Author: Andrew Packer

Cryptocurrencies

Bitcoin Magazine: Is the Bitcoin Bull Cycle Over?

Posted on by Andrew Packer

Bitcoin started the year off on a strong note. The SEC approved 11 bitcoin ETFs for trading. Prices hit a new all-time high in anticipation of that move. In the months since, the price has languished.

The past few months have seen choppy price action and some sizeable selloffs. That’s not the typical behavior of an asset making new highs. In that sense, bitcoin has faltered while assets such as stocks and gold have continued higher.

Historical data from past bitcoin cycles suggests that this is nothing new. The 2016-2017 and 2020-2021 rallies in bitcoin saw similar drawdowns after making new all-time highs. Such pullbacks, while more extreme in bitcoin than other assets, seem critical to fuel the next leg higher.

In the meantime, short-term holders have an average price of about $63,000 per bitcoin. At current prices, many new bitcoin investors may be holding at a loss. Typically, short-term investors will see a loss at some point during a bull market cycle.

Meanwhile, the hash rate of the bitcoin network continues to grow. Typically, prices follow moves in the hash rate higher. That’s another sign that the drop in prices off the peak is a pause, not the start of a protracted rally.

Looking at the data as a whole, while price action has been discouraging lately, bitcoin is still on track to push higher in the months ahead. It simply remains to be seen what catalyst will trigger the move.

 

To read the full analysis on bitcoin’s price action, click here.

Trading Strategies

Tastylive: Most Options Traders Make at Least One of These 5 Mistakes

Posted on by Andrew Packer

Traders have a number of strategies that they can use to profit from the market’s short-term swings. Typically, most traders will use options. They’re less expensive than using shares outright. And they can magnify a profit … or loss.

Understanding how to use options responsibly in a portfolio is huge for determining your trading success. And it can also be used as a tool to help boost the returns or hedge a more conventional stock portfolio.

First, when trading with options, many traders first look at the buy side. Buying options, whether puts or calls, can lead to massive returns.

However, those options have to be bought at the right time. And they have to be at the right price. Otherwise, traders risk losing on a trade. Even if they’re generally right.

To counter this challenge, traders can look at the sell side of the equation. Selling options tends to offer lower returns. But it offers a higher probability of providing investors with a gain.

Investors who want to hedge a stock portfolio can sell call options against their position. This “covered call” strategy is a conservative way that can boost returns. And it can help to mitigate some market risk. Selling options also brings in more income, which can then be used to also buy options.

 

To look at the full list of options trading mistakes, click here.

Income investing

Dividend Growth Investor: Seven Dividend Growth Stocks Rewarding Shareholders With Raises

Posted on by Andrew Packer

With interest rates set to decline, yields on bonds will drop. As that happens, their price will rise. Investors may want to lock in bonds at today’s yields in anticipation of lower yields and higher.

Investors can also buy dividend-paying stocks. As interest rates decline, the yields offered on stocks look increasingly attractive. While there are many high-yielding stocks out there, companies that pay a reasonable and growing dividend over time tend to offer great total returns.

Companies that can grow their sales or earnings over time are able to pay an increasing payout. Many shareholders, as owners of the company, appreciate those payouts. While only a small fraction of stocks pay growing dividends over time, there are always some announcements of dividend increases.

For instance, Altria Group (MO) just announced a 4.1% increase in its quarterly dividend. The tobacco firm has paid increasing dividends for 55 consecutive years. At current prices, Altria pays a high yield of 7.8%.

Other sectors also offer increasing payouts now. EastGroup Properties (EGP) is a real estate investment trust. They own industrial properties in Sunbelt states, which have seen significant population growth over the past few years.

EastGroup shares yield 3%, and they just raised their payout by 10.2%. EastGroup has increased its dividend for 13 years running.

 

To see the full list of dividend growth stocks increasing their payout now, click here.

Economy

Heresy Financial: Why Fed Rate Cuts Will Trigger a Recession

Posted on by Andrew Packer

Interest rates are set to decline coming in mid-September. This comes more than a year after the Federal Reserve last raised interest rates, and four years after the central bank last cut.

Typically, the Federal Reserve raises interest rates to slow the economy. Doing so curbs inflation, such as the high inflation experienced after the pandemic. Lowering rates is designed to spur economic growth. It can also be seen as a sign of a slowing economy.

Many times, the economy is already weakening quickly by the time the Fed starts to cut rates. That’s why many see the potential for a recession.

Typically, if the Fed starts with a quarter-point rate cut, markets can continue higher, and the economy may continue to grow. If the Fed starts cutting rates with a half-point cut, it could signal that economic danger is already here.

As with anything else, the economic data will take months to indicate how the economy will fare. Until then, the market trend is higher, although seasonal factors may weigh on stocks over the next two months.

The upcoming election will also create some market uncertainty going into November. After the election, markets will likely be clear to end the year on a strong note. And if the Fed cuts by just a quarter point, stocks will likely close the year at or near new all-time highs. 

 

To view the full analysis, click here.

Stock market

Geeks of Finance: Massive Reversal. The Market Is About to Trap Everyone

Posted on by Andrew Packer

After rallying nearly 10% in three weeks, the stock market is back near all-time highs. Traders remain bullish, even moving into September, historically one of the most challenging months for the market.

Could this year be different? Following a selloff in early August that got into correction territory, it’s certainly possible. However, it’s also possible that stocks still face a seasonal pullback. Traders should be prepared for either prospect.

The chance of a pullback is reflected somewhat looking at the fundamental data. Concerns about a slowing labor force, which drove markets lower a few weeks ago, haven’t changed. Neither have concerns about the level of leverage in financial markets.

Stocks are encouraged by rate cuts, with the first one likely after the Federal Reserve’s next meeting on September 18.

Meanwhile, options data reveals that investors remain bullish. Gamma exposure suggests that traders remain bullish on the markets over the next two months.

In other words, the market is likely to trend higher over time based on the actual positioning of trader right now. Consequently, seasonality may not play as much of a factor as expected this year. Investors simply bought the market drop strongly, and traders expect that trend to continue.

That trend could shift if economic data shifts, so traders should continue to look at gamma exposure on the stock market and on top-traded stocks.

 

To view the full rundown on market gamma, click here.

Cryptocurrencies

The Compound: Only One Factor Drives Bitcoin Prices and This Is It

Posted on by Andrew Packer

Cryptocurrency prices have largely bounced around over the past few months. The crypto market set an all-time high earlier in the year. More recently, assets such as gold and stocks have taken the lead.

That’s in spite of a slew of good news. Crypto ETFs have launched, including 11 bitcoin ETFs and several Ethereum ETFs. Investors have more and easier access to crypto than ever before. But other factors will push prices higher.

Cryptocurrencies are incredibly volatile. When price soar, investors love the asset. When prices drop, they hate it. In a sideways market, investors tend to get frustrated and move on to faster-moving assets.

Today, with crypto trading sideways, the digital asset space looks much like gold after its early year run. A further breakout is likely.

Part of that is that investors continue to accumulate cryptocurrencies such as bitcoin. Long-term holders look at it as a store of value. And bitcoin’s halving has reduced new supply. Right now, demand for bitcoin exceeds the latest daily new issuance.

Over time, that should be bullish for prices. And could lead to a massive price move higher for bitcoin over the next 12-18 months. But in a short-term period, the price will remain volatile both up and down.

Given the strong demand for bitcoin, and rising investor demand, this key factor driving prices should push them higher.

 

To watch the full interview, click here.

 

Commodities

VanEck: Miners’ Margins Grow as Gold Soars to Fresh Highs

Posted on by Andrew Packer

Gold prices have set new all-time highs. Since it first soared higher in April, the metal consolidated around $2,350. In August, gold started to trend higher again, breaking over $2,500 per ounce for the first time.

Gold’s price looks set to rally further. Investors remain concerned about inflation, which may trend higher as interest rates come down. And commodities in general appear to be in a bullish uptrend, which can last for years.

Add in the current geopolitical risk right now, and gold looks attractive. Central banks remain robust buyers of the metal. Those big buys can help keep prices trending higher thanks to the strong demand.

When gold prices rise, the prices of gold-related investments tend to also perform at least as well as gold, if not better.

That includes gold mining stocks. Since a company’s costs are relatively unchanged over a quarter, a boost in gold prices tend to move directly to a company’s bottom line.

That can mean higher profit margins. So far, for the second quarter of 2024, gold miners have beaten earnings estimates about 80% of the time.

Investors can buy individual gold mining stocks such as global giant Barrick Gold (GOLD).

Or, investors can take a wider approach with a diversified gold miners ETF, such as the VanEck Gold Miners ETF (GDX), which owns a basket of leading gold stocks.

 

To view the full analysis on gold’s move higher, click here.

Stock market strategies

A Wealth of Common Sense: Talk Your Book: Quality Growth Investing

Posted on by Andrew Packer

Investing comes in all types and flavors. However, most styles tend to get grouped as either value or growth. Right now, the market loves growth, especially given the prospective returns of AI stocks.

However, value stocks can also lead to great returns for patient investors over time. That said, there are ways to blend the two ideas together. Ideally, that can mean getting the best of both, high growth at a reasonable value.

One way is to look at a company that’s growing in terms of the quality of its growth. That gets into a company’s earnings, and how those earnings are made. Rising revenues and cash flows matter more than the one-time sale of a division.

A company that makes inconsistent moves or spends tremendous sums on new endeavors may be a poor one. Meta Platforms (META) which is a massive cash generator with its social media sites, fits the bill. Meta’s push into the metaverse moved away from growing quality earnings.

A company that focuses on quality can also see growth under any market conditions. Factors such as inflation or rising interest rates should have little impact on the business itself. A company that needs low interest rates to succeed likely has not done so.

 

To listen to the full podcast, click here.

Stock market

FX Evolution: This Has Only Happened 8 Times in 30 Years

Posted on by Andrew Packer

Markets continue to roar back from their early August selloff. Investors who bought the dip are faring well. Those who expect another big selloff have been disappointed so far.

In the meantime, the S&P 500 and Nasdaq hit an 8-day winning streak. And both indices gained more than 5% over that period. That’s a huge move. It’s also one that suggests the rebound has ended.

Going forward, the market will likely continue its long-term uptrend. But it will take on a slower and more cautious approach.

This market shift higher may have some believing that there will be no recession anytime soon. However, the economic data that helped the market sell off in the first place does show that markets are slowing.

Meanwhile, global liquidity remains on the rise. And it’s set to rise further as interest rates decline, there is still some more upside over the next year.

With markets still looking bullish, investors can still stay long this market. And over the next year, investors can look to get increasingly defensive. That includes sectors such as utilities and gold.

Thanks to the AI boom and rising demand for electric power, utilities offer both safety, income, and some medium-term growth over the next few years. Gold can hold up with a bullish market, and the metal still has more room to run over $2,500.

 

To view the full data behind the market’s latest move, click here.

Economy

Game of Trades: This is a Textbook Bear Trap

Posted on by Andrew Packer

In just two weeks, the stock market has gone from being overly fearful to closing in once again on all-time highs. The volatility index topped 65, a level last seen around the Covid crash. That index is now back to its normal range near 15.

Meanwhile, investor data shows that as the market neared a 10% pullback level, investors got increasingly bearish. In hindsight, the market move now looks like little more than a classic bear trap.

A bear trap is simply a market downdraft. It makes investors bearish, leading to a selloff. But the trap is sprung and prices shoot higher.

Those who held steady did fine. Those who bought into the market and ignored the fear made out like bandits.

For investors, it’s essential to know what separates a normal pullback and bear trap from a major selloff.

For starters, investors can look towards economic conditions. While conditions have weakened, it’s also weakening to the point where central banks will start cutting interest rates. With rates at their highest level in 15 years, the start of rate cuts could be bullish.

Meanwhile, the U.S. Treasury curve remains inverted, after briefly flirting with un-inversion. It’s only after the curve un-inverts that investors should be thinking about a recession in the near future. When a recession looks likely, markets will start to move lower and price that in.

 

To watch the full analysis, click here.