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

—-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.—-