Flip Flopping Friday – Winding Down a Weak Week

That went pretty much as expected

On the whole, it was just the one big drop on Wednesday morning that did us in and, if we just consider the drop from our 20% line at S&P 3,420 to our 15% line at 3,277.50, then it's just a 5% correction in a bull market and our weak bounce line is 20% of the 142.5 drop (we ignore the spikes), which is 28.50 but now we rond so call it 3,310 and 3,340 would be our strong bounce line – where we were rejected yesterday afternoon.

This morning we're back down to 3,280 as Apple (AAPL) earnngs disappointed along with, as we predicted – Starbucks (SBUX) but not too badly so, in yesterday's trade idea for our Earnings Portfolio, we're going to cash in our 10 Jan $70 puts for a small profit and the real money will be made on the expiration of the short calls below the $90 line -so those we can ride out for a bit.  We never thought SBUX would hit $70 but the puts would have jumped nicely if SBUX took a big hit.  It didn't so that part of the trade is over.  Never forget why you got into a position.

Earnings reports and guidance from technology companies after the closing bell weighed heavily on markets overnight. Twitter (TWTR) plunged 15.3% in offhours trading after posting its slowest user growth in years and warning that uncertainty around the U.S. Election could compress ad spending.  Apple (AAPL) shares dropped 4.2% ahead of the opening bell after quarterly iPhone sales fell from a year earlier. That, combined with a delay in the launch of the company’s new smartphone, led to iPhone revenue falling more than analysts had expected (but exactly as we had expected).  Shares of Facebook (FB), Amazon (AMZN), Tesla (TSLA), Microsoft (MSFT) and Netflix (NFLX) are all down over 1% premarket – Google (GOOGL) is up $100 (7%) and is pretty much holding the market up by itself this morning.

The big tech earnings were not that bad but markets did not respond positively, so that does suggest a deeper sense of negativity in the market,” said Seema Shah, chief strategist at Principal Global Investors.  "While big tech has driven the U.S. stock market
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Faltering Thursday – Rally Runs Out of Steam without Stimulus

"You give it all but I want more
And I'm waiting for you
I can't live without you" – U2

It's GDP day and we're all expecting some fantastic numbers at 8:30 as the US economy bounces back from Q2's -31.4% drop but, as I have pointed out before, 100% less 31.4% is 68.6% but 68% + 31.4% is only 89.35% so we need more like a 45% gain in GDP just to get back to our Q1 level, which was already crap at -5% – before Trump even had the virus to use for an excuse on what a terrible job he was doing with the economy.  

Q2 was the biggest downturn in GDP in US history – including the Great Depression, including 9/11 and, since then, the Trump Administration and the Federal Reserve have put over $4,000,000,000,000 to work proping up the market.  $4Tn is, by the way, an entire Quarter of GDP so, rather than be excited that the GDP is coming back to "normal" we should be alarmed at how adding 100% to the Q3 GDP ONLY gets us back to normal.

Category Q2 Q1 Q4 Q3 Q2


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Wednesday Writedown – Virus Resurgence Spooks Markets

Wheeeeee! 

Down we go again as US cases hang around their record highs and Europe is starting to catch up as another wave of the virus goes global.   No country, of course, can match the US in number of cases or number of deaths because we are truly the most incompetent Government on the planet.  Of 50 US states, only 2 (Mississippi and Mossouri) do not have rising numbers of viral cases – only 2.

The does not, of course, stop Donald Trump's White House from announcing that it has "successfully ended the COVID-19 pandemic" on the same day that 73,240 Americans came down with the disease.  

“We have exploding case counts. Death rates will undoubtedly rise. They are living in a parallel universe that bears no relation to the reality that Americans are living,” said Dr. Tom Frieden, former director of the Centers for Disease Control in the Obama administration. “And this idea that we should let it spread and protect the vulnerable is a really dangerous mistake. The idea that it [containing the virus] can’t be done ignores reality.”

Do you see where it says "National Emergency Declared"?  That was 7 months ago when the US had less than 2,000 cases and now, on October 27th, with 8,779,839 American infected (73,240 in a single day), the White House has declared the National Emergency is over, not because it's actually over, but because it's a week before the election and Donald Trump likes to claim he defeated the Coronavirus at his rallies and now he can say "it's official".  

1,000 Americans per day are dying.  3,393 Americans have died from Terrorist attacks yet 1,000 people, EVERY DAY, are being killed by Trump's virus and he's declaring "Mission Accomplished".  20 years later, we still have to scan our bags and take off our shoes at the airport and even the incompetent George Bush II formed the entire Department of Homeland Security in response to 9/11 and the TSA was formed on November 19th, 2001, 5 weeks after the attack on the World Trade Center.

CartoonsWhy?  To prevent more American deaths.  To help Americans return to their normal lives
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Testy Tuesday – Dropping Below the Lines

Wheeeee – that was fun! 

It only took a day to wipe out the rest of October's gains but we recovered a bit off the weak bounce line (of the 15% line) but that was sure to lend support so now we calculate the bounce lines off the bounce line and we fall from 3,562.50 (the 25% line) to 3,360 (the weak bounce line) and let's call that an even 200 points which makes the bounces 20% of that so 3,400 on the dot is the short-term weak bounce and 3,440 is the strong bounce but 3,410 is the 400-Hour (2 month) Moving Average on this short-term chart and that's about a month – so we'll have to respect that line followed by our 20% line at 3,420 – that's going to make it a tough slog to get back through that zone of resistance.  

Keep in mind TA is totally BS, our 5% Rule™ is not TA – it's just math.  Math that is derived from the same formulas that drive the electronic trading that is 90% of all trading these days – so it works very well.  If you want to apply TA you shouldn't look at a chart's past but consider it's future.  We're significantly below the 100-hour (2-week) moving average and, since it's a fast-moving average, it's going to get pulled down quickly and that's going to turn that blue support line into a downtrending line of resistance and, since we are as much below it as we were above it at the moment – then we can imagine the downslope will match the upslope but, for that to happen, we'd have to be having days below the 15% line again so – if we can't pop back over that red 400-hour moving average this week, which also "happens" to be our 20% line heading into the election, then DOOM!!!! is a ahead for the market.  

Of course DOOM!!!! is a relative term as we're miles up from the bottom but not far off the 3,200 we started the year at.  Earnings season has not been kind so far, as we've fallen almost 10% from our too highs since companies began reporting in earest and it hasn't been the data – as we haven't had too…
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The Week Ahead – US Virus Infections Hit a New Record Ahead of Election

4 more years!  

At this pace, in 4 more days anther 240,000 American citizens will hve the "China Virus" – named so by the President despite the fact that, to this day, less than 100,000 Chinese citizens have caught the virus – TOTAL!  By election day, 480,000 more Americans will be infected, more than Germany's 8-month total and, at over 60,000 infections per day (more than Singapore or Ireland's totals), we are now pacing at a new record of infections heading into an election to decide between a candidate who belives the virus is a major threat and one who doesn't.  

Keep in mind these infections are increasing and, with 8,637,000 Americans now infected (one in 38 people), if we don't DRASTICALLY change our ways (hint, hint for next Tuesday!), we are on a truly disastrous path that is not only a threat to your health – but a dire threat to our economy as well.  This is the ticking time bomb Trump is leaving us, whether he stays in office or not.  Like George Bush II's economic collapse before him, the Democrats will inherit a disaster in progress which the next Republican Candidate will try to blame on the Democrats – and not the man who truly caused it.

I would almost hope Trump does get re-elected – so that people will truly see him trapped in a bankruptcy he won't be able to walk away from but that bankruptcy – Moral, Ethical, Evironmental, Financial, Health and Reputational – is our bankruptcy and the bankruptcy of our children, which will take many, many years to recover from.

 

IN PROGRESS

 

 

Friday Market Folly – Up and Up Regardless of Events

Higher and higher we go.

994 Americans died from Covid-19 yesterday, 1 per minute during the debate where Trump denied it was a problem, leading Joe Biden to give him a WTF?!? look.  As Trump falsely stated that we are "rounding the corner" on the virus (we are not) and that a vaccine was ready (it is not), Biden pointed out that projections indicate that over 300,000 people (50% more) will be dead by Christmas – though he didn't say it that harshly.

In reality (a place we're no longer familiar with) Pfizer and Moderna have both said they could apply for Emergency Use Authorization from the US Food and Drug Administration in the coming weeks, but only if they have positive results from their Phase 3 clinical trials. Neither company says they know whether the results will be positive. Pfizer has said they could apply for emergency use authorization after the third week in November. Moderna has said they could apply in early December.

"99.9% of young people recover," Trump said. "99% of people recover. We have to recover. We can't close up our nation," Trump said.

So far, about 2.6% of people in the US who tested positive for Covid-19 died from it, according to Johns Hopkins University. Recovering from Covid-19 depends on someone's underlying health conditions, and many survivors experience lingering symptoms. Health experts are unclear as to why some people experience lingering symptoms and other internal damage.

"If you look at the people who were sick, but didn't require hospitalization," Dr. Fauci said, "when you look at the percentage of them — that actually recover, and recover within two to three weeks — a substantial proportion of them don't feel right."  According to a CDC survey, symptoms subsided in some people in as little as five days, while others, studies show, have experienced symptoms several months later. Only 65% of 292 people surveyed in the CDC study from April 15th to June 25th said they returned to their normal health as soon as five to 12 days after they tested positive for Covid-19 – as
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Distressing Thursday – CDC Concerned About US Virus Trends

Coronavirus Briefing: What Happened Today - The New York Times"CDC says the U.S. is now seeing a ‘distressing trend’ in coronavirus outbreak."

I'm sorry, I don't want to keep talking about the virus that's impacting the Global Economy and life on Earth as we know it but it IS out there every day and it is the #1 Macro Concern on the planet – no matter how much you choose to ignore it.  Today Jay Butler, the CDC’s deputy director for infectious diseases, said Covid-19 cases are growing “really in all parts of the country,” with particularly high transmission in the Midwest.  “Unfortunately, we are seeing a distressing trend here in the United States.  Smaller, more intimate gatherings of family, friends and neighbors may be driving transmission as well, especially as they move indoors.”

I can testify to that as I was at the Breakers Hotel in Florida this weekend and there was a wedding in the courtyard and there were about 500 people, none of whom were wearing masks and they were having a buffet AND they were all gathered in the half of the courtyard where the food was, rather than spreading out.  And they were hugging and kissing and talking in small circles – MADNESS!!!  

And these are wealthy people (the hotel is very expensive) so you'd think at least SOME of them have had educations and would be aware of the risks.  I felt bad for the bride, who will aways remember her wedding as a super-spreader event that leads to the deaths of dozens of guests but I felt more bad for the hotel staff – who were the only people wearing masks and gloves which offered little protection from this germ-fest.

“I recognize that we are all getting tired of the impact Covid-19 has had on our lives,” Butler said. “We’re tired of wearing masks, but it continues to be as important as it has ever been and I would say even more important than ever as we move into the fall season.”

The U.S. still has the worst outbreak in the world, with more than 8.2 million cases and at least 221,122 deaths, according to Hopkins data.  Health officials and infectious disease…
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Which Way Wednesday – Stimulus Hopes Hold off Disaster (so far)

We're holding up so far.

We are flirting with disaster at the 3,420 line but, so far, it's holding up on endless promises of endless stimulus – currently over 10% of our GDP ($2Tn) is on the table to be pumped into our economy in the last 2 months of the year – just like we did in Q2 and that gave us a 20% pop in the S&P, from 3,000 in late June to 3,600 at the end of August.  The question now is, can $2,000,000,000,000 give the markets another 20% boost or is it only enough to fill the hole that's been blown in this economy by  the Covid Crisis?

Nancy Pelosi said she hoped that fresh stimulus spending would be retroactive, although Republican Senate Majority Leader, Mitch McConnell has warned the White House against a bigger Democrat-led deal before the election.  The administration said its offer is now up to $1.88Tn, below the $2.2Tn Pelosi has pushed for.  “The rise in yields suggests that the market thinks a stimulus deal will be forthcoming and that the Democrats are set to take both the presidency and the Senate at the Nov. 3 election,” said John Hardy, chief foreign-exchange strategist at Saxo Bank.

 

 

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Tipping Point Tuesday – Schrodinger’s Stimulus Moves the Market

The Week Ahead – Election Looms Large

Two weeks to go.

Two weeks ago the S&P was down at 3,350, down about 4% from where we are now so don't get complacent – especially into the elections and ESPECIALLY when Global Covid Cases topped 40M this weekend with 8.15M in the US and growing at 0.05M per day along with 220,000 deaths.

You KNOW Trump is lying about the virus, you KNOW Trump has been lying about it since day one.  You KNOW Trump is essentially doing nothing to stop it and I REALLY hate to be that guy every week but how can you let yourself be deluded by all this other nonsense when we are STILL right in the middle of a Global Crisis?  

Come on people, let's not rely on the lie to make us feel good.  This is the chart of how many people per 100,000 in the US are infected by the Corona Virus.  In May, I said I was very concerned because passing 1/250 (400 per 100,000) means that any time I went outside and walked down the street and walked into a store – I probably either passed an infected person or touched something they had touched and we now know the virus lasts a lot longer than we thought on surfaces.  

That was back in May.  Now it's October and 1/2,500 people are infected as we brilliantly ended our lockdown on Memorial Day Weekend to "save" Trump's economy and now 1/40 people are infected.  That means, if you go to a restaurant – even one that's 1/2 empty – you are likely there with an infected person and your children are in class with infected people and now you can't walk down the block without coming in contact with infected people and Trump is doing what to control it before it gets to 1/4 people?  What?  Name SOMETHING???

Our lives are at stake people – our actual lives!  220,000 Americans are dead an "only" 8M out of 330M have contracted the virus so far.  That means 40x more to go and 40x 2,200 is 8,800,000 dead – that's the entire population
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