| TAOST Wrap Week Ended Friday 13 March 2020 |
| Just think... "If you want to be rich, the BEST way to get there is to find a way to consistently make a little each day... and let it pile up."
-- The Trader |
| | | Greetings Traders:
I nearly am and this volatility is pretty much the best thing ever for someone who trades like me, so I assume the whipsaw is killing some of you newer folks.
If the volume of questions and such that I got this week is any indication, folks are pretty much at a loss... and not just retail folks.
I would say relax, but that ship has pretty much sailed.
A few tips... - Don't just dump your stocks indiscriminately because you're panicking... especially not now...
- Don't wade into the markets and buy something because you feel like you have to...
- Don't try to "get into live day trading" now because you're home for a bit and really "how hard could it be" right?
- Do listen to the authorities and isolate yourselves as best you can... COVID-19 is real... 400 deaths today in Italy
Do Note: The Fed slashing it's target to 0% is desperate and ill conceived... especially in front of a 2 day meeting... in 2 days. It suggests Powell etal are panicking and/or know something terrible is coming in the next 48 hours. The futures seem to agree with me so far as they are "locked limit down" at the time of this writing.
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| Select Index, ETF & Stock Results From Friday 13 March 2020 |
| Don't get excited... remember these are the results for Friday...
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| | | In Sum
It’s hard to believe that last week's volatility exceeded the previous week's... and yet...
S&P 500 -8.8%, Nasdaq -8.2% DJIA -10.4%
Around 70M to 150M people in the U.S. will become infected with COVID-19, according to Dr. Brian Monahan, the attending physician of Congress and the U.S. Supreme Court. The World Health Organization declared the spread of the new coronavirus a pandemic, spanning 112 countries and regions. The term has only been applied to a few diseases in history. And on Friday, 45 [finally] declared the coronavirus outbreak a national emergency and pledged to supply $50 billion in emergency funding, lift restrictions on doctors and hospitals and waive interest on student loans. The virus has now been reported in 49 states (with the exception of West Virginia) affecting more than 2,700 people and at least 58 patients have died.
Amid all this uncertainty, the longest-ever bull market for U.S. stocks officially ended on Wednesday, as the Dow Jones Industrial Average (during this recent downturn) declined by 20% from its most recent high. Then on Thursday, the markets experienced its worst day since the 1987 crash, with all major U.S. indices falling nearly 10% on the day. The markets did manage to rebound in the last half hour of trading on Friday, arguably on the back of 45's announcement, mitigating what would have been one of the worst weeks in market history. Fears this week also sent the benchmark 10-year Treasury yield below 0.4% for the first time ever, touching an all-time low of 0.347%.
The other major (less talked about) story of the week was around OPEC+ and their failure to agree on production cuts, sending crude oil prices as low as $27 per barrel and marking the worst weekly decline since the financial crisis (it started the year in the mid-$60s). Besides the collapse in demand due to the coronavirus, Saudi Arabia also launched an all-out oil price war against Russia (see below). I bring this up because energy companies are big issuers of junk (high yield) bonds and the fall in oil prices could very well make it harder for them to service their debt. To put that in perspective, at the end of last year, non-financial companies had borrowed $13.5 trillion of debt (double the amount of a decade earlier). So even if we see a lower rate of defaults than during the global financial crisis, given the increase in leverage, it could mean a similar absolute number of defaults by junk bond issuers.
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| | | The S&P500 suffered a dramatic fall last week, gapping down on Monday before nearly testing support at the red horizontal line. |
| | | CNN Investor Sentiment [Fear & Greed Index] |
| This gauge at this level would normally be a buy signal, but even as I type this, the Fed has slashed interest rates to 0 leading S&P futures to lock limit down already. Hold on to that buy ticket for just a bit.
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| | | Just as above, this kind of extreme often leads to tremendous short term trading opportunities.
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| | | The VIX spiked early in the week because of the downdraft in stocks before settling back a bit due to Friday's rally. But don't get too comfortable... tonight's action in the future's and the overall structure suggests we may not be done to the downside yet.
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| | | The TRIN is a short-term trading tool that measures volatility in the stock market. TRIN represents the relationship between advancing and declining issues by measuring their volume flow. Because of how it's calculated, rising TRIN depicts a weak market and a falling TRIN suggests a strong market. As you can see here, we peaked at a pretty high level recently before taking a nosedive of late.
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| | Total Advances/Declines Volume Difference Weekly |
| Spiked because we closed the week with bullish flow.
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| | 52 Week Overall Highs Weekly |
| Not surprising given the moves last week.
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| | 52 Week Overall Lows Weekly |
| | | % Stocks Above 200 Day Moving Average Weekly |
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| It would be hard for very many stocks to be above their 200 day moving average.
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| | | - The N.Y. Fed announced on Monday it is increasing the amount offered in daily overnight repo auctions to $150 billion from $100 billion and the amount offered in two-week term repos to at least $45 billion in an action that is definitely not quantitative easing.
- Japan's economy, the world’s third-largest, shrank an annualized rate of 7.1% in Q4, revised data showed.
- The ECB said it would step up purchases of bonds to stimulate the economy, but it didn’t cut a key interest rate.
- Coronavirus is not the only plague threatening the world. In East Africa, the Middle East and South Asia, traveling swarms of locusts the size of Manhattan are putting potentially hundreds of millions at risk of starvation in what the UN has called the worst outbreak in a quarter of a century. In one day they consume wheat, barley, sorghum, or maize crops that feed 35,000 people. Masses the size of cities can consume 1.8 million metric tons of vegetation every day – enough to feed 81 million people.
- Boston Fed President Eric Rosengren said if yields drop to zero, the Federal Reserve should consider buying a broader range of assets. "That would be a game-changer in my opinion, as no one in their right mind would want to be short an index when against a central bank with unlimited funds," said Chris Weston, head of research at Australian brokerage Pepperstone. "It seems the bond vigilantes are out to get the Fed to go hard here." The current bond rally is also notable because traders are preparing not only for zero-bound rates, but a raft of additional measures, including QE. Seems like Powell just gave them the 0 rate...
- Marriage is becoming a luxury. Middle-class Americans have experienced a sharp decline in marriage rates over the past four decades. Couples are deciding to live together instead, citing strained finances as the main reason why they don't marry. Yeah... THAT'S the reason...
- Where are companies seeking employees with machine learning, data science and A.I.-related skills? Within the U.S., the hiring firm ZipRecruiter recently found that just four states dominate: California, Washington, New York and Massachusetts. Together, they account for 90% of all ZipRecruiter-advertised jobs that required advanced-A.I. skills, and 60% of all A.I. jobs. I wonder if A.I. is doing the recruiting...
- London police are using facial recognition, badly. The U.K.'s Metropolitan Police released figures that show its efforts to deploy facial recognition to identify wanted suspects in crowded public spaces has not been working that well, The Register reports. On one day, its system at Oxford Circus, in central London, had an almost 88% false positive rate. On another day, the system broke entirely.
- Italy locks down entire population. In the most dramatic step so far from a country hoping to contain the coronavirus, Italy placed the whole of its national territory under quarantine. The country has banned public gatherings and decreed that bars must close at 6 p.m. as it contends with the world’s highest daily rate of virus deaths...
- The U.S. is broadening travel restrictions to include the U.K. and Ireland and is considering some restrictions on domestic travel, while Spain is joining Italy to become the second European country to go under lockdown.
- The country’s days as a net petroleum exporter may be numbered as plunging oil prices threaten domestic production, Bloomberg reports. For four of the last six weeks, the U.S. has shipped out more crude and refined products than it brought in, but the margin is relatively thin. After the worst price rout in nearly three decades, domestic drillers are facing a million-barrel drop in production that could curb U.S. exports and set back its progress toward energy independence. If shale output slips by more than 1M barrels per day this year, that could be enough to take the U.S. from net exporter back to net importer, Bloomberg estimates.
- Saudi plans to supply a record 12.3M barrels of oil per day next month, up 25% from the previous month, as it ratchets up its oil price war with Russia. The production boost pushes Aramco’s supply over its maximum capacity, indicating it’s tapping Saudi Arabia’s strategic inventories to bring as much crude as quickly as it can onto the market.
- The FCC estimates 21 million Americans don't have access to high-speed broadband, though that number could be higher due to problems with data collection. The FCC in January approved a plan to allocate $16 billion over 10 years to fund broadband deployment in unserved parts of the country.
- A nationwide survey of 1,440 Americans across the millennial, Generation X and baby-boomer generations offers insights into how millennials view money and investing, and how those views often differ from previous generations’. Those born between 1981 and 1996 feel more financially burdened and are more focused on the here and now than their parents and grandparents. They also are more distrustful of financial institutions and less financially literate. Many are putting off big milestones—even while being committed to putting social values before monetary rewards when choosing investments or jobs.
- The last time the NYSE floor was forced to close was when superstorm Sandy flooded lower Manhattan in 2012. But that happened as part of a broad two-day shutdown of the entire market. NYSE’s current backup plan has only been tried out in special weekend tests and never during real-life trading conditions. But get ready...
- U.S. airstrikes in Iraq on Thursday killed three Iraqi soldiers, two police officers and a civilian, according to Iraqi military officials, and damaged an unfinished civilian airport.
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| TNX - 10 Year Note Interest Rate |
| Interest rates remain below 1%... and are likely to fall given today's surprise move by the Fed...
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| | GLD - Gold Trust Gold Shares |
| Gold collapsed for last week... right into support. Next week will be interesting.
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| | | This Triangle looks to be playing out not so well for Bitcoin Bulls...
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| | JNK - High Yield [Junk] Bond ETF |
| I thought JNK would fall but...
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| | BRN - Brent Crude Oil Futures |
| Good for consumers (gas prices)... Not so much for the global economy... Not to mention US producers.
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| | | Below you'll find stock news and the associated charts. |
| | In California, ride-hailing drivers are re-upping their lawsuits against ride-hailing companies to be classified as employees, amid the COVID-19 pandemic. Labor attorney Shannon Liss-Riordan filed an emergency complaint in California against each company, arguing that Uber and Lyft’s decision to not classify drivers as employees is not only a risk to employees, but also to the public. Good luck with that... Can't have it both ways.
Also -- Uber may suspend accounts of riders and drivers that have been exposed to COVID-19. The ride-hailing company said it is working with governments around the world to suspend accounts of riders and drivers confirmed to have contracted or been exposed to the coronavirus. |
| | | If you're looking for a place to "hide" from falling stocks... This might not be a bad place to look.
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| | | | | | And for a place you likely don't want to be...
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| | | | | Facebook is halfway between a groove and a grave... |
| | | Amazon is holding support for now. I actually think Amazon may make more money from COVID-19 as more people discover the joys of Prime membership... especially with in-store shopping curbed.
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| | | Apple closes stores. Apple said Saturday it would close all its retail stores outside Greater China. Retailers from Nike to Abercrombie & Fitch are also closing hundreds of stores, though Walmart and Target plan to remain open.
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| | | | I heard a lot this week about how all of the quarantining will be good for Netflix... That's true only if new subscribers join up... If it's just about current subscribers, the exact opposite might be true... the company may struggle to deliver if everyone is trying to Netflix and chill at once. |
| | | Google's G Suite, which includes Gmail, Google Docs, Hangouts, Meet and other apps, quietly passed a major milestone at the end of last year: It now has more than 2 billion monthly active users, G Suite boss Javier Soltero told Axios Wednesday. The stock had a nice bounce at support (the rising trendline)... This week will tell the true story.
Also -- DeepMind unveils A.I.-generated predictions of protein shapes useful in coronavirus treatment. The London-based artificial intelligence research company, owned by Alphabet, made headlines 18 months ago when its system AlphaFold proved better at predicting the shape of a protein based on its underlying amino acid sequence than any previous software method. Now DeepMind has let loose an updated version of the algorithm on the six proteins associated with SARS-CoV-2, the coronavirus that causes COVID-19. |
| | | Select Economic Announcements: |
| | | As always, make up your own mind and, more important, minimize your risk no matter what you do.
KIS,
The Trader
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