ALL HOSPITAL BEDS WILL BE FILLED BY MAY 8 (ZeroHedge)
“I think most people aren’t aware of the risk of systemic
healthcare failure due to #COVID19
because they simply haven’t run the numbers yet. Let’s talk math…We can expect
that we’ll continue to see a doubling of cases every 6 days (this is
a typical doubling time across several epidemiological studies). Here I mean
*actual* cases. Confirmed cases may appear to rise faster in the short term due
to new test kit rollouts. We’re looking at about 1M US cases by the end of
April, 2M by ~May 5, 4M by ~May 11, and so on. Exponentials are hard to grasp,
but this is how they go…
…By this estimate, by about May 8th, all open hospital beds
in the US will be filled…If we’re wrong by a factor of two
regarding the fraction of severe cases, that only changes the timeline of bed
saturation by 6 days in either direction…
…Importantly, I cannot stress this enough: even if I’m wrong – even
VERY wrong – about core assumptions like % of severe cases or current case #,
it only changes the timeline by days or weeks. This is how
exponential growth in an immunologically naïve population works.” - Liz Specht,
PhD in biology and the associate director of Science and Technology for the
Good Food Institute. Commentary/analysis at…
My cmt: Luke: “I’m not afraid.” Yoda: “Oh. You will be. You
will be.”
So, I was sitting with a group of folks and someone said,
“No worry. The virus will go away once
it gets warm. The Doctor in the group said, “Tell it to Australia. They’re in the middle of summer and
coronavirus is there, too.”
My cmt: Here’s a YouTube that explains the math of
pandemic exponential growth. The presenter shows that, at current rates of
growth, world-wide, we could see 100-million cases in 2 months. During the
Spanish Flu pandemic of 1918, 27% of the world’s population contracted the
Spanish Influenza. View here…
The real question is, what will be the impacts to the
economy?
HIGH ODDS CORONAVIRUS WILL CAUSE RECESSION (BNN
Bloomberg)
“The rapid spread of the coronavirus is likely going to
send the global economy into a recession, according to prominent Canadian
economist David Rosenberg. “I think very strongly that it probably is going to
cause not just a recession in Canada, but a global recession,” the chief
economist and strategist at Rosenberg Research and Associates told BNN
Bloomberg Thursday.” Story at…
https://www.bnnbloomberg.ca/rosenberg-high-odds-bet-the-coronavirus-will-cause-a-recession-1.1396931
My cmt: Oh yeah…I’ll go you one better:
THE US MAY ALREADY BE IN RECESSION (Bloomberg)
“Let’s just say it: The longest economic expansion in
U.S. history may already be over, killed by Covid-19. It might seem crazy to talk about a recession when jobs
are plentiful. Today the Bureau of Labor Statistics announced a
decline in the February unemployment rate to 3.5%, tying a 50-year low. But a
recession isn’t when things are bad. It’s when they aren’t quite as good as
they were at the peak.” Story at…
OIL PRICES PLUMMET (CNBC)
“Oil prices plunged 30% in early trading after OPEC’s
failure to strike a deal with its allies regarding production cuts
caused Saudi Arabia to slash its prices as it reportedly gets set to ramp
up production, leading to fears of an all-out price war.” Story at…
My cmt: Low oil prices pressure the S&P 500 because a
lot of companies in the Index are oil-service related. It has even more of an impact to High Yield
bonds, since many bonds were sold in the shale-oil patch. Shale-oil production will shut-down if
projections of $20-a-barrel oil come true. Defaults in bonds will rise – a
perfect storm? I don’t know, but it is clear that investors are currently pricing
in significant downside in the economy.
MARKET REPORT / ANALYSIS
-Monday the S&P 500 fell about 7.6% to 2747.
-VIX rose about 30% to 54.46.
-The yield on the 10-year Treasury slipped to 0.569.
I am not an economist. I can only say this: if the
economy does get pushed into recession, we could see a 50% drop in equities. For
that reason, I am going to watch the markets and the indicators and try and
discern where the herd is headed.
Overall, the daily sum of 20 Indicators declined
from -6 to -10 (a positive number is bullish; negatives are bearish). The
10-day smoothed sum that negates the daily fluctuations improved from
-114 to -110. (These numbers sometimes change after I post the blog based on
data that comes in late.) Most of these indicators are short-term. We saw
some improvement; but not much!
My expectation remains that stock markets will retest the
lows. It appears that the bottom may not be in yet; it could be, but we don’t know.
The “average” correction has been 12% since 2009. In the
past 15 years or so, corrections greater than 10% have lasted 68 days top to
bottom.
We’re at day 13 and the S&P 500 is now 18.9% below its
all-time top, on 19 Feb. It is 10% below its 200-dMA.
The S&P 500 fell through support levels at the August
lows around 2850 and are sitting just above the low of 2740 on 3 June. The long-term,
bottom trend-line that includes the low of Feb 2016 and Dec 2018 suggests that
a bottom below about 2550 is not likely.
It’s possible that today was the final low – we won’t
know until we see a retest.
TOP / BOTTOM INDICATOR SCALE OF 1 TO 10 (Zero is a
neutral reading.)
Today’s Reading: +6**
Most Recent Day with a value other than Zero: +6 on 9 March.
(The Index is too far below its 200-dMA when Sentiment is included; Bollinger
Bands are oversold; RSI is oversold; S&P 500 is well below Breadth; Money Trend
is bullish; and Smart Money (late-day-action) is oversold.)
(1) +10 Max Bullish / -10 Max Bearish)
(2) -4 or below is a Sell sign. +4 or higher is a Buy Sign.
**The Top/Bottom indicator is giving a BUY signal,
but my data doesn’t go back far enough to include crash-data and this decline
is acting like a crash even if it doesn’t continue to fall. Bottom line: the validity of the buy signal is
not proven or even suggested. I want to see a retest of the low rather
than rely on untested data.
MOMENTUM ANALYSIS:
CAUTION: Momentum is not a good tool during market
declines.
TODAY’S RANKING OF
15 ETFs (Ranked Daily)
*For additional background on the ETF ranking system see
NTSM Page at…
TODAY’S RANKING OF THE DOW 30 STOCKS (Ranked Daily)
The top ranked stock receives 100%. The rest are then
ranked based on their momentum relative to the leading stock.
For more details, see NTSM Page at…
MONDAY MARKET INTERNALS (NYSE DATA)
Market Internals declined
to NEGATIVE on the market.
Market Internals are a decent trend-following analysis of
current market action but should not be used alone for short term trading. They
are usually right, but they are often late.
They are most useful when they diverge from the Index. In 2014, using these internals alone would
have made a 9% return vs. 13% for the S&P 500 (in on Positive, out on
Negative – no shorting).
Using the Short-term indicator in 2018 in SPY would have
made a 5% gain instead of a 6% loss for buy-and-hold. The methodology was Buy
on a POSITIVE indication and Sell on a NEGATIVE indication and stay out until
the next POSITIVE indication. The back-test included 13-buys and 13-sells, or a
trade every 2-weeks on average.
My current stock allocation is about 40% invested in
stocks as of 3 March. (I previously dropped stock allocations to 45% on 27
January). You may wish to have a higher or lower % invested in stocks depending
on your risk tolerance.
INTERMEDIATE / LONG-TERM INDICATOR
Monday, the VOLUME and VIX gave bear signals; The
SENTIMENT and PRICE Indicators were neutral. The Long-Term Indicator remained SELL. The important
sell signal was 24 February and I reduced stock allocations before that due to other signals.
