MARKETS/VIRUSES/CENTRAL BANKS/WHAT’S NEXT?

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—-The lines were still quite huge on Disney properties today. What virus?—-
—-After scanning 1,500 stocks, 200 sectors, every country and every commodity, one word comes to mind…dang! Just another one of those outlier market events where we are sure the central bank team will come to the rescue…or at least try to. But first:—-

—-On Thursday and Friday, the 20th and 21st, we took a stand that the complexion for the market was changing and had changed. Our thoughts came from one observation…all the strongest leading names were topping out and topping out from some of the most stretched, extended and overbought conditions we had seen in a very long time. If the big leaders were topping, it was just a matter of time before the rest followed.—-
—-4,600 DOW points later…again, dang! One can use any label to describe. Doesn’t matter to us. The fact is the market opened wide and swallowed to the point where there are in the neighborhood of 1,500 new year lows… where the TRANSPORTS are basically flat since November 2014…where the RUSSELL 2000 trades where it was August 2017…where the DOW has no gains in over 2 years…where you have to go back to the Trump election to see where the REGIONAL BANKS trade. Many have said this is a correction because the main indices are not down 20%. But as we did our scans , we found a ton, just a ton of stocks that are down more than 20% and in their own private bear market.—-
—-We are not sure we need to go into what they have done with all the areas most affected by the virus. Just one example, since the virus news, Royal Caribbean Cruise Lines has dropped from $135 to $80. We have no edge on where they go from here but we do know just to stay away as we saw the tops not only in these areas but all other areas of the market. They even smoked gold, utilities, and consumer staples, areas that should hold up during times like this.—-
—–We have been telling you since Christmas of 2018 that Jay Powell was making Ben Bernanke look like Paul Volcker. Powell is a much more easier money dolt than Bernanke as Powell prints more money than Bernanke with unemployment in the 3s. We have highlighted all this for you since the Bernanke days. We have been highlighting for you the NOT QE Powell has been doing which enabled what we call “Eiffel Tower” moves in the market. Do you really think it is normal for a Tesla to go from $300 to almost $1,000 on a 2% rise in sales? That’s the outcome of easy money. We told you early in the week, before the futures moved and before anyone else, it was just a matter of time before Powell would react to the drop. And on cue and on Friday, this came out:—-
—-“The Fed is closely monitoring developments and their implications for the economic outlook. We will use our tools and act as appropriate to support the economy.” —-
—-But give us a break Jerome. We believe you just need to replace the word “economy” with the word “market.” Jerome cannot affect the economy with a 1/4 point or a 1/2 point. After all, his NOT QE is like 10 rate cuts. So Powell did his usual. He telegraphed lower rates. The only question is whether there is some sort of coordinated effort over the weekend. So…we would not be surprised that before Monday’s open, some sort of move is made. If not, be rest assured the March meeting will be about more central bank largesse.—-
—-As we stated, we believed the complexion changed on the 20th and 21st. We now think there is a good chance that after 4,600 Dow points in short order that the near-term complexion has changed again. We say this because of what we were telling you all day Friday, even when the Dow was down 1,000 again. We just noticed that the most important bellwether group, the SEMICONDUCTORS, were completely outperforming the market all day. Even at 3:45 pm, when the DOW was nearing 1,000 points again, the SOX was down a measly 8 points. You all saw what happened in the last 15 minutes as the SOX ramped and the rest of the market followed. (The cynic in us says someone important leaked something but that doesn’t happen…does it?) So we think that reversal may have marked an area where the market had had enough…where the big institutional crowd finally took a stand…where bets were made on a Powell move and to repeat, 4,600 Dow points. The SOX, the NASDAQ and the NDX all reversed at vital longer-term support. These are the areas that led the market up.—-
—-We very much understand shorter- term stuff is the trees. The forest is the big, gargantuan, monolithic top the market just put in. We very much understand that the news is fluid. If there are a lot more cases, especially in the U.S., all bets are off. And now, since the close, there has been more cases and China came out with an important economic number that was downright depressionary. We are just pretty decent at reading the tape and think the tape was changing throughout the whole day Friday.—-
—-That all said! Don’t blink. As usual, when markets are distressed, we will be alerting you more often.—-

RADIO SHOW 2/28- MARKET WASHES OUT NEAR TERM?

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SOURCE: https://archives.warpradio.com/btr/investorsedge/022820_18.mp3

LOTS OF THOUGHTS

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—-We think it was Lloyd Bentsen who once said: I know washouts. Washouts are a friend of mine. That was no washout.—-
—-We were hoping for a near term washout yesterday but nothing doing as markets sank into the close. As we told you, we know when there are the conditions for one but can never predict one. A washout serves to clear out all the late sellers after a drop…leading to an oversold rally. They often occur on days where the market is down 1,000 points only to finish near flat to up. By midday, it looked to have a good chance but nothing doing.—-
—-Our thoughts:—-
—-We told you last week we thought the complexion had changed because we interpreted that all the high-beta, leading growth names had topped out. When leading growth names top, it is a wake-up call. We had no idea it would lead to such a deluge but knew we were headed lower.—-
—-The move has been quite unprecedented. The S&P 500 5-day decline is the largest since August 2011. Before that, one has to go back to November 2008.—-
—-Near-term sentiment is off the charts…and we mean off the charts. It is this type of sentiment that leads to near term lows but remember, sentiment is always secondary to price. Sentiment just sets conditions for potential.—-
—-Did you see the percentage number of medical supply stuff that is produced in China? That is going to change.—-
—-You cannot find masks in Central Florida. Whenever any show up, they sell out quickly. This tells us enough are worried. This tells us there is potential for all these people to NOT go out and spend money. We are going to visit many merchants this weekend and will report back to you before Monday. We will also take in Disney World to see if crowds are lighter there.—-
—-Our thought process is that if Mastercard, Microsoft and Apple lowers numbers, is there anyone that is immune?—-
—-We are utterly amazed at the drops in AIRLINES, CRUISE LINES, RESTAURANTS and all that. We all know how much they are affected but wow.—-
—-If the week ended today, it would be the largest weekly spike in the VIX ever.—-
—-Junk bonds have been mauled. We have told you for a long time this is one of the most distorted markets out there brought to you by the good people at the central banks. We also must tell you that the junk bond market hasn’t given a crap what we think as it had stayed strong.—-
—-Even GOLD STOCKS have rolled over. Even the UTILITIES and other DEFENSIVE areas have been yonked. This rates a big wow as there have not been many places to hide.—-
—-The few places to hide all have to do with hanging in your home. Peloton, Netflix and teleconferencing companies have led the way. Of course, a few medical companies working on the virus fix are also doing well. Be careful about shoddy biotech companies announcing they are deciding to address the virus. This feels like they are just trying to pump up their stock.—-
—-Our friends in Shanghai tell us it is good to see no new cases there over the past few days but also say streets, malls and stores are empty. They are saying the talk in the past day or so was trying to get things back to normalcy.—-
—-We told you early in the week that the Fed would lower rates at the next meeting. Everyone as well as the futures are now putting the number at 100% but think if this continues lower, something coordinated would come out sooner. Fedhead Evans leaked some of this noise yesterday.—-
—-Speaking of the Fed, The Fed response to corrections since 09:—-
2010: -17%. Took rates to 0% and QE2
2011: -21%. Rates still 0% and Operation Twist
2012: -11%. Rates still 0% and QE3
2016: -15%. Rates at 0.25%, stopped hiking plan.
2018: -20%. Change from raising rates to patience leading to 3 rate cuts.
Current: – 14%. 3 rate cuts now priced in with 1st one in March at 100%.
—-Of course, the maniac running the Fed is still performing his NOT QE.—-
—-We have no clue what today brings. Futures are all over the map, down but off overnight lows. We are amazed that much lower prices have not satiated sellers. The charts and patterns we follow are outlier. The move lower is near unprecedented. We would not be surprised by a 1,000 point bounce nor a further drop. That’s what you get when markets are in no man’s land. The only thing we care about is the main trend and the big picture and that’s speaking loud and clear. We only believe in the reality of price and not someone’s opinion on whether it is an over-reaction. If we see anything that gives us a great clue, we will alert you. But right now, it is all random.—-

THE DEBATE

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The moderators:

Why were there almost as many moderators as candidates? How is it possible they waited 83 minutes to ask about the Coronavirus and actually asked about sodas before that? When Sanders again complimented Castro but called Netanyahu a racist…where was the follow up on the facts? Did they even hear Sanders say he wants to give money to blacks and Hispanics in order to sell marijuana? Not one follow up. And not one question, we repeat, not one question on UPWARD MOBILITY, HARD WORK, WEALTH, SUCCESS, FAILURE, SWEAT, TOIL, RUGGED INDIVIDUALISM, GROWTH, LEADERSHIP, THE GREATNESS OF THE AMERICAN PEOPLE, THE GREATNESS OF AMERICAN BUSINESS and so on. Moderators should be flexible. Moderators should react to the answers. Moderators should dig deeper. These moderators…a complete swing and a miss.

Sanders likes Castro…hates Netanyahu. Yes…the place in the Middle East where Jews, Muslims, Christians, whites, blacks, gay. straight…every race, every creed, every color…live together, work together, play together. Yes…the place where as you travel the highways, you see buildings with every major corporation with their names on the buildings. Israel, a miracle in the Middle East that has been overseen by Netanyahu for years but he is the racist but Castro taught literacy. Not a word of any of this from the moderators OR THE OTHER CANDIDATES. Not a word digging deeper into Sanders kissing up to Castro, Chavez, Maduro  and the rest of that ilk. Another gigantic missed opportunity.

Sanders says he is not authoritarian and does not like authoritarians. Let’s see…higher taxes, massive taxes, financial transaction tax, the green new deal, 8% yearly wealth confiscation, shoving 150 million Americans off their health insurance, more regulations, more fees, more fines, more mandates, taking the profits away from companies, eradicating industries, breaking up industries. On video, calling for a 100% tax on anything above $1 million. On video calling for the state to take over industries. On video, praising every creep that have run countries and people into the ground…but not one follow-up question on any of this from moderators and no big swings by the others on stage on this obvious authoritarianism.

Biden…better but still gaffe prone. Better but feels like no separation. Better.

Bloomberg…much better…had to be much better. Still not doing what he should be doing on how he became such a great businessman. Continues to miss a gigantic opportunity by explaining how Sanders has lived off the tax payer his whole life while pissing all over the successful and wealthy while Bloomberg worked his tail off creating wealth, jobs, success, philanthropy. Quite a missed opportunity telling the young people that it is not terrible to strive for greatness. Wealth and success are not dirty words. But…nope!

Warren….acting like she is now running for VP under Sanders. The usual. Nothing different. 2 cent wealth tax. No…it’s 2% and no, you have raised the maximum to 6%. Moderators did not call her on this.

Buttigieg…fading in the backstretch…felt like was talking too much about others and not about himself. But a magnificent effort getting where he is.

Klobucher…no harm, no foul but just not resonating enough.

Steyer…amazing. Managed a $20 billion hedge fund…became wealthy and successful beyond all imagination but that all sucks.

As you can see, we concentrate on Sanders as he is the lead horse. But he is also the lead economic nightmare of epic proportions. His whole mantra is a con game doing a good job of convincing people success and wealth are corrupt and that your lot in life will only be better by him taking care of you while taking down others a few notches. They do not understand just yet that the reason Sanders rips success and wealth on a daily basis is because success and wealth are the enemy of people like Sanders. Success and wealth cannot be conned. Success and wealth run circles around people like Sanders who has never created a dime of wealth or a job.

Lots more to come as we move forward.

 

MARKET NOTES

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—-After telling you late last week that we thought things were changing…some very important thoughts as markets are bouncing this morning after a nice trashing yesterday:—-

—-Let the market be the guide. Let the intensive study every day of how many are working, what is working, how many above the 50 day, how many broke below the 50 day, how strong are the reactionary bounces, how weak are the reactionary bounces…be your guide. —-

—-A TON OF STUFF BROKE BELOW THE 50 DAY YESTERDAY. The DOW sharply through. The S&P less sharply through. The TRANSPORTS through the 200 day and never got going. The RUSSELL through sharply. Foreign ETFs like EEM, EFA, FXI, EWJ, IEMG and others have imploded.  HIGH YIELD (HYG and JNK) broke through. Even the SOX has now dropped below the 50 day…and needs to be watched. Every time it has done this, it holds just underneath and eventually turns back up.The NASDAQ and NASDAQ 100 are still at or just above the 50 day but have come in hard off of the extended conditions that have been around for weeks. The XLK (technology) is the same. This is what had us selling a ton of stuff before the deluge. We knew things were frothy. We knew things were extended. We knew things like MSFT did “EIFFEL TOWER” moves after gliding higher. We just waited for that first ugly day off the highs. —-

—–In the last 50 minutes yesterday…after the markets were trying to bounce, the DOW dropped 277 points and the NASDAQ dropped 87 points. As of this second, we are not even getting that back this morning. BUT do not think for a second that if the market wanted to, it could rally a decent portion of the drop in the days ahead. Anything is possible especially with the president tweeting, saying he liked the market. Yes, the president is trying to prop up the market. AND Powell will not let markets drop so expecting a leak of another rate cut.—-

—-Back to stocks:—–

—–AMZN up $20 this morning but is down $175 in the past 3 days. TTD up $8 this morning but is down $40 in the past 3 days. MSFT up $2 this morning but is down $17 in the past 3 days. YOU GET THE HINT. Be careful about getting too excited about reactionary bounces.—–

——We have a list of everything that has held above the 50 day…all the strongest names. We also have a list of things that have dropped down to the 50 day. There is actually a tiny list of things that were up Monday. Keep in mind, this list is much much much lower than just 3 days ago.——

—–We just want to get the major trend right. We want to get the intermediate trend right. When there is no trend, we want to recognize that also. There is a decent chance the trend has changed…not 100% certainty but a chance and we do not want to fight it. We will get a much better idea in the days ahead.There is not much we take out of what we have seen except that everything sold in the past 2 weeks were great sells.—–

—–Lastly, the Knicks still suck!—–

CONTINUED UH OH

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On Thursday, we alerted you to an “uh oh” moment that was a possible change of complexion on our readings of the market. On Friday, we confirmed the change of complexion. We thought the massive move in the growth/high beta area was more than likely done. As we write this, DOW futures are down a juicy 740 points while the NDX futures are down a whopping 245. Of course, the numbers can change overnight.

We are hearing the blame is on the virus. We are hearing the blame is on Sanders’ performance in Nevada. We are hearing the blame is on Dolan’s handling of the Knicks. We will let others decide why. Our job is to interpret the tape and interpret we have. As always,we have no idea how long or how far. But we do know a few things that give us pause. Froth, straight up moves, outlandish predictions/targets and the one-sided trade as the big money pored into a select few names giving them their “Eiffel Tower” look. Sentiment just went off the charts. But it is not until price gives us clues that the party is possibly over do we react. So we reacted.
On another note:
It is good to see even the left of left has come around to recognize what we have been telling you about Sanders for years. It is good to see that Mr. Sanders is finally getting the full colonoscopy as all his words and videos throughout the years will be coming out. We are even seeing some serious Trump haters rooting against Sanders. A big wow! The consistent praise of Castro will not augur well in Florida, only 29 electoral votes. The consistent talk of shutting down fracking and energy…see ya rust belt states. Independents? Don’t think so. The big worry for the left  is the down ballot as the two words “Speaker Pelosi” are at risk. And may we state Republicans running the committees with a continued presidency for Trump must scare the  —- out of the left. We will update all our op-eds on Sanders we put out to you in recent years and send them out soon. The man is an economic nightmare of epic proportions. We have absolutely no clue how anyone cannot take out a rusty abacus and see nothing out of his mouth adds up. We have absolutely no clue how anyone cannot see that all of his proposals are the exact actions taken in those havens of democracy in places like Venezuela. We are in hopes the central bank-induced worldwide bubble does not pop before November 3. (an eventuality) That $250 trillion of debt worldwide is still out there.
On another note:
As always, if the market continues to drop, you will once again  see the Fed leak the possibility of more rate cuts. We know someone was out saying the opposite last week but that falls under the heading of “who was he trying to kid?” We know Powell’s modus operandi.
On another note:
We know the numbers continue to go up with the coronavirus but as we write this, more than 97% of “confirmed” cases remain in mainland China. Most other cases are limited to Asia with a small smattering in other areas. This is not to marginalize the seriousness of this. Just making sure the facts are out there. Leave no doubt, this is going to put a dent into economic growth. When we read that Adidas business is down 85% in China…when we read housing sales are down 90%…and that’s just a start, it matters. A continued escalation is nothing but bad news.