Market Timing Brief™ for the 03-20-2020 Close (SPX Earnings/Rev and Bull Market Health Score Update 4-04-2020; Coronavirus Update on 4-06-2020 11 pm): “Deep U.S. Recession? If So, Bigger Losses to Come. How Big? Gold Remains ‘Insurance Only.’ Debt Markets Throwing Fits. Fed is Catching Up Still.”

A Market Timing Report based on the March 20, 2020 close…A Briefer than Normal Update!  An Intra-Month Market Timing Update!

The context for the charts will be addressed on social media during the week…be sure to read those posts as well, or you’ll miss at least half of the picture.

NOTE: If you want to get to the prior stock market issue, scroll past the Coronavirus updates that follow… The behavior of markets will be highly related to the COVID-19 disease response across the world and the degree of its success!

NOTE: I am publishing just after the last Friday/Holiday close of the week each month, so if the last Friday precedes the end of the month, I will publish on that corresponding weekend.  (for example, posts will be on 2-29, 3-28 (published last week, so please see my social media posts for financial updates), 5-02, 5-30, 6-27 or the day after, meaning on Saturday most likely, but at the latest by the day prior to the next week’s open, and in case of a holiday, meaning by Monday evening.)  I may publish earlier each month if the market action requires it…

If you want to be alerted to each post, please subscribe via WordPress, and you’ll receive an email each time I publish here… Thanks and feel free to comment or leave a question below…

4-06-2020  11:00 pm ET: Global Coronavirus Stat Update Vs. China (Use South Korea, if you don’t like China’s data!)  I’ve explained this below….not going to repeat it here except to say this is a PER CAPITA comparison…  The US still has far too much growth Day/Day.  The world has been looking better than the US.  South Korea and China are both adding very few cases per day.  The US total case number is now 5.60 TIMES that of South Korea and 19 times China’s on a per capita basis!  We need to learn from them. 

China is being used as the anchor in this comparison, because it was first off the block and 1st to the finish line, which means to get to a point of having so few cases that they can receive proper public health follow-up (rapid case ID and isolation with aggressive contact tracing).  That’s all we have that works, so we had better be doing it along with large scale testing.   Antibody testing could be better than RT-PCR in establishing PRIOR infection.  Antibody’s take several days to be formed, so it’s not a good way to detect infection in the first few days.

RT-PCR has a high false negative rate of up to 30% and a very low false positive rate meaning a positive test with RT-PCR tells you if you are positive for virus with great specificity, but does not adequately prove a negative due to the high false negative rate (negative tests in patients with disease).  Perhaps with further studies we’ll find that 3 tests can exclude COVID-19 with a sensitivity of 95% or higher, but realize even a 5% leak of a rapidly spreading virus means trouble.  It really has to be 99% most likely to prevent a RE-infection of communities.

You can see we have the highest Day/Day growth rate in total cases in the table and now have a case number worse than Iran’s on a per capita basis.  (doesn’t matter whether some do not trust Iran’s data either as the trend vs. South Korea stinks too)… A 9+% increase Day/Day for the US means there is still far too much community spread! 

Global Coronavirus Stats vs. China updated 4-06-20 at 11 pm ET

Global Coronavirus Stats vs. China updated 4-06-20 at 11 pm ET

4-06-2020 Coronavirus Global Stat Update: There is some good news finally…but it’s just the first day.  The peak of active case increases was 28.32% on March 21st.  Since then the rate of increase has FALLEN with a bump up to the 3-26-20 lower high.

We finally are seeing the FIRST day of a possible break in the active case day/day % increase to a lower low (orange line shown below).  The 6.01% increase seen yesterday (see chart) is still too high to allow for aggressive case isolation through widespread testing with aggressive contact tracing, but it’s a step in the right direction.  We should still ramp up testing in the meantime.  What we don’t want to see is everyone become lax about the Stay-At-Home orders too soon.  Dr. Fauci said the same thing during his recent appearances.  We need to drive the increases to DECREASES that were last seen on March 5th (-6.32%).

One other point… The global mortality rate is a very high 5.45% currently…  This is not a pandemic we want coming back for the lack of having testing in place ALONG WITH the public health work force needed to prevent a bump up in active cases!

Tell your Rep in Congress and your Senators you want that funded, or this will not work… We will be back to square one without that effort in place if treatment and/or vaccination is not yet in place when it happens…

 

Coronavirus Day Over Day Active Case % Increase Fever MAY Have Broken

Coronavirus Day Over Day Active Case % Increase “Fever MAY Have Broken.”

4-04-20 I updated both the Earnings and Revenues chart and the Bull Market Health Score below the Coronavirus updates…

4-02-20 Global Stats of 7 Countries Vs. China: Only South Korea has seen the success of China (the issue of the validity of China stats DOES NOT MATTER.  It has been a “Trumpublican” favorite frankly.  It is a dumb distraction IMO and a subconscious attempt to say the US is not doing worse than China did because they lie about their statistics.

It is MISDIRECTED ENERGY.  Why?  Because there are now SIX THOUSAND SEVENTY-FIVE AMERICANS tonight.  So who cares what the China numbers are in exact terms? We know Apple and Starbucks stores have opened up again in China, so they’ve done something right.  And we still don’t have governors with the sense to issue comprehensive stay at home orders.

It is also misdirected because South Korea has succeeded and so have Singapore and Japan on a relative basis.  Let’s look at the extent of failure of the US so far vs. South Korea.  The ratio of South Korean cases per death (which are not made up) is 59.03.  That means there is one South Korean who died for every 59.03 cases.  In the US, there are 40.28 cases per death. 

Further testing, since the US is so far behind, could lower the higher US mortality rate BUT the total cases per capita in the US exceed South Korea by 285% meaning the US case number per capita is 3.85 TIMES the South Korean Total Case Number.  That is with the US still behind on testing. South Korea has done 2.33 times the number of tests that the US has per person, so that makes that 3.85 number too low!

This suggests that while the spread in our population is definitely worse than 3.85 times S. Korea’s infection rate, the US death rate could end up being lower in the end.  The actual US infection rate per capita adjusted for testing frequency would be 3.85 X 2.3587 if we had tested as much as S. Korea has or 9.08 X South Korea, but our cases per death would be 95.00 for a US COVID-19 death rate (adjusted for testing frequency to S. Korea’s test rate) per case would be 1.053% vs. S. Korea’s current rate of 1.694% (% of patients with the disease who die).  This may also get somewhat worse for the U.S. as the active cases have not flattened out yet, so the current active cases are still not resolved.  That means more people have yet to die as they are early in their disease process.

This is a testing comparison between the U.S. and South Korea from data taken from HERE.  I used South Korea, because of their greater success to date in flattening the Total Case Curve to a horizontal line.  (NOTE: The data on testing is a bit inaccurate due to testing reporting by states being extremely variable.  Some don’t distinguish multiple tests on the same patient for ex. from numbers of people tested!)

Testing as of 4-01-2020
Per Capita Tests Tests Per Capita Times US Test Rate
US 1,131,474 0.35% 1
S Korea 421547 0.81% 2.3587

The US has not yet seen this success, but it will IF we institute a National Coronavirus Stay-At-Home Order and those states currently under such orders persist in their efforts, the curve will flatten in the US too!)   Poor Spain.  They now have the worst problem of the top 7  countries by case number (South Korea is now #15 in the world!).

Please pray for every nation to flatten their total case number curve, but most of all, if you are in a state that is still not enforcing strict Stay-At-Home Orders, which sadly includes Florida still that says people going to places of worship have the right to put their communities at risk, please call your governor’s office and tell them to issue a comprehensive Stay-At-Home Order (14 days minimum extended as needed for a week at a time IMO)!

P.S. On a spiritual note: The teaching is “God helps those who help themselves.”  God does not make exceptions for people in places of worship, yes, even for me were I to make the unfortunate decision to show up in person this Sunday.  If you pray and defy prudence, God will not protect you.  God does not like big egos/pride!  If you tempt God, “S/He” will teach you a lesson (I use “He” as a Christian, but realize God is a single parent and encompasses the masculine AND feminine, and I respect ALL loving religions and even atheists who are actively denying God and thereby recognize Him.  ;)). 

This is the Picture of the World on 4-02-2020

Global Coronavirus Stats Vs. China. National Stay-At-Home is still needed.

Global Coronavirus Stats Vs. China. National Stay-At-Home is still needed.

 

3-31-20 Coronavirus Global Update: Looking at Active Case Rate of Increase Day Over Day

This chart below shows that the top orange line, the Day Over Day percentage increase in active cases (infected patients), has been decreasing gradually globally, since March 21st.  It’s still too high to end the pandemic as it was 9.56% last night, and it’s leveled off for 3 days at about 8-10%.  That needs to continue to head lower to extinguish the pandemic, because you cannot do aggressive active case quarantining and aggressive contact tracing of those positive patients when community spread is still excessive. 

That 8-10% level is still too high to allow contact tracing EXCEPT for countries that have their percentage increase of new cases (Day Over Day) down below 0.1% most likely (just an estimate).  China has done this.  The Day Over Day % total case number increase in China was 0.07% for 3-30-20 to 3-31-20.  The US was at 14.74% last night!  Not good!

We need to all join in the #NationalCoronavirusStayAtHome effort, and we need to do so now.  Why?  Because we have to drive down that “Active Case Day Over Day % Increase number to nearly ZERO. 

The states doing either nothing or those making half-hearted efforts to “StayAtHome” as we see in Florida and other states, could easily RE-infect the rest of the states doing the right thing by staying home!   This will last far longer, as I’ve said, and be far more expensive in human lives and economic losses, if we do not take bolder action now.  I spelled it out in this article in the Herald Tribune… HERE

Global Coronavirus Update: Rate of Increase Slowing?

Global Coronavirus Update: Rate of Increase Slowing? “Stay At Home” may be working.

I’m going to update the chart for Global Stats Vs. China (Total Cases) below, but not update the prior comments as they are similar. Just look at the current numbers on the graph… I am referring to the top eight countries I’ve been tracking (7 vs. China).  Others like Singapore have also had success…  (Technical Note: The very small case number increase occurring in China is included in this analysis.  It will take a long time to get the ACTIVE case number in China to zero, because, as they’ve said, they are importing cases and may have some areas of local transmission that are not being monitored well, out in the countryside for example.)

This graph shows you how much worse various countries are doing (How many times worse they are vs. China who is now beating the Coronavirus…

Global Coronavirus Case numbers Vs. China

Global Coronavirus Case numbers Vs. China

3-29-20 Coronavirus Global Update: How many times worse per capita is the situation in the U.S  vs. China?  7.36 Times worse than China in the U.S., per the data I analyzed in the table below from the primary data from Johns Hopkins tonight on 3-28-20 (Graph Below).   China is used as the reference point in the comparison, because their new case numbers are so negligible vs. their total case number.  Please CALL your Representatives, Senators, and Governors who don’t understand exponential math and tell them we need a #NationalCoronavirusStaycation!  (HOUSE Contact Numbers/Email . SENATE Contact Numbers/Email).  Bill Gates, who has worked to exterminate AIDS on a global basis knows we must do this (says shutdown would last 6-10 weeks.  (SEE TABLE BELOW)  President Trump did extend the “voluntary” stay at home suggestion today, but that may not be enough.  It depends on how many Americans take it seriously.  See THIS message of mine from today on StockTwits/Twitter.

I have been saying we should start with 14 days (nationwide though, not “if you want to”) and extend it week by week until we bring active cases down to levels we can do case isolation/contact tracing, which you cannot do when there is rampant community spread as there is in many of our states.).  If you agree, call Congress as above, and please let me know below that you’ve done it!  That may encourage others to do the same.  Thanks.

US Case Number Adjusted for Population is now 7.36 Times China.  That means the US Total Case Number is 636% higher per capita!  Some of that rapid climb could be related to testing, but no one has tested like South Korea (they’ve tested 6.44 X as much per capita as the US by 3-25-20 per this source), and we are 133% worse than South Korea in total case number.  South Korea is flattening out their total case curve as you see below, meaning they have fewer and fewer new cases, while our case number is still growing rapidly (14.7% growth in active U.S. cases, the worst of the “Big 8 Countries” vs. yesterday, which is just where Italy has been or worse; Italy has been looking better in fact for a couple of days).  So much for the conspiracy theorists who don’t trust China to report anything right.  They are wrong!  And the President has just admitted to the very serious problem in the U.S. by extending the stay at home recommendation.  Trump’s been told the risk of large numbers of dead if we let up too soon and let the virus shoot up even higher: 1.6 – 2.2 Million dead Americans.  His words tonight.

Pres. Trump and Dr. Fauci also said with the extension of his plan to the end of April we could still end up with 100,000 to 200,000 dead Americans.   I don’t think it will be quite that high, but we could easily see over 10,000 dead.  If people don’t stay home in many states they will all see pandemics.  Dr. Birx said “every U.S. city” will see a pandemic if they do not take staying at home seriously.  The only question is how MANY get sick and how many die.  It’s up to you and me!  The outcome is dependent on what we decide to do.  This will end at least for this season, but we will determine whether it ends relatively better or worse…

US and other countries per capita Coronavirus cases vs. China

US and other countries per capita Coronavirus cases vs. China.

A good part of the increase is more likely due to what is called community spread or untraceable spread.  We have to get these numbers down BEFORE contact tracing can be done as said, BUT they can do case isolation/contact tracing in states with few cases especially IF LARGER SCALE TESTING CONFIRMS the low case numbers in the less effected states.  They should stay at home/socially distance until we get that testing data.  We need to test more people in every state, so they can be quarantined and kept away from everyone else.  Stay at home if you can and get tested if you develop respiratory symptoms of any kind.  There are as of tonight 2,484 deaths in the U.S.

Back to this week’s new market timing issue…

1.  SP500 Index Market Timing (S&P 500 Index®; SPY, SPX): 

What would satisfy me that the Bulls are serious?

The Bull Market Health Score this week is Bulls 0.5/Bears 5.0 vs. Bulls 0.0/Bears 5.0 for the March 13th close.  It’s a 5 point scoring system.  It has been 0 or near 0 for 4 weeks straight.

For each checklist item below, I give you the points scored as Bullish or Bearish.  If the number is “Bulls 0.0” that means the Bears score a point.

1. New high? (here I look at large caps alone) Bulls 0.0  Answer: No. Closed near the low achieved on March 18th.

2. V*IX trend favorable?  (VIX trend is either up, down or undecided and consolidating.)  Bulls 0.5  Answer: Neutral but barely.  The VIX Game Score is Bulls 0/Bears 7 at a VIX close Friday of 66.04, which is still “off the charts.” Some say above about 30 volatility in anything is untradable. But see my comments on social media as to why I gave the Bulls 0.5 point here. 

From last week:  “Remember that as volatility falls from here, it does not mean we are back to the races.  After around 11-26-08, VIX fell over the time right up to the bottom in early March 2009 at SPX 666ish.”

3. AD % Line in an Uptrend short term? (This is a proprietary stat; see base of report.): Bulls 0.0 point.  Answer: No.  It is in a downtrend despite a Friday bounce attempt.

4. Higher volume on Up Moves?  Lower volume on Down moves?  (Has to be true for either large caps or for both small and midcaps to be a “Yes.” If discrepant, the Score is 0.5)  Bulls 0.0 point.  Answer: No.  Look at the chart.  Same pattern as last week!

5. Is the “U.S. Index Matrix Signal,” as I call it, positive?  (To be positive, small and mid caps must be trending up with large caps; if mid and small caps are discrepant with each other the score is 0.5)  Bulls 0.0 point. Answer: No.  Same as last week’s issue.  The small caps are down 41.52% from their ATH 8-31-2018 vs. SP500 Index down 32.08%.  

Graph of the Bull Market Health Score (BMHS)

Note: 1000 = 1 BMHS point on the scale.  SPX values are adjusted (by 3000 points) to plot them more easily on the same graph.  (That means you should look at the relative changes in the SP500 Index (SPX), not read the values off the Y axis.)  BMHS cannot be below zero or above five.

Note that back in the summer of 2019, the market started to rally once the BMHS bottomed out for 4 weeks in a row.  The market rallied after a small blip up on Friday, 3-20-2020.

Bull Market Health Score Update for 4-03-2020

Bull Market Health Score Update for 4-03-2020

This Update of the Earnings Picture (see FactSet.com for original data and some great content!) for the S&P 500 Index (see caption) shows the trouble ahead for stocks:

Note that analysts think earnings will be negative for the SP500 in Q1 and Q2 of 2020, and they are bringing down estimates for the second half of the year and for the full year, even more than the did last week.  

4-04-2020 Update: Note the dramatic declines in earnings and revenue projections for ALL of 2020…but rebounding per current numbers in Q4 in earnings terms.  Revenue is expected to rebound in Q3 and Q4 as you see below…

2020 Earnings Falling with Rebound Expected in Q4

2020 Earnings Falling with Rebound Expected in Q4

Revenue Growth to Turn Negative in Q2 but Rebound in Q3 and Q4.

Revenue Growth to Turn Negative in Q2 but Rebound in Q3 and Q4.

 

This is probably just the tip of the Coronavirus Recession iceberg. 

Keep up-to-date and read my comments on the current setup during the week at Twitter and StockTwits (links below) where a combined 34,304 investors are following the markets with me…

Follow Me on Twitter®  Follow Me on StockTwits®.  (real time messages are on StockTwits as always and back on Twitter)

Join the Conversation in the StockTwits “MarketTiming” Room  (I’ll publish comments in the room periodically)

I wrote this for the 1-31-20 Issue:

‘As I warned many weeks ago, if the market keeps pushing above that top long yellow line [on the SP500 Index chart], there will be eventual payback.’  This is the payback…”

I told you last week, I’d be selling more if this turned into a “Big Bear Market,” which it has per my ‘New Rules” (scroll down to “New Rules” in blue on that page…). 

So what is lower?  From prior history, it’s around 50-60% off the all time high of 2-19-20.  Predicting the exact percentage is impossible, but let’s use 50% as the drawdown for the SP500 Index in making some reasonable guesstimates of what a Big Bear Market would look like numerically.

The only reason I added a bit of exposure during the sloppy consolidation of the past 3 days was the change in the VIX I noted on social media (see Friday posts; links below).   If it were not for that, I would have been hands off.  At a certain percent loss, I’ll sell further exposure.  I’ll post my exposure level on social media sometimes today.

I warned also that the Fed cutting rates past 3 cuts was a recession signal.  The Federal Reserve tends to be behind the curve, because it’s conservative and it tries not to upset the markets, but it was far behind the debt markets and had to catch up.  It also had to supply liquidity in large amounts, because of the demand for dollars around the world.  Here come the trillions of dollars!  Fiscal and monetary trillions alike. That is why gold will work in the end, even though it’s on trading pause right now.  I think it has further to fall as all assets are revalued in a crash as they were in 2008.

Is it going to be bad for our economy?  Considering California and New York are entirely shut down and the rest of the country is doing a half-bottomed version of that (it should be a #NationalCoronavirusVacation as expressed last week; this piecemeal approach will drag it out much longer and cause more economic damage in the end in my view).  It will also lead to re-infection of the states doing a full “time out” by people from the states not doing it. 

Same as last week: “Right now, we don’t know how deep the recession will be and whether the dip in activity will exceed one quarter, which is required definitionally, but regardless, we cannot expect the market to just bounce back to the previously stretched valuations while earnings and revenues are FALLING.”  You can see that in the two charts above.

I covered my Big Bear Market trading strategy in last week’s issue, but I’ll say more below… Have a look at the chart…

SP500 Large Cap Index (click chart to enlarge; SPX, SPY):

Market timing the SP500 Index (SPY, SPX). A Big Bear Market is here.

A Big Bear Market is here.

Now let’s review investor sentiment…

Survey Says!

Sentiment of individual investors (AAII.com) showed a Bull minus Bear percentage spread of -16.90% on 3-18-20 vs. -21.57 on 3-11-2020.  The spread is again “bad enough to support a bounce, but can easily go 10 points or so lower.”

From last week, a review: “This degree of Bearishness is fairly extreme, but there are still Bulls to be toppled.  The spread should push toward -30% if they are.  Near the Great Recession bottom the Bears were at an off the wall 70.27%, which was a convincing washout level.  The peak Bull – Bear spread hit -30 and below, peaking at a -51.4%.  That is a huge extreme that would only happen after investors have been pummeled by losses for many months, which was the case.”

Bulls Neutrals Bears
34.25% 14.50% 51.15%
Thurs. 12 am CT close to poll

 

This I found more interesting than the spread: Bearishness at a similar degree of decline in the 2008 much slower crash reached 70.27% with Bulls beaten down below 20%.  We are not at the ultimate bottom yet IMO.  We are right around the same sentiment levels as 10-01-2008 (AND PRICE DECLINE AS NOTED ABOVE) of:

33.33% 11.67% 55.00%

Not a bad match wouldn’t you say?  The spread was a somewhat juicier 21.7% back then.  But if we take this as a valid comparison, that means we could have another 26.7% lower to go from HERE. 

On a scale with 100 points being the 2-19-20 high, the current decline is 32.08% or a relative level of 67.92 points.  That’s where we sit as of Friday, March 20th.

Now drop that by 26.38% and you get?  Drum-roll…. a final low of 50.00 points on the 100 point scale, which would be a total drop off the 2-19 high of 50% (50/100).

That number is very possible considering:

1. The fact that we entered the “Big Bear Market” range of over 25% losses is symptomatic itself of the magnitude of what we are in.

2. The speed of the fall, which is, as said, 12.14 times as fast as in 2008 off the 2007 top.  That decline took 359 calendar days!  This one to the current low of Weds. was 29 days.

3.  The massive increase in unemployment and economic damage to many, many thousands of businesses nationwide.

So yes, that means the market could drop to a total decline of 50% off the 2-19-20 top.  That means you’d have to have a 100% gain off that bottom to get back to even.  This is why you don’t likely want to ride the pony all the way down that there hill…so to speak…

If you take off some exposure on a further drop, that’s not always ideal because if that becomes the bottom and you wait a day to invest back the last “chunk” of 5-10% that you took out, you could be 10% behind.  But what’s 10% among friends?  Just kidding, but really, there is no perfect way to time the unknown, which this is.  And if you are 10% behind on 10%, you are really only 1% behind in total, which is not the end of the world coming off an important low.

Why plan ahead?  When no one knows, it’s best to have a mechanical/numerical system.   So what’s your plan?  Write it down or you don’t have one in my view.  You need to hold yourself accountable to improve as a trader/investor.

It would be better to sell exposure on very strong bounces, and buy the exposure back on the pullbacks.  That’s what I call passive shorting, explained HERE However, the same warning applies. If the market simply continues up from where you sell, you drop behind.

You can always re-enter, and you must do so to have this work; otherwise, it’s better to just add what you can at each level down, keeping cash for still lower numbers.  Or you might wait for some sort of fundamental turn in the economy/coronavirus stats along with improvement in the charts.  Decide for yourself.

But what if…?  If you add on a further stretch UP, the market could then simply continue to plummet to new lows wiping out the amount you chased the market by in a few minutes.  Again, there is no perfect way to adjust exposure, and the opportunities to sell “higher” have been limited during this rapid crash.

If you believe as I do that the market is not done going down, you do not want to ride that pony all the way with more exposure than you would like. Consider what you can tolerate and still be OK financially, and decide what you’ll do based on that.  I heard someone “sold everything” last week.  Better to “sell some” at different levels particularly if you did not take profits at the top or cut your exposure dramatically then.  “Selling it all” is a bad idea, unless you absolutely need the money in the next few years for your kids’ college education, or you need to preserve a certain level of assets for retirement etc., because you did the math and you could not live without an extra $X in income.  Determine what that number is and drop your exposure to it as I’ve outlined, or come up with your own plan to accomplish it.  If you “get out” without thinking, you will likely never get back in or end up buying far too late next time. 


2.  U.S. Small Caps Market Timing – Russell 2000 U.S. Small Cap Index  (click chart to enlarge; IWM, RUT) 

Simple message: Stay out of small and midcaps unless you intend to trade them.  You don’t want to own them in Big Bear Markets due to their inherent higher financial risk.  We are now in a Big Bear Market until proven otherwise.  If you know a particular small cap can do well in a recession, of course make an exception, but remember that ALL ASSETS are revalued against each other in a liquidity crisis, which this is, until the Federal Reserve is able to stabilize markets.

I would add that if you held them all the way down, selling them now may not make sense!  Sell the bounce only and when stocks fall again, add back LARGE CAPS until the Bear Market is over (up to 2 years but time is compressed of late, so it could be much sooner).

Market timing the U.S Small Cap Index (IWM, RUT). Stay out for now.

Small caps are a trading vehicle only due to their greater financial exposure in a Big Bear.

 3. Gold Market Timing (click chart to enlarge; GLD):

Market timing the gold ETF (GLD). Can gold bounce now or will it break support?

Can gold bounce now or will it break support?

Gold broke down in part or largely due to liquidity concerns as well.  There is now room for  bounce, but over the intermediate term, gold could continue to suffer should stocks fall another 26.2% from here.

As said last time: “I am keeping only my core GLD exposure, which is now at about 4% of all assets.”  I also have very tiny investments in a trial gold stock portfolio that is doing poorly due to the recent drop, but my GDX profits are safe.

Check out the “Market Signal Summary” below – after you review the following chart…

4. Interest Rate Market Timing (10 Year Treasury Yield; click chart to enlarge; TNX, IEF, TLT):  First take a look at the chart…the BOUNCE!

 

Market timing the US 10 Year Treasury Yield (TNX, TYX, TLT, IEF). Rates rising in counter trend bounce.

Rates rising in counter trend bounce.

The “Falling Rate Shock” was ongoing until it was overdone.  There was then a 7 day bounce and a two day correction in the bounce. 

The next direction depends on the market’s view of inflationary pressures, which are likely to stay muted as the demand will be low from consumers who don’t have jobs.  The consumer economy just had its knee caps broken by a mobster called coronavirus.  It’s not a good situation to be in at all.

The financial situation we are in is the result of the excesses of the past FOUR decades and the overspending of Presidents of both parties beginning with Ronald Reagan who created the first multi-trillion dollar National Debt by the end of his second term with the help of Tip O’Neill, the Dem Speaker of the House, and continuing now with Trump (who had a 26% overspend in 2019 vs. 2018 despite the BS tax cut, which is a redo of “Tinkle Down Economic” theory that has failed now for the THIRD TIME (they think we are idiots apparently?).  I said in advance it would not work and was proven correct.  Trump spent magical dollars we did not have!  And now we need LOTS OF MONEY to help people who are hurting economically and in health terms.

On and on it has gone with both parties as I’ve discussed previously (Google “The Invention of Fiscal Lying”).  Whether the spending was worth the money spent under Reagan to defeat the Soviet Union, we can discuss (were they defeated???  They seem to have taken Crimea back huh?  We like having Eastern Europe mostly free of course.), but what it has done is put us in a precarious position where we now need trillions to pay people to tide them over because of the coronavirus, and we really don’t have the money, and we really already have too much debt.  Hence my core gold position…

“Rates were already crashing as of 1-31-2020, and it’s even worse now.  This is a recession signal the Federal Reserve should be careful of ignoring.”

They didn’t! Lots of cash coming!

“Federal Reserve tools should be used in crisis times, and THEN reversed!  They failed to reverse rates when they could and now they have less powder…but there is always the printing press!  Ugh!”

They are starting with the printing presses now…  I don’t need to go over what they are doing.  You can find it all over the mainstream media.

Now let’s review three key market timing signals together…. 

Do not use these signals as a trading plan.  They are rough guidelines.  I currently share my actual BUYS and SELLS in as timely a way as possible on social media (links above).

MY MARKET SIGNAL AND TREND SUMMARY for a Further U.S. Stock Market Rally with Real GDP Growth (“Real” means above inflation):

Stock Signal RED for a further U.S. stock market rally with a short term BEARISH and  longer term Bearish SP500 Index trend. 

Gold Signal NEUTRAL  for a further U.S. stock market rally.  The Gold Trend is  short term BEARISH and longer term Neutral.   GLD’s longer term neutral, but it will be longer term Bearish if it drops below the Oct. to Dec. 2019 lows.

What gold does mostly as I’ve written HERE is follow real interest rates around the world (if you own “gold in dollar terms” you care about U.S. rates most of all).  The rest of the world does matter however, including massive buying by central banks. 

GUIDE: “Remember GLD is being used as an indicator for the ECONOMY here.”  If gold continues to rise again, it means the market believes real rates are going to fall or stay negative for a period of time.

Rate Signal RED for a further stock market rally with a short term Bullish and longer term BEARISH 10 Year Yield Trend.  (Remember: higher rates mean lower bond and Treasury prices and vice versa).  Rates are still too low to consider the signal to be anything but recessionary.  The bounce is helpful actually, but will not necessarily last.  The short term call defines the immediate rate trend off the low alone.

Thank you for reading.  Would you please leave your comments below where it says “Leave a Reply”… or ask a question if you like…

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Standard Disclaimer: It’s your money and your decision as to how to invest it.

I thank Worden Brothers for the charting system I use to post these charts.  If you want to know more about the charting system I use every day, contact me.  It makes it much easier to follow along with me if you can see the charts and manipulate them on your own computer.  It’s a great investment to have an excellent charting system.

Note: I’ve updated my criteria for the equity signal for a further U.S. stock market rally to the following: GREEN = Bullish, YELLOW = Neutral, RED = Bearish.  In other words, the colors tell you whether the signal supports the stock rally or not, while the Bullish, Neutral, and Bearish designations are about the trend. 

A BEARISH trend signal does not mean we should not buy.  A BULLISH trend signal does not mean you cannot sell some exposure.  It depends on what is going on in the economy and how oversold/overbought the market is at a given point whether the Bearish signal is to be sold or bought, sold on the next bounce, etc. and whether a Bullish signal is to be bought or if profits should be taken.  A NEUTRAL trend signal does not mean the end of the Bull or Bear. It means to wait and look for possible subsequent entry points within the existing trend, Bull or Bear, but preserve capital if the entry fails.  Our strong intention is to buy low and sell high.  By the way, I will keep showing the prior orange “Trigger lines” in the IWM and GLD charts for now as reference points only; they have historical value for us from the post-2016 election period.

Copyright © 2020 By Wall Street Sun and Storm Report, LLC All rights reserved.

This entry was posted in Bonds, gold, investment, investor sentiment, large cap stocks, S&P 500 Index, small cap stocks, Treasuries and tagged , , , , , , , , , , , , , , , , , , , , , , . Bookmark the permalink.

5 Responses to Market Timing Brief™ for the 03-20-2020 Close (SPX Earnings/Rev and Bull Market Health Score Update 4-04-2020; Coronavirus Update on 4-06-2020 11 pm): “Deep U.S. Recession? If So, Bigger Losses to Come. How Big? Gold Remains ‘Insurance Only.’ Debt Markets Throwing Fits. Fed is Catching Up Still.”

  1. Charles says:

    Is the 2008/09 markets crash a good comparison to a virus related crash which causes extreme economic damage? We know the Federal Reserve will support the markets and they are buying Mutual bond funds! Any sign of improvement in Coronavirus numbers even if there’s no evidence to suggest a real improvement will be risk on as we see in the futures market and other world markets today! If the bounce holds today IMO, the S&P reaches 2700/2800 area. I will likely trade a sustainable bounce over the next week or two on pullbacks if we see them.

  2. H Paul Vaughan says:

    Hi David,

    Always informative. Given every recession I’ve worked through (Volcker forward) resulted in a housing crash, how soon, June, July? Thinking lenders might get too “conservative”, which is deadly for Real Estate. I do appraisals as well & hoping the refi-boom will continue once we can go inside homes again.

    I’ve listed my house & pretty sure we should rent/lease. Sit on that cash until. Your thought(s)? As opposed to buying.

    Thx

    H.Paul Vaughan
    Certified Residential Appraiser AR013413
    Keller Williams Shoreline DRE# 01276236

    Pauleev on Stocktwits

    ✌🏽

    • David Durand says:

      Hi Paul, Thanks for your comment and interest in the blog. There will be pressure on housing as people will be less interested in upgrading when things are dicey. Timing? You’d probably have better data from your field of work. The other issue is it’s an election year, and I’ve been told by a guy who owns 26+ houses, people tend to sit on their hands prior to an election. If you can sell your house now, it may be you’ll be able to scoop another up at a better price later as you say. Lots of “ifs” in there, and its hard to make a fully informed decision without a sense of when COVID-19 will be under control. I’m going to wait until things get “messier” to buy real estate. All the best!

  3. Charles says:

    I agree with that market analysis with an eye on the Federal Reserve and other monetary stimulus. So far, the rate of market decline has slowed and IMO, a re-acceleration of the markets decline would confirm a likely 50% plus fall! Excellent job!

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