Managing Risk in Volatile Markets 3-22-20
Massive stimulus bill
Futures had a bit of a temper tantrum last night after the Senate failed to pass the massive stimulus bill. We can expect significant price sensitivity through-out the day as they legislators scramble to resolve issues and vote again later today. A passage could trigger a quick rally, but a failure could really bring out the bears, so keep an eye to the news as they wrangle party politics.
Asian markets closed mixed but mostly lower as Hong Kong and Australia saw heavy selling during the night. European markets continue to tumble with the FTSE down another 3.5% as the coronavirus continues to ravage the euro block. With tremendous overnight volatility, US futures point to a substantial gap lower this morning that will test the lows of last weeks as support. Hang on for another wild day of price action.
Economic Calendar
Earnings Calendar
On the Monday earnings calendar, we have over 80 companies stepping up to report quarterly results today. However, after looking through the list, I don’t see any particularly notable or market-moving reports.
Top Stories
After another volatile evening where the futures briefly dropped to limit down, they point to a substantial gap down this morning. The massive stimulus bill failed to pass last night but will try once again today. If passed or fails to pass, it’s likely to be a market-moving event, so keep an eye to the news as we progress through the day waiting on the vote.
The Olympic committee is under pressure to postpone or cancel the Summer games hosted in Japan due to the virus concerns. Canada and Australia are the first countries to announce they will not send athletes should the games move forward as scheduled.
Last evening the President activated the National Guard in New York, Californa, and Washington to expedite the moving of medical supplies and equipment as their outbreaks continue to grow at an exceptional rate.
Technically Speaking
The QQQ had the best chance of recovering the 500-day average last week, but on Friday left behind a very disappointing bearish engulfing candle. This morning the four major indexes are set to open at or below recent market lows. Although most charts paint a pretty grim picture, there was an effort by the bulls to defend the week’s lows. In a surprise and very bold move, Goldman upgrades BA suggesting they have enough cash to get through the crisis and that air travel will return following the crisis. I assume the Goldman is also anticipating that the government will swoop in with a considerable bailout for the company in an attempt to prevent massive layoffs.
We can continue to expect extreme price volatility and sensitivity to the congressional vote on the stimulus bill. I would not rule out the possibility of a quick and substantial rally should the bill pass. However, another failure to pass could easily trigger another sharp selloff that could easily trip circuit breakers. Keep in mind no matter what happens, holding positions overnight will remain very dangerous due to the overnight swings. I think a V-bottom recovery is unlikely because we are still weeks if not months away from seeing an improvement in the war against the outbreak.
Trade Wisely,
Doug
The Elected Fail But Fed to Steps Up Again
Friday was another head fake day in the downtrend. After a gap up of about 1%, the rollercoaster began. Selloffs led to rallies, which led to ever more selloffs. With a 7% intraday range, we closed very near the lows. As a result, the SPY lost 4.62%, the DIA lost 4.67%, and the QQQ lost 3.92%. Interestingly, the VXX also lost 2.34% on the day to close at 60.55 and the 10-year bond yield also fell to 0.876%. Meanwhile, Oil (WTI) got hammered again, down 8.88% to $23.61/barrel as in addition to the epidemic and price war, money continues to seek safety in dollars (making dollar-denominated items, worth less each day). This concluded the worst week on Wall Street since 2008.
During the day, the Treasury Dept. also pushed the Income Tax filing deadline out to July 15th. Attorney General Barr also invited ethics probes into Senators (both parties) who sold and/or bought specific heavily-impacted stocks after coronavirus briefings in late January and early February. (Back when this was still a hoax.) The Fed also expanded its operations into buying municipal bonds. NY, IL, and CT also all joined CA in a state-wide in-home quarantine.
On the relief bill front, what started as a $1 Trillion bill, has doubled in size, but even so, it is likely to grow more. For now, the stumbling block seems to be the emphasis of the aid package. Democrats want the bill to concentrate on aid for hospitals and other healthcare as well as money for unemployed workers. For their part, Republicans insist the bill focus on more tax cuts and grants/loans for companies. (So, stereotypes are nicely still intact as Monday dawns.)
Over the weekend, many more countries have banned incoming travelers, more US states have locked-down with “Stay Home” quarantine measures, and the federal government failed to reach an agreement on a relief bill. Meanwhile, the Fed is close to announcing a $4 Trillion infusion via asset purchases as they and Sec. Mnuchin held talks this weekend. The question now is what we will see out of DC? Ether we see some bi-partisan leadership or a new round of the “Blame Game.” It appears markets are depressed at the lack of leadership and fear the Blame Game as both global markets and US futures tanked when the Senate failed to pass a procedural vote on a relief bill.
The global headline virus numbers continue to climb fast, now just under 350,000 confirmed cases and 15,300 deaths. In Asia, the very early stages of a second wave have started in places like Australia, Thailand, Malaysia, and South Korea. In Europe, Germany has now banned any gathering over 2 people. The UK has also quarantined anyone who is at-risk for the next 12 weeks. In addition, Spain has extended its lock-down through Mid-April. Meanwhile, Italy has banned domestic travel and deployed the military to enforce the restrictions.
In the US, cases almost tripled since Friday morning as testing ramped (but then was almost immediately greatly restricted, to rare cases where a positive result would change the treatment plan, in places like Los Angeles and New York City). Regardless, the totals are now 35,070 cases and 458 deaths.
Overnight, Asian markets were down hard again everywhere except Japan, which posted a 2% rebound. There isn’t even that single green shoot in Europe as every bourse across the region is down 3-4% so far today. In the US, futures were volatile again overnight, but went limit-up on the NASDAQ at one point. As of 7:45 am, the futures were pointing to a gap down of between 2.5% and 3.5%.
There is no major economic news on Monday. There are also no major earnings announcements scheduled. However, the Fed announcement will drop some time. Also, some industry/business leaders have started calling for reduced restrictions on workers who are less at risk. Apparently, they do not understand (or care) about lower-risk categories of people being carriers for virus distribution.
Markets remain very gappy and erratic. It is true we are down a very long way and got here historically fast. Some bottom-pickers (who can stand the pain, like funds) are likely to start dipping in here. However, retail traders cannot take the pain that is likely still to come. With more “stay a home” orders coming into effect every day (midnight Monday in Ohio), there are a hell of a lot of bad headlines still ahead. I’ll say it again, this is not a Swing Trading market. You don’t have to pick the absolute bottom to make a bundle on the rebound. So, use this downtime to really learn, refine your trading plans, and improve your processes. Wait for trades to come to you. For now, continue to either be very fast (day trade), very slow (long-term holds) or just wait.
Ed
Sorry, but due to extreme volatility there are no Trade Ideas for 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.
Hit and Run Candlesticks / Road To Wealth Youtube videos
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.
Free YouTube Education • Subscription Plans • Private 2-Hour Coaching
DISCLAIMER: Investing / Trading involves significant financial risk and is not suitable for everyone. No communication from Hit and Run Candlesticks Inc, its affiliates or representatives is not financial or trading advice. All information provided by Hit and Run Candlesticks Inc, its affiliates and representatives are intended for educational purposes only. You are advised to test any new trading approach before implementing it. Past performance does not guarantee future results. Terms of Service
A Ray of Sunshine
A ray of sunshine begins the market day with the first bullish follow-through open setting up this morning. It’s been nearly 2-weeks since we have seen a positive close followed by an optimistic open the next. That said, expect the wild price volatility to continue as infections here in the US begin to spike heading into another uncertain weekend.
Asian markets closed mixed but mostly higher as China holds steady on its price rates. European markets are green across the board this morning, reacting to the massive government stimulus efforts. The US futures point a positive open ahead of economic and earnings data but expect the price action to remain very challenging.
Economic Calendar
Earnings Calendar
On the Friday economic calendar, we have 59 companies reporting. Looking through the list about the only notable stock I can find today is HIIB.
Top Stories
After another turbulent evening where the US Futures traded between 350 down and 900 up currently points to positive open of more than 700 points. However, with such volatility in price, anything is possible by the open.
With virus infections beginning to rise rapidly, the California Governor ordered that all residents stay home and inside. The first state to issue such an extreme lockdown order. Italy now has the distinction of the largest death toll surpassing China as the country calls out the military to move coffins overwhelming the countries cemetery system. Here in the US, infection estimates could reach more than 30,000 by next week.
The Senate has proposed a massive spending bill sending direct payments to US citizens of $1200 per adult and $500 per child, including billions and billions for company bailouts. I doubt this will be the last of the backstop measures that will be required to stabilize the economy.
Technically Speaking
Although we saw more than a 1200 point swing the in Dow yesterday, it was nice to see a positive close. As of now, it looks as if we could get our first bullish follow-through open that we have seen in 2 weeks of massive overnight reversals. Crossing my fingers and hoping it will hold at least to the open, the QQQ could recover its 500-day moving average. The technical damage in the charts is so extreme that even a hold of this week’s lows could lift spirits as we head into another uncertain weekend.
Although there are some fantastic values in stock prices, buying them in the faces of such volatility and extreme uncertainty is not for the faint of heart. With the VIX holding above a 70 handle options are punishingly expensive, and the slippage in the bid/ask spreads make then nearly impossible to trade except for very quick and very dangerous day-trades. Let’s all hope for the best but prepare for the wild price action to continue in the coming weeks as impacts of the outbreak continue to expand. Protect your capital, take care of your family, and support your communities as best you can through these troubling times.
Trade Wisely,
Doug
Future Point Up As Impacts Get Worse
Thursday was a relatively stable day, with a 1% gap down, a sell-off to the lows, and an immediate rally to up 1%. The rest of the day included trading in a relatively tight range…relatively. The actual intraday range was 6.5% with the SPY closing up 0.58%, the DIA up 0.96%, and the QQQ up 0.60%. All three printed long-wick Spinning Top candles showing the indecision. The VXX fell 10% to 62.00. Meanwhile, Oil spiked in its best day ever, up 23% after the prior day carnage, closing at $25.08/barrel (WTI). The 10-year bond yield fell to 1.158%.
During the daily presser, the President said he was “ok with” both future legislation that may prohibit buybacks and is also considering the US government taking equity stakes in those companies that will receive bailouts. In addition, he said he has not exercised the Defense Production Act he invoked Wednesday because there was no need yet. He also ordered the FDA to do “off label” tests on a 1940 malaria drug (hydroxychloroquine) for potential effectiveness as a treatment for COVID-19. It has been shown effective in one study in test tubes and promising in small-scale Chinese studies, but it is poisonous in higher doses. (This drug is more promising than the alternative because of its availability and being off-patent versus say the GILD drug Remdesivir, which has also shown some promise.)
The Senate and House (and both parties) continue to wrangle over competing versions of the next relief bill. After the close, a Republican Senate version was unveiled that ups the ante from $1000/adult to $1200/adult with both proposed plans also kicking in $500/child. However, there are mavericks (and excluded players) on all sides of these negotiations who oppose the announced plans. Expect this story to continue with a target of a deal passing both houses over the weekend, but that may be optimistic.
Afterhours, TSLA closed its Fremont CA factory and NY operations after fighting such measures earlier in the day. In addition, former UN Ambassador Nikki Haley resigned from the Board of BA, because she opposes the idea of government aid. However, BA management says the company will not survive without a bailout and has asked for a $60 billion aid package.
The global headline virus numbers continue to climb fast, now at 252,750 confirmed cases and 10,400 deaths. In Europe, Italy now has 41,100 cases with 3,400 deaths. Spain has 20,000 cases with 1,002 deaths, France has 11,000 cases with 375 deaths (a day behind in reporting), Germany has 16,625 cases and 45 deaths. The number of deaths in both the UK and France jumped 40% in the last 24 hours. Italy and France also extended the duration of the national quarantines they have in-place.
In the US, virus infections are following the same path as in Europe as our testing ramps up. The totals are now 14,366 cases and 217 deaths. More companies and industries continue to say they will fold without immediate government aid. This now includes the hospitability industry, retailers, entertainment venues, airlines, rental car industry and many others. While small and medium-size businesses will have far less political clout, their needs will be just as large. In terms of impact, the Governor of CA issued a statewide “stay at home” order overnight.
Last night, Asian markets were up, except Japan where the NIKKEI lost 1%. Europe is green across the board, up 2-5% so far in their day. In the US, futures were volatile again overnight but went limit-up on the NASDAQ at one point. As of 7:45 am, the futures were pointing to another gap up of between 1.5% and 3.5%.
Friday’s major economic news is limited to Feb. Existing Home Sale (10 am). The only major earnings are from TIF before the open.
Markets remain erratic. However, as said yesterday we are down a very long way, very fast already. Bottom-pickers are likely to step in. Still, regardless of what happens during the session today, holding over the weekend is a very risky prospect. There are a lot of bad headlines yet to come and it will be two long days before traders can adjust. As has been the case for some time, this is not a market to be Swing Trading. Use this downtime to really learn, refine your trading plans, and improve your processes. Wait for trades to come to you. For now, continue to either be very fast (day trade), very slow (long-term holds) or just wait.
Ed
Sorry, but due to extreme volatility there are no Trade Ideas for 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.
Hit and Run Candlesticks / Road To Wealth Youtube videos
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.
Free YouTube Education • Subscription Plans • Private 2-Hour Coaching
DISCLAIMER: Investing / Trading involves significant financial risk and is not suitable for everyone. No communication from Hit and Run Candlesticks Inc, its affiliates or representatives is not financial or trading advice. All information provided by Hit and Run Candlesticks Inc, its affiliates and representatives are intended for educational purposes only. You are advised to test any new trading approach before implementing it. Past performance does not guarantee future results. Terms of Service
A run to cash.
I had a computer problem this morning, so I apologize, but I will have to keep the blog short this morning. After another wild night of price action in the futures market, it would appear sellers still have the upper hand this morning. Even the so-call safe-haven securities sold off yesterday in a rush to raise cash and avoid additional market risk. During the night, the ECB unveiled a massive stimulus plan of more than 800 billion with the President signed the first stimulus package for the US almost immediately after the Senate passage. They are now going to work on the second package that could top 1.2 trillion with direct payments to US citizens. Monday, tradings pits will close, and we will move to a fully electronically traded market. It’s unclear how that might affect price action.
With infections numbers continuing to grow, we could easily see more than 10,000 cases by the weekend, which would suggest and exceptional expansion is likely to occur over the next 2-weeks. I know I sound like a broken record but Protect Your Capital because the uncertainty going forward is expected to get much worse before it gets better. More importantly, protect yourself and your family. The next few weeks could be difficult, but I’m confident better days lie ahead.
Economic Calendar
Earnings Calendar
We have more than 120 companies reporting earnings today, but in the current situation, it’s unlikely many will notice. Notable reports include DRI, LEN, CAN, CTSAS & OLLI.
Trade Wisely,
Doug
More Resue Plan Headlines Ahead
Wednesday was another brutal, roller-coaster day in the market. After futures went limit-down overnight, US markets opened on a 5% gap down. The volatile intraday moves covered a 9% range and caused a trading halt when the circuit-breaker was tripped mid-morning. However, prices closed up off the lows, with the SPY down 4.94%, the DIA down 6.60%, and the QQQ down 3.04%. The VXX rose almost 18% to 69.00. Oil was crushed during the day, closing down 24% at $20.37/barrel.
The 10-year bond yield spiked sharply to 1.198% by day end, as overall interest rates rose. This seems counter-intuitive with the Fed spending hundreds of billions of dollars to drive yields down. However, Bloomberg reported the likely cause is the fact the federal government is increasing national debt just as fast or faster in order to provide relief, stimulus, and bailouts. In addition, the public is selling everything, including bonds, to raise cash. Regardless of the cause, rising rates are not good news for an economy starting into a big shock. So, we might expect Fed programs to increase pace even further in an effort to over-power the new government spending effect.
Late in the day, stocks did come up off their lows as the Senate finally passed the House-White House relief deal from last week. (This isn’t the major stimulus bill, but rather the one to guarantee paid sick leave, paid family leave and increased funding for food programs and Medicaid.) The larger stimulus bill(s) are still being haggled over between Republicans, Democrats and the White House. Expect that larger stimulus plan to be the lead story for a couple of days as what is finally included is negotiated.
In ominous news, at the daily presser, Dr. Deborah Birx pleaded for Millennials to respect social distancing and quarantine measures. This was prompted by data out of Europe showing that more young people are getting sick from the virus than had been previously believed. In addition, the WHO report that 6% of infected children have had severe or critical symptoms from COVID-19 (as opposed to 19% for adults).
The global headline virus numbers rose to 221,450 confirmed cases and 9,000 deaths. In Europe, Italy now has 35,720 cases with 3,000 deaths. Spain has 15,000 cases with 640 deaths, France has 9,150 cases with 265 deaths, Germany has 13,100 cases and 31 deaths. On this continued spread, Automakers and other industries closed all of their operations across Europe and the US on Wednesday. In the UK, the country prepares for lock-down with closures of transit systems, schools, and businesses. The ECB also announced an $819 billion dollar stimulus package (this caused US futures to jump well over 500 points from negative to positive on this news).
In the US, confirmed infections continue to grow, following the same exponential growth rate seen in Europe. The totals are now 9,425 cases and 150 deaths. Last night, NYC again lobbied the NY Governor to approve a shelter-in-place quarantine order for the city. This came less than a day after the Governor said he wouldn’t allow this measure. The NYSE also announced it will be closing floor operations as of Monday the 23rd and go to fully-electronic trading due to a pair of infections found among floor traders trying to enter the floor.
Overnight, Asian markets were down, with South Korea hammered 8.4%. Europe is mixed, but the majors (FTSE, DAX, CAC) all down 1-2% so far in their day. In the US, futures were volatile again overnight, swinging up and down repeatedly. As of 7:45 am, the futures were pointing to another gap down of between 1% and 2%.
On Thursday, the major economic news is limited to Weekly Initial Jobless Claims, the Mar. Philly Fed Mfg. Index, and Q4 Current Accounts (all at 8:30 am). In earnings news, ACN and DRI report before the open, while LEN and CTAS both report after the close.
While the worst is yet to come in terms of cases, deaths and economic damage, it is important to keep in mind that we have fallen very far, very fast. We are more than 40% off the mid-February highs in the SPY and almost 50% off those highs in the DIA. So, expect the funds (who can handle pain) to start picking up some deals soon as long-term holds for their portfolio and suggesting the public do the same (maybe to protect their own moves?).
We remain in a very erratic and over-reacting market with a strong bias still to the downside. Again, this is not a market to be Swing Trading. Use this time to really learn the trading setups and vehicles (like option strategies) you will be using. Refine your trading plans, put the time to work…but don’t be chasing trades. Remember the market can stay extremely oversold a lot longer than any retail trader can stay solvent being too early. Wait for trades to come to you. For now, continue to either be very fast (day trade), very slow (long-term holds) or just wait.
Ed
Sorry, but due to extreme volatility there are no Trade Ideas for 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.
Hit and Run Candlesticks / Road To Wealth Youtube videos
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.
Free YouTube Education • Subscription Plans • Private 2-Hour Coaching
DISCLAIMER: Investing / Trading involves significant financial risk and is not suitable for everyone. No communication from Hit and Run Candlesticks Inc, its affiliates or representatives is not financial or trading advice. All information provided by Hit and Run Candlesticks Inc, its affiliates and representatives are intended for educational purposes only. You are advised to test any new trading approach before implementing it. Past performance does not guarantee future results. Terms of Service
Violent Price Gyrations
As violent price gyrations continue, so does the extreme danger for retail traders. Although we have had several big one day rallies, we have yet to see the bulls able to follow-through the next day. Instead was we see is overnight reversal ripping the heart out of traders that tried to hold positions just one more day. This morning is a repeating that pattern once again with US Futures limit down wiping out most if not all of yesterday’s hopefulness.
Asian markets seesawed back and forth overnight, finally closing the day lower across the board. European markets are sharply lower this morning with the DAX, FTSE, & CAC, all showing losses fo more than 5%. Ahead of a Housing Starts number and 60 earings report Dow futures to point to an overnight reversal of more than 800 points, and fear and uncertainty continue to drive extreme price volatility. Prepare for another wild day.
Economic Calendar
Earnings Calendar
On the hump day earings calendar, we have about 60 companies reporting results. Notable reports include GIS, FIVE, GES, HABT, TLRD, TCOM, & WSM.
Top Stories
Biden swept three primary elections last night as he doubles the delegate lead over Sanders can drawing closer to clinching the Democratic nomination. President Trump has now won enough delegates to lead the Republican party in the 2020 election.
After a day of rally closing the Dow up more than 1000 points, futures now point to an overnight reversal wiping out the gains waiting on yet another government bailout proposal to be passed. Munchin reportedly warns senators the impacts of the virus could lead to a 20% US unemployment rate as a business shutdown responding to CDC recommendations.
The Vegas strip is quiet for the first time since the Kennedy assassination as all gaming in the state was ordered to shut down. Kansas schools have closed public schools for the rest of the year! The first such state to make such a drastic decision.
Technically Speaking
Yesterday’s relief rally was a nice change to the extreme selling pressure, but sadly it looks as if a second day of follow-through is too much to ask for amid such wild volatility. After another wild night of price, action futures reached another limit down trading halt. The QQQ rally moved up to test the resistance of its 500-day average, but sadly the overnight reversal will wipe out almost all of yesterday’s hopeful gains at the open.
With the VIX closing, the day above a 75 handle, and a likely sharp move higher this morning options, prices will remain very dangerous and virtually untradeable. While there are some tempting values in stock prices, the volatility requires a tremendous tolerance for risk that few retail traders are willing to ride out. The best course of action for most is to continue to remain disciplined to your trading plan and protect your capital while market prices continue to gyrate violently.
Trade Wisely,
Doug
Markets Not Happy This Morning
Tuesday was another roller-coaster ride for markets. A 2% gap higher was met with immediate selling down to the lows of the day. However, from 10 am to noon was a hard rally. The massive waves continued all day until a close near the highs. Once again, we had an 8% intraday range, but the SPY closed up 5.63%, the DIA up 5.42%, and the QQQ up 7.58%. The VXX only lost 1.18% to 58.51, which points to intraday volatility. Oil was down 6% on the day, closing at $26.84/barrel (WTI) on fear of a global recession and even further Saudi supply increases. However, the 10-year bond yield was back up above 1%, closing at 1.064% on the day as Fed bond-buying ramps up.
During the daily press conference, the President kept his tone for a second straight day, announcing desires to have fiscal stimulus. This includes deferring April 15 income tax payments for 90 days and a check sent to every American home. At the time of the presser, the administration hadn’t yet spoken to Congress on the plan specifics, but their hope was to have the checks cut and mailed within two weeks. Note that it took 2 months after signing the bill in 2009. Nonetheless, markets liked something they heard.
The House and Senate Democrats also put forth packages of their own and as said, were in mid-day negotiations with Treasury Sec. Mnuchin (who left the President’s press conf. early to start those negotiations). Subsequently, it leaked that they were talking about a $1.2 trillion relief package including over $250-$500 billion in immediate checks to family homes, $200-$300 billion in small business assistance, $200-$300 billion in tax cuts, and $50-$100 billion in relief for the airline industry. It also came out that during discussions with Congress, Mnuchin said he was worried unemployment could hit 20% due to the virus.
Not to be outdone, Majority Leader McConnell told the press that the Senate would not adjourn again until they had passed a relief package larger than the House passes. (A somewhat odd statement for a “Fiscally Conservative” party leader, but I guess these are different times.) In addition, during the day the Fed extended its $500 billion/day repo operations (to aid banks) through at least the end of the week and announced a new lending facility for US businesses (beyond banks). So, the government is now firing all their guns.
The global headline virus numbers rose to 203,500 confirmed cases and 8,225 deaths. In Europe, Italy now has 31,500 cases with 2,503 deaths. Spain has 13,720 cases with 600 deaths, France has 7,750 cases with 175 deaths, Germany has 9,920 cases and 26 deaths. On this continued spread, the EU closed its exterior borders to all non-EU people for 30 days. In addition, the UK announced a 400-billion-pound relief package. Both the UK and France said they will start fining and may jail anyone infected who is out in public. Italy, France and Belgium all also banned selling short for 3 months in their stock markets.
In the US, all 50 states (plus D.C. and Puerto Rico) have confirmed infections as the virus is following exactly the same exponential growth rate seen in Europe. The totals are now 6,525 cases and 116 deaths. Again, more states have ordered public venues, bars and restaurants closed. Schools were closed across 37 states. NYC also gave warning that they will soon join San Francisco in closing the city and ordering shelter-in-place quarantines.
Overnight, Asian markets were down, with South Korea down 6.5% and Australian down almost 5%. Europe has continued to the downside, with another acceleration today. So far in their day, the major European bourses are all down more than 5%. In the US, futures were volatile again overnight. However, as of 7:30 am, U.S. futures were pointing to another 5% gap down.
On Wednesday, the major economic news is limited to Feb. Building Permits and Feb. Housing Starts (both at 8:30 am) and Crude Oil Inventories (10 am). The only earnings of note for the day are GIS before the open and TCOM after the close
The US numbers will continue to rise exponentially (especially once testing really starts ramping up), more businesses will report the impacts, and the life of the public will halt. So, volatility and gaps are not going anywhere. We are simply in a massively erratic and over-reacting market with a bias still to the downside right now. Again, this is not a market to be Swing Trading. Keep reminding yourself, you do not have to trade every day, week, or month!
Needing action is the worst reason in the world to take trades. So, remember there will be another day. Keep preparing your list of strong companies you will want to own WHEN THE TIME IS RIGHT. Then wait for those trades to come to you. Don’t chase. Don’t trade on emotion. Don’t think you can predict turns. Let price tell you when we have a more stable price action, less volatile trend and see proven support below us. Until then, get very fast (day trade), very slow (long-term holds) or stay out.
Ed
Sorry, but due to extreme volatility there are no Trade Ideas for 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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Buy our way out?
It would appear attempting to buy our way out of this current crisis is not going to work after the massive move of the FOMC did little to dissuade the bears in the face of such uncertainty. I would like to assume the worst is over, but with the US just now beginning the process of a shutdown, the path forward is more uncertain than ever. Long and short trader getting involved in this will volatility with have to have considerable tolerance for risk with the VIX now above the 2008 high. It would seem the best course of action for most retail traders is to remain on the sidelines protecting their capital until we begin to see some improvement.
Asian markets closed mixed with Australia surging nearly 6% overnight. Unfortunately, European markets are still feeling some selling pressure this morning as they are modestly lower across the board. After a wild night of volatility in the futures markets, point to a little bullishness at the open. With a big day of earnings, economic data, and uncertainty, anything remains possible.
Economic Calendar
Earnings Calendar
On the Tuesday earnings calendar, we have 60 companies reporting quarterly results. Notable reports include FDX, FLR, HDS, LE, & MIK.
Top Stories
With more than 4200 confirmed cases and over 70 deaths, the CDC has recommended restricting gatherings to less than ten people in an attempt to slow the spread. Many states have now recommended closing bars, restaurants, night clubs, fitness facilities, and schools until further notice. Small business impacts are tremendous.
The Feds surprise rate cut and massive cash injection increased the fear of the unknown lifting the VIX-X above the 2008 highs and creating the worst one-day selloff since 1987. All 11 sectors of the S&P were down on the day, but there were some bright spots amongst the carnage, such as KR and CLX.
Airlines have already asked the government for a 50 billion dollar bailout, and I’m guessing there will be many more industries to follow as the impacts on business grows. The virus is now impacting the Presidential election, with Ohio closing its primary polls.
Overnight futures came close to a limit up rally, but during the night gave back most of the move in another display of incredibly dangerous price volatility.
Technically Speaking
When looking at the charts, there is very little to see but tremendous technical damage. One would hope that yesterday was the final capitulation, but with much of the country right at the beginning of its shutdown, the path forward seems more uncertain than ever. With such incredible price volatility, stock traders attempting to pick up the deeply discounted stocks will have a substantial tolerance to risk and willing to hold through the huge overnight reversal and steep intra-day swings. With implied volatility so high option traders face incredibly inflated contract prices, as well as punishing bid/, ask spreads making it extremely dangerous to trade. Until there is some improvement, it is hazardous to consider being long or short. Staying in cash on the sidelines, protecting your capital continues to be the most reasonable course of action the majority of traders consider.
Trade Wisely,
Doug
