and return to make higher-highs.
In fact, during the Bull Market of 2017, Bitcoin often pulled back more than -40% before regaining the strength needed to make higher highs. Looking at the historical price action would suggest this current drop isn’t done, yet, and the market has a buying opportunity in store at lower levels.
While we are making plays in the space, we continue to take a very conservative approach as long as Bitcoin remains overbought on the weekly and monthly Relative Strength Index (RSI).
We’re being very patient, rather than attempting to day-trade, we’re looking at swing trading and taking advantage of the possibility that Bitcoin may pull back to the new Support of Last Resort, or, perhaps even lower as we wait for the positive momentum to rebuild from these levels.
While the Daily and 4-Hour RSI indicators have cooled off substantially, historically, Bitcoin will completely cool off the Daily RSI – even during a Bull Market – before trying to make higher-highs so Get Irked doesn’t believe we’re remotely out of the woods, yet. Lower-lows are the likely result before we see $9090 broken.
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