A Market Timing Report based on the April 7th, 2020 close…
5-15-20 Since my prior update on 5-10 here, I’ve changed the name of the reopening plan to “Age Based Reopening,” or A.B.R. for short… There is more to it than what is described below, and I would tweak my prior age groups to:
- Up to 30 years old
- Up to 40 years old
- Up to 45 years old
- Up to 50 years old
- Up to 55 years old
- Up to 60 years old
From 2 to 2.5 weeks after a group goes back to work, they will be tested (at least to gain a statistical view of the group IF not testing every person) to see how many have been infected and how many have been either hospitalized or died. Above 60, we’ll have to evaluate the data from the earlier groups, but I suspect healthy older individuals WILL be able to return to work, although they may still be at somewhat higher risk due to the relative immunosuppression vs. younger people based on age. I’ll be sharing more of my reopening plan with government leaders and the media…
5-10-2020 Coronavirus Update: The chart is self-explanatory… The downtrend continues in active cases despite increased testing, which is positive, but the return to work while there is still community spread of the virus (simply put “they don’t know how Jack or Jane got the virus”), will inevitably lead to a surge in cases and more deaths.
My Back to Work Plan (in states with falling case numbers for 2 weeks in a row per CDC guidelines):
I would suggest that governors allow groups by age back to work in stages. This plan does NOT include those at risk for health reasons. They’ll have to wait for a vaccine, and we’ll have to support them as a society until it’s safe for them to work.
- Up to 30 year olds go back to work first, then…
- Up to 40 year olds, and then…
- Up to 50 year olds
Going back in steps like this would increase the immunity among the “worker group,” which would in turn reduce the R0 (pronounced “R Naught”; it’s the transmission rate – the number of other people each infected person infects) for those going back to work in the “next added shift.” As the immunity of the population increases, the R0 falls.
While going back to work in “non-essential services,” those doing so would have to keep away from older individuals to protect them.
We would have to see what the stats did by pausing between each of these 2-3 weeks at least. We cannot afford to just “let the virus rip” as many are suggesting whether they are articulating that or not. Here is an essay to read on why this will lead to bad results.
4-26-2020 Market Update: My Bull Market Health Score is sending an ominous signal (a drop) at a point where the Bulls MUST move the ball forward and reach another new recent high. The VIX score was 1 (Bullish new low), but the volume and other parameters were weak (see back 2 issues or so for an explanation of the score).
4-24-20 Coronavirus Update: Using data through last night, the first chart shows COVID-19 active daily case % increase has not been falling since the 13th, (which could be due to testing, but it shows there are lots of new cases, so that’s not a positive epidemiologically, whether there is a lot of testing or not as much testing, as it says “don’t reopen yet, because there is community spread,” meaning too many cases to case trace. The only FDA approved “treatment” for COVID-19 is “Stay At Home.” Vaccines will succeed in the end, but that will be a ways out time-wise as said HERE (see April 24, 2020 post). Note also in the second chart below, the % increase in deaths has not fallen for 5 days. It will, but it needs to fall even more along with new cases…
4-20-20 Coronavirus Update: Although I was concerned about the bump up you see in the chart below from 1.56% to 6.52% (on the far right on the chart), the next two days came in at an Active Case % D/D increase of 3.24% (4-19-20) and 3.60% (4-20-20), respectively. The bump up was two days ago, NOT last night. I apologize for the calendar error. I did say that the active case number was subject to the caveat of higher rates of testing, which still stands as an issue in gauging the rate of recovery of the U.S. from COVID-19 (SARS-2 is the virus).
Although deaths lag behind active case number improvement by several weeks, they do reveal progress better when testing levels are rising (see 2nd chart below…). The data is very lumpy/bumpy, but the trend in the “Death Chart” is clearly down (see next chart below…).
Miami just did a study of over 800 people without a known diagnosis of COVID-19 and found 60% had antibodies to COVID-19, which means they were exposed without knowing it (Ref. NBC News; 11th Hour tonight with Brian Williams). The more people you test the higher the active and total case numbers rise. But you cannot manufacture dead patients by testing more people… This shows things are improving. The drop to a negative number that you see back in March was not explained just as some drops in total case numbers were never explained by Johns Hopkins or any other source I have found. We need to see a move to NEGATIVE day over day increases both for active cases and deaths! Then we will really be making progress….
4-12-20 US Market Update: More Reasons Not to Anchor on Stories (which was my original conclusion in the post that begins below the virus updates…)
SPY SPX and IJH midcaps are wedging up on the daily chart (negative), despite progress made on price. IWM (small caps) is at the top of its up channel, although there is no wedge there. My Bull Market Health Score (see 2 issues back; BMHS) is 5/5, although it could be misleading on a strong bounce in a Big Bear Market. Markets can look like they are in recovery only to pancake again.
You see, if you look at the daily trend, the trend off the low is UP. The close above the March 13th high is positive. But in the bigger picture, all 3 cap indexes can bounce to just above the 50 day mavs and fail, only to continue the Big Bear Market to the prior low or a brand new recent low… They’ve taken that trip before. Although I doubt the market is fully discounting the mess ahead, I am hedging my bets by buying in steps.
But by all means, take your pick. The number of people who will agree with you, whatever you think are numerous… That’s why I refuse to anchor on what any human thinks will or won’t happen. I set my exposure level for better or for worse, based on my view of the markets and their risk level, but then adjust my exposure according to what the market actually does. None of the self-proclaimed geniuses knows what will happen; no one has a clue about the timeline of recovery from the virus or of the economy. None. All President Trump has to do is open up things too early, and we’ll see a second big wave of cases and 10’s of thousands of additional deaths. How do you think the market would take that? I’m not saying he WILL do that, but he could do so, given the way he’s been talking about getting everyone back to work quickly.
Stories are made up. They may be educated by the facts, but take care not to anchor on them, even those I share. It’s better to “Be flexible,” IMO, and follow the markets, not the stories about the markets. As things change, we change our minds… #AnchorsAway!
(virus updates are just below and my prior market update/point of view is below those…)
4-12-20 Coronavirus (COVID-19) Update for the Globe: The Day Over Day increases in both deaths and active cases are still on the decline for the world! This is proving that the Stay-At-Home programs are working… The US active case Day/Day % increase fell to 4.85% since yesterday’s 5.63% (it was 10.55% on 4-04-20; see chart posted yesterday below) … Now we need to drive the active case % increase to NEGATIVE numbers as it was at the end of February and in early March. Had the entire world aggressively stayed at home early on the huge increase in active cases and deaths could have likely been markedly reduced. The skeptics delayed the response. There are now over 22,000 dead Americans. Now we have to be sure when we “open up for business,” an entirely new pandemic is not created…
4-11-20 Coronavirus Update for the US: Day Over Day Active Case % Increase Still Falling!
You can see “Stay-At-Home” is working. The percentage plotted should eventually turn NEGATIVE, and then we’ll know we are really winning. At the same time the total case number curve will become a horizontal straight line, as eventually we’ll have close to ZERO new cases each day. That is the goal at any rate! The last data point for active cases on the chart below was 5.63%. On 4-11-20 it was 10.55%. That’s good progress!
(Note: There was an unexplained DROP in the % increase on 3-13 which made no sense, so I smoothed out the curve to remove it. The Johns Hopkins team never explained that. The next day there was a spike up by a huge 114.98%, which was likely the combination of two days of data. Again, no explanation…)
Back to the issue I wrote up earlier this week on the markets..
NOTE: In this update I take a broad view of global equity markets and give you my conclusions about 1. How we get out of this mess and a related 2. How long will it take…
Is it Over Yet?
Almost every chart I looked at this morning across the globe is in a 4th wave up position preparing for the 5th wave down to test the prior low or lower. That does not mean the market cannot trade up higher; it will simply have farther to fall. It would be much clearer if the market respected my “anointed target” from yesterday (look it up on my message stream). Otherwise the market (SP500 Index, for ex.) may go up to or above the 50 day moving averages of “just about anything,” before falling again.
Is it possible the market is NOT going to retest further than it did on the last pullback to the 38.2% Fibonacci retracement level? Yes, but it’s not “probable” for reasons I’ll discuss.
There are very divergent views of this market from “If you are betting against the USA, I’ll bet against you every day of the week,” to “It’s just economic gravity and we’re going even lower than before.” So they’ve split the difference with a 50% retracement of the total drop off the top. Like every other poll in our country, investors are split about 50:50.
I believe strongly in basic research, as loyal readers know, but I also know the time element of that research having contributed to medical textbooks through my own work. It takes time to develop a vaccine, which to me will be the first “cure” for COVID-19 disease for the general population. The drugs which are candidates for directly defeating the virus (which would be actual “cures” vs. prevention by vaccines) have a lower probability of winning, but the number of companies chasing those solutions may lead to something that helps at least at the margin. We see that in cancer Rx all the time. Just a 4 month improvement in survival for cancer patients is often given FDA approval. If a drug allows even 10% more COVID-19 patients to recover as proven by the stats, it would potentially be approved. The skills companies have from defeating HIV give them a head start for sure.
The best possibility on the “drug front” is still in the realm of immunological approaches and that is the use of “immune serum,” which is obtained from infected patients, to then be replaced by mass produced humanized antibodies to SARS-2 (the name of the virus causing COVID-19 disease; just like HIV causes AIDS) if they can get that to work. Those who have been infected will be able to supplement their incomes (if needed) through these donations.
This “passive immunity” approach has been used successfully in the past against other viruses and there are some initial reports that it may be working. We need data to prove it. If it works, it could be used in medical workers to protect them if they have not yet been infected (prior to a vaccine being available). It could be used both for prevention in a small or vulnerable population and for treatment in those who become symptomatic.
Vaccines are much more likely to return our society back to a relatively COVID-19-Free state except the people who refuse to take any vaccine. BTW, it will be a vaccine everyone takes like the MMR vaccine, because of the seriousness of the disease being FAR WORSE than the seasonal flu. https://bit.ly/NationalCoronavirusStaycation
I also know economies take time to heal after a disruption and there is likely to be an overhang on the economy, meaning some significant remaining level of caution about doing the things we used to do, until SARS-2 (COVID-19 is the disease it causes) is “cured” by a vaccine. This is what “Back to Work” will need to look like: We will likely start allowing people to go to work if they 1. Wear WELL FITTING N95 masks (even surgical masks serve mainly to reduce spread of infection vs. protecting the wearer FROM infection -wear them, even a cloth mask or scarf for others please!) 2. While staying at a distance of 6 ft or more from each other. 3. In well ventilated/air filtered buildings. 4. A COVIDTracker/COVIDTracer/CaseTracer Public Health work force needs to be in place as I told a local news station HERE… (remember, we did not have enough public health pandemic prevention in place before COVID-19 hit!)
CONCLUSION: There will be a delay in the healing process for the economy as we wait for an effective vaccine, and this will determine the length and depth of the recession we see. That timeline will impact and slow the recovery in the global equity markets. I currently favor a complete/nearly complete retest of the prior lows and potentially even lower lows, but nothing is a given. Remaining flexible is the best strategy rather than anchoring on EITHER extreme of “That’s it,” or “We’re falling to [substitute your favorite guess for an abysmal SPX low]!”
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