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Monday Market Mayhem – Virus Suddenly Matters

833 infected.  

What?  That's low!  Well, that's just South Korea now and Italy has 215 cases, 154 in Japan and 89 in Singapore.  Even the US has 35 people infected now.  As I said last week, just because China seems to have things under control (though that is debateable), doesn't mean we won't get fresh global outbreaks in countries that will have a much harder time locking down their citizens to prevent the spread of the virus.

As you can see from the big chart, however, we "only" have 79,524 total cases and 25,163 have recovered so big progress in China – we just have to hope these other hot spots don't get out of hand.

The market crashed hard on the news as the Futures came back on from the weekend break last night – dropping 2.5% across the board in the US but we chose to go long on the Dow (/YM) Futures as they tested 28,200 in our Live Member Chat Room this morning – as that's the 2.5% line and should be bouncy by at least 0.5% or about 150 Dow points which would be good for morning gains of about $750 per contract if all goes well. 

Anything less than that is a weak bounce and, if so, it will be a strong indicator that the market wants to head 2.5% lower by Wednesday.  All in all though, it's just a minor correction in a massive rally that's been going on since early last year.  We've been very cautious with our entries so far and this is a nice sale the market is throwing so we can go out and do a bit of bargain shopping – if the virus issue isn't getting worse. 

Of course, Corporate Profits will be worse in Q1 and some countries may spiral into a Recession – because not every country gets to print money the way the G7 can.  China's President Xi warned yesterday that the virus epidemic is “still grim and complex,” calling for more efforts to stop the outbreak, revive industry and prevent the disease from disrupting spring planting of crops which, as I mentioned last week – is our next looming disaster (a year of hunger from missed farm production).  

Invoking the martial theme the ruling party has given the anti-disease campaign, Xi called on them to “deploy medical forces” to “cut off the source of infection,” especially in the capital, Beijing. At the same time, he said they must help factories and other companies reopen and make sure low-income workers are employed.  The president said “low-risk areas” in China should adjust disease-control measures to “fully restore production” while higher-risk areas keep their focus on epidemic prevention.

Infections in China are down but not out and putting people back to work in crowded factories may not be the greatest idea at the moment but, like many countries, China has to try to balance a potential Health Catastrophe with a certain Economic Catastrophe if they don't get those factories open and especially if they don't get those crops planted.  

8:30 Update:  Oops, worse than I thought, there are now 833 cases in South Korea, that's up 602 since yesterday.  Sorry to keep circling back to this but this is pretty out of control and the Futures have already stopped out our longs and it looks like we're on the way to a 5% correction (3,230 on /ES, where we can play long for the next bounce but tight stops below) as the markets finally begin to digest the severity of the virus and its potential impact on the Global Economy.  If that fails to hold, this could be the first leg of a 10% correction.

That's because a new report from a WHO infectious disease modeling team based at Imperial College London is estimating about two-thirds of Covid-19 cases worldwide have gone undetected. The analysis suggests the global spread of the novel coronavirus is significantly greater than the current volume of confirmed cases.

“We are starting to see more cases reported from countries and regions outside mainland China with no known travel history or link to Wuhan City,” explains Natsuko Imai, one of the authors on the new report.  This new report set out to explore how accurate current country-based surveillance of the disease may be, in relation to the average volume of travelers flying out of the epidemic epicenter in Wuhan, China.

“We compared the average monthly number of passengers traveling from Wuhan to major international destinations with the number of COVID-19 cases that have been detected overseas,” says another author on the new report, Sangeeta Bhatia. “Based on these data, we then estimate the number of cases that are undetected globally and find that approximately two thirds of the cases might be undetected at this point. Our findings confirm similar analyses carried out by other groups.

The report concludes it is very likely a number of undetected chains of transmission have begun in many countries across the globe. Director-General of the World Health Organization Tedros Adhanom Ghebreyesus affirmed this growing concern during a recent WHO briefing.  Although the Director-General did state the “window of opportunity for containing this coronavirus is narrowing”, the WHO has not yet classified this outbreak as a pandemic. Less than 2,000 cases have been currently confirmed outside of China, however, as this new report indicates, the viral spread may be broader than the official numbers suggest.

So, obviously, be careful out there!

 


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  1. Good Morning!



  2. People are finally waking up to the risks! I saw an interview of a health professional on French TV and she was asked if France was ready for a big epidemic. The answer was yes, but she was more cautious when bigger numbers were mentioned – hospitals are already stretched apparently. Not very reassuring.


  3. Will probably be selling some VXX calls today! Spot VIX looks to open at close to 23.


  4. And of course, we are not ready for any sort of national emergency here:

    https://www.wired.com/story/trump-hollowed-out-us-national-security-vacancies-acting/

    No one qualified wants to work in the administration.

    There will soon be no Senate-confirmed director of the National Counterterrorism Center, director of national intelligence, principal deputy director of national intelligence, homeland security secretary, deputy homeland security secretary, nor leaders of any of the three main border security and immigration agencies. Across the government, nearly 100,000 federal law enforcement agents, officers, and personnel are working today without permanent agency leaders, from Customs and Border Protection and Immigrations and Customs Enforcement to the Drug Enforcement Administration and the Bureau of Alcohol, Tobacco, Firearms, and Explosives.


  5. Sell-off – Looks like I sold out a week early. I can live with that. Now sitting with about 85% dry powder this morning so let's hope we can catch the bottom. But I don't think it'll be today.

    Looks to me like Iran and China are lying about coronavirus cases. There are enough sick people in Iran that border crossers have now spread it to Afghanistan. South Korea and Italy are blowing up – Italy is a special concern because they have no means of keeping people from spreading this to the rest of Europe … one of the downsides of having a whole continent with effectively no border controls. 


  6. Right there with you dawgy. Dry powder feels good.


  7. We could go down 1000 points on the Dow today! They are selling every bounce it seems.


  8. Good morning! 

    What a fine day for me to be taking off to…

    Ah well, Mondays….  They matter as little on the way down as they do on the way up so we'll see tomorrow what's real.  Just testing the 50 dmas for a change – something we very much needed to do but so much for this year's gains, right?

    France/StJ – Well they have the best medical care in the World but other countries are never going to be able to handle it.  

    The US has 792,417 hospital beds so we should be able to handle a couple of thousand virus victims  

    Hopefully 28,000 holds!


  9. I'm off to the Confernce, will check in later.


  10. Phil – F .. What's your thoughts on Ford  touching 52 week lows with pretty ugly 5 year chart.  Nice dividend!  Do they have Tesla fever or something seriously wrong?  Thx


  11. StJ – Nice market call this morning.  Wish that I had shorted some /NQs.


  12. I recall a number of years ago liking rhodium. I even looked into a few types of rhodium coins though it's a fairly esoteric investment. It eventually went 10X proving once again that investing is a 50/50 mix of being right (making the right call) and patience. 

    Really, rhodium at $1000/t.oz. wasn't much of a call at all, given the obviousness of the price versus a historical chart. So I'd say it's 95% patience.


  13. Easy call Albo… Not getting better by the hour!


  14. We are probably going to get the usual Trump tweets about the Fed rates being too high and so on… 


  15. It's the reality that when rallies are based on basically no fundamentals, you can give back gains very quickly. We have just erased 2 months in one morning!


  16. /NQ/Albo – was holding one measly short NQ over the weekend. Oh well… caught a bounce at the open for $600 on top of the Big Win, but sitting out for now. I'm very tempted to short any kind of rally off the bottom that we see today.


  17. Nice work dawg I missed the close Friday and didn't get my contract for the weekend


  18. Anyone hedging their hedge? Might go long weekly DIA calls into the close….


  19. VIX over 25.


  20. Closing some more CCL puts. Wheeee…


  21. What I'm thinking is some cure/vaccine news comes out at the the same time QE cash is coming in globally, so that would turn everything around and push stocks to ATHs in less than a week


  22. TSLA 1100 call only 90 cents…….


  23. Down 1,000?  What the heck are you guys doing?

    F/Jeddah – No sales in China and the virus is spreading – not good for Q1 but long-term they should recover.  Could be a while though because a spreading virus can trigger a recession.

    I'm waiting for a chance to buy TM:

    Even TSLA is taking a hit:

    Rhodium/BDC – Good call when it was cheap.

    /SI almost $19!

    Hedging the hedge makes sense BDC but I wouldn't go overboard.  28,000 on /YM is a good bounce line as $50.50 held on /CL and 1,620 on /RTY

    Cure/BDC – Would be nice but months away I think.


  24. The ETHE mega-scam hit 164.50 today. wow.




  25. Albo – even CMG is down …. must be the end of the world! ;)



  26. For people selling VXX calls, I just checked and my chart is predicting the move almost perfectly. I had VXX at 18 or so if the VIX moved to 25 and we are now a bit below 18. So on track for now and feeling good for my shorts. Need the VIX at 60 to start having to roll positions. 


  27. BDC/DIA weekly

    282/284 BCS for 0.93?

    regards


  28. FYI, I had a call at 3:00 AM with a major Asian airline who is using our software and they told me that the coronavirus is really having some impact on business. I don't have hard numbers though.


  29. That photo from BBC above, under "World should prepare…." is in Daegu, Korea, where most of the patients are. The line is to get into a store and buy face masks. Very frustrating……first they're spreading the bug in mega church services. Now they're spreading shopping for masks that offer no protection anyway – but again they're gathering in an environment with a lot of people. I'm betting at least a couple people in that line and going into the store have the bug.


  30. pat_swap yes!


  31. I got out of an RCL leap as well but holding CCL leaps along with UAL/AAL because long term I'm fairly bearish. Coronavirus could be the catalyst that sweeps the US into single payer health care, along with Bernie getting elected and that's -50% of the fake news stock market right there.


  32. I guess getting all your stuff from Amazon might reduce your risk of getting the virus! Sounds like a good marketing campaign there.


  33. If the last decade was "solar" this decade will be "battery", the growth could be over 1000% the next 8 years.

    https://www.greentechmedia.com/articles/read/global-energy-storage-to-hit-158-gigawatt-hours-by-2024-with-u-s-and-china


  34. Coronavirus: China postpones National People’s Congress



  35. BDC -I'm still staying away from the burritos !


  36. I've also been wondering if we'll end up wish a single-payer system here. What will that do to a company like UNH? Bearish I would assume, but then again…


  37. Lines/Snow – And then they sit in waiting rooms at the Doctors and Hospitals with people who already have compromised immune systems – yikes!

    Single-payer/BDC – Well, above you can see the problem without it.  A guy goes to get checked and ends up with thousands in bills.  Our system discourages people from taking care of themselves or opting for tests.  10% of the population has no Health Care at all (was 20% so thanks Obama) and, even with health care, there's deductibles, etc.  This can get out of control fast with a system like ours as the "backstop".  

    AMZN/StJ – Until you hear the story of an AMZN worker spreading the virus along his route as he sneezes on boxes…

    Battery/Advill – That does make sense.

    UNH/Ati – Oh those guys are all gone.  That's the one flaw in the Dem's plans – there's no bailout for the Health Insurance industry they are going to destroy.  Word is getting around this time that even Bernie's "$35Tn" plan is STILL cheaper than what we're actually paying now.  Last time the Republicans were able to fool people into thinking it was on top of what we pay now but this time the Dems are doing better at explaining that we are spending that money anyway – it's just being spent by citizens instead of the Government.   

    Mexico/JPH – That's a great example of how totally broken our system is.  

    Well, we finished at the lows so that's a disaster.  Won't take much of an uptick in virus cases to send us another 5% down.

    STP improved to down 10% ($90,008), LTP got worse at $503,133 but that's about even from last week – so we're well-balanced for a downturn.  STP should start outperforming if we head lower.  Money Talk still up 10.3%, Hemp Boca up 3%, Future is Now up 7.2%, Earnings up 1.4%, Dividends up 14.6%, Butterfly 104.6% – so no major damage on the pullback from last week which means we have good horses going forward.  

    All 3 Indian patients in Mumbai recovered – Trump should get over there and find out what they did to treat them…


  38. advill – batteries won't affect storage more than a couple of %. 


  39. no last half-hour stick. hmmm. tomorrow could go from bad to worse!

    Phil/healthcare – that's a real thing with the current tough-guy narrative from trump. He can be derogatory and call people names all he wants as long as people feel like the government is staying out of the way while the economy hums along. But that's not the case if a nasty virus runs through the population. This is life and death, people are scared, they lose loved ones, the economy tanks. The top 1% own 50% of the stock market and the top 10% own 84%. The bottom 60% of the country can't come up with $400 in an emergency. They count on their week-to-week income to keep the show going. That's "no problem" as long as it's there – so they go to trump rallies, which are evangelical-like and emotions-based and not policy based, and "feel good" about their pride and such. Sure, I can see that. What I can't see is watching grandma die at home because the hospital will cost $100k, multiplied by 40M families.

    At that point the narrative can change very quickly. It would be very easy to say "gee whiz, these billionaires can take 10% off the top so the rest of us can have health care," if the circumstances are right. The gov't already pays 100% for the military, so that's already identical to healthcare in terms of being called "socialism," so I feel like this kind of thinking isn't much of a leap, once the motivation presents itself.

    Trump has to be careful here. His schtick works well enough in a particular environment, but not well in others. 


  40. Pentagon adopts new ethical principles for using AI in war




  41. How the Economy Differs for Workers, Consumers, and Savers


  42. Stj/VXX – I’m at a full position now on the 2021 $30 VXX calls. 100% covered by March and April $50 Vix calls to protect me from an extreme spike in volatility (very cheap peace of mind insurance in this volatile macro environment). One thing to point out is that vix futures are in contango now, which is a tail wind for VXX price levels.  I plan on watching that closely, as it has the potential to change the angle of the VXX/VIX correlation curve.  See the graph in this guy’s tweet.

    https://twitter.com/vixcentral/status/1232057532513996800?s=21


  43. US healthcare system – it's the most expensive yes and it's also the best. They're not going to leave granny to die in the old folks home if for no other reason than they don't want her spreading the disease. All these assholes without healthcare still go to the doctor, they just don't pay their bills which is why things are so godawful expensive – all the paying customers have to cover the costs for the ones that use their medical bills to either light cigars or wipe their asses (but hopefully not both.)

    In other news the indexes are perking up a bit after hours so maybe tomorrow won't be a total blood bath. 


  44. It makes you wonder what the reaction is going to be once NYC reports its first coronavirus case.



  45. PBOC Steps Up Lending Support for Companies Fighting Virus




  46. ‘Recipe for a Massive Viral Outbreak’: Iran Emerges as a Worldwide Threat


  47. Thanks for the information Palotay! Interesting reading from that Twitter feed. Got a lot of free margin now but I'll be watching closely for sure.


  48. Good morning!

    We failed at 28,200 and back to 28,000 on /YM, which is playable for a bounce but super-tight stops below.  Lined up with 3,220 on /ES, 9,100 on /NQ and 1,630 on /RTY – I'd make sure 2 are over at least and get out if there are any failures at all (in other words, the others should cross over shortly, not fail).

    Europe is already heading lower so, on the whole, it looks like we're more likely consolidating for a move lower, not higher. 

    The Dollar fell almost 1% since Friday – that should have boosted the markets.  We'll have a really hard time going higher if it bounces.

    Apparently the strength of your currency is not impacted by how much you print or how in debt you are:


  49. And you know I have to add /NG back at $1.82!