Volatility reigned Thursday as markets gapped lower, rallied hard and then fell again even harder.  It is a sure bet that a slew of reversal-pickers had their heads handed to them during those intraday swings.  On the day the SPY closed down 4.49%, the DIA down 4.54%, and the QQQ down a whopping 5.01%.  All three closed on their lows and printed big black candles with large upper wicks.  As you’d expect, the VXX spiked to 22.00 and bond yields fell to new all-time lows for a second straight day. 

It’s impossible to overstate the dominance of coronavirus in markets, media, and public discussion.  The headline numbers are now 84,000 confirmed cases and about 2,900 deaths globally.  However, these numbers are questionable with anomalies like Iran, where 26 are reported dead against only 245 cases has led to skepticism.  (An 11% mortality rate would be extremely alarming compared to the 3% death rate in China.)  Among other headlines that jerked markets around were GS saying that it has lowered its 2020 forecast for the growth of US company earnings to zero.  This is a dramatic break from the Wall Street consensus of 7% earnings growth for 2020. 

The related resource concern in the US has also escalated.  The Dept. of HHS announced Thursday that 40 labs nationally can now test for the virus, but 93 more labs could also be equipped next week.  However, shortly after the CDC increased the pool of people who should be tested to include not just those who have been to China, but also travelers from South Korea, Japan, Italy, and anyone with major respiratory issues.  Meanwhile, the Gov. of California said his state has 8,400 people under observation because they traveled from China.  However, they have less than 200 test kits in the entire state.  So, they simply cannot test even a fraction of those 8,400, let alone those who have been to Japan, South Korea or Italy…or the people they have contacted since returning.

Then overnight, a new angle was reported by the government of Hong Kong, who found the first case of suspected human to animal transmission.  In this instance, the pet dog of a previously confirmed coronavirus case has now tested as “weakly positive” for coronavirus.  This raises the specter of another means of community transmission.

Asian markets took another beating and were deeply in the red again Friday.  Europe is also once again down sharply across the board at this point (more than 3%).  As of 7:45 am, U.S. futures are pointing to a one to one-and-a-quarter percent gap lower.

Friday’s major economic news includes Jan. Core PCE, Jan. Trade Balance, Jan. Personal Spending, and Retail Inventories (all at 8:30 am), Feb. Chicago PMI (9:45 am), Michigan Consumer Sentiment (10 am), and another Fed speaker.  On the earnings front, AES, BAX, and FL all report before the open.

The bears continue to pile on. While some people have made a quick buck in this market, a ton of traders have been sliced and diced by the whiplash.  Markets are quite oversold but can remain that way longer than most of us can take the pain of being too early.  As we head into a weekend of headline risk, we all need to consider how much risk we want to carry through that period.    

Remember that today is a completely new and different day.  If you let your emotions lead you into trying to get back to even (or get rich) quickly, you are likely to get punished.  Keep repeating the mantra: no chasing….no reversal picking…no bottom/top picking.  Trading is a business, cash is a valid position, and consistent, effective trading is the goal.

Ed

Friday is payday. Sorry but in front of the weekend and especially with current headline risk, there are no trade ideas today. Trade smart, take profits along the way and trade your plan. Also, don’t forget to check for upcoming earnings. Finally, remember that the stocks/etfs we mention and talk about in the trading room are not recommendations to buy or sell.

🎯 Mike Probst: Rick, Got CTL off the scanner today. Already up 30%. Love it.

🎯 Dick Carp: the scanner paid for the year with HES-thank you

🎯 Arnoldo Bolanos: LTA scanner really works $$, thanks Ed.

🎯 Bob S: LTA is incredible…. I use it … would not trade without it

🎯 Malcolm .: Posted in room 2, @Rick… I used the LTA Scanner to go through hundreds of stocks this weekend and picked out three to trade:  PYPL, TGT, and ZS.   Quality patterns and with my trading, up 24%, 7% and 12%…. this program is gold.

🎯 Friday 6/21/19  (10:09 am) Aaron B: Today, my account is at +190% since January. Thanks, RWO HRC Flash Malcolm Thomas Steve Ed Bob S Bob C Mike P and everyone that contributes every day. I love our job.

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Disclosure: We do not act on all trades we mention, and not all mentions acted on the day of the mention. All trades we mention are for your consideration only.

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