Down we go again.
Yesterday's press conference with Trump and the CDC did NOT calm the markets down as we gained 600 more global cases yesterday and 400 more cases in China, where things are "under control". “We’re testing everybody that we need to test,” Trump said yesterday, “and we’re finding very little problem, very little problem.” Nonetheless, right after he put Pence in line to take the blame when this thing goes bad, the CDC announced the first case in Califonia not linked to foreign travel – the guy just caught the virus in the wild in California!
As you can see from the chart above, the Nasdaq (/NQ) Futures shorts we added during yesterday's Live Member Chat are doing well as that index drops another 150 points, giving us gains of over $2,500 per contract (you're welcome) and we are having a FANTASTIC week shorting the indexes but tight stops here (8,750) to lock in those gains.
We're benchmarking a bottom this morning at 26,500 on the Dow (/YM), 3,065 on the S&P (/ES), 8,700 on the Nasdaq (/NQ) and 1,525 on the Russell (/RTY) – those lines should at least be a little bounce and, IF NOT, like yesterday – we can use them for shorting lines on the way down with /YM 26,600 being the best line to play in either direction (with very tight stops). As I noted on Tuesday for our Members:
The 5% Rule™ goes both ways so 28,000 is the line we should use and 1.05 x 28,000 makes 29,400 on the button (there are no coincidences, only the 5% Rule) so that makes the bounce lines 280 points up or down from there so 27,720 is a strong retrace, 27,440 is the strong retrace, 27,160 is the strong bounce off the -10% line (and the 200 dma) and 26,880 is the weak bounce off the -10% line, which must be 26,600.
It's very doubtful that we'll get any resolution into the weekend so I'm not expecting much of a recovery. We couldn't even hold the weak bounce lines yesterday. As 26,600 is the -10% line on the Dow, the weak bounce line is up 2% from there – at 27,160, which was the strong bounce line before we dropped another 1,400 points. Now it's the weak bounce line of the larger drop.
Q4 Revised GDP is up 2.1%, the same as it was in the prior estimate. Durable Goods are -0.2% in January and December was 2.9%, so it's a pretty drastic slowdown already and that's before the virus really became an issue. Shipments of manufactured durable goods in January, down seven consecutive months, decreased $0.5Bn or 0.2% to $250Bn. This followed a 0.1% December decrease. Transportation equipment, also down seven consecutive months, drove the decrease, $1.3Bn or -1.6% to $82.1Bn.
As I said in yesterday's Webinar, this is not a time to jump into things just because they are less ridiculously priced than they were last month. As I said in November on Bloomberg, the market is having the CORRECTION we were looking for but correction means moving to the CORRECT prices – there's no reason for them to bounce back to overpriced from here – we'll be lucky if we make it through the year justifying these levels – I'd rather see another 10% drop before I start bargain-hunting and there are sectors (Airlines, REITs, Retail, Entertainment, Travel) that are already well below that.
If the virus is "fixed" – that's where I'd want to start shopping.