LOTS OF THOUGHTS

—-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.—-