Where Do We Go From Here

America is turned upside down as the MLB baseball season is suspended, Disneyland closes, and college kids around the country are being sent home! Those close to the top suspect "containment" is now out the window and it becomes all about "care". The powers that be will be trying their best to "flatten the curve" of those being infected so as not to collapse our healthcare system. If the number of cases explodes early it could easily overwhelm our doctors and hospitals and leave thousands without care for normal and urgent health concerns. By canceling large social events, restricting travel, etc... makes sense in trying to slow the outbreak and to keep our hospitals operating. Ultimately however it extends what seems to be the inevitable, a large portion of the U.S. population being infected with coronavirus and probably a 1% mortality rate. In my mind, if I assume a 50% infection rate, which many sources are saying is very realistic, then I have to envision sitting at a meeting room with 200 people, 100 will end up with the virus, 99 battle through it and make it out alive, but unfortunately one ends up dead. The human and political reaction to this equation is nothing like any of us have ever seen or experienced. All of my trading and investing friends are mostly lost and searching for the direction of "real value". I still don't think we are close to a bottom as retail investors still need to feel more pain. I looked at data yesterday that showed retail investors were still in the market placing more buy orders than sell orders for many big-name stocks. I told my son Jordan and a few close friends who are professional traders that it's now all about human psychology. And I've learned in life most of the time it doesn't really hurt all that bad when you are giving back the casino's money, but it quickly becomes much more real and painful when the losses start coming out of your own pocket. I'm keeping a close eye on big names like Apple and Microsoft, once those stocks really take a big tumble and people start giving back "real money" not paper profits from the recent bull run, then we might start to see a bottoming type process. I'm not saying we won't have some big up days in the process of bottoming, because I suspect at some point we will see two or perhaps three days of massive double-digit gains, but again followed by more losses. Bottom line, I still see no reason to be racing into this burning building trying to be a hero. There's a time and place and this is still not it... Short-term traders might consider trying to time the bounces but that could be an extremely dangerous game. Like I said earlier in the week, it's when the market clusters five or six big down days together in a row that novice investors get seriously beaten up... and it still hasn't happened.

These next two days are going to be very important! The market is due for a big double-digit bounce to the upside but since we are going into the weekend with so many unknowns and everyone in panic mode I worry. If people gather and talk this weekend and become even more freaked out we have even further panic selling on Monday. That would be the clustering I've been talking about and perhaps a buying opportunity will exist mid to late next week. On the flip side, if the market rallies today and or Monday and again bails the recent buyer out of a jam then we will have several more days or perhaps weeks in a bottoming process. Again, I'm looking for a major setback in big-name stocks like the FANG's and Microsoft along with a clustering of down days as the sign of a bottoming process. I still think the fallout from the virus is going to get worse before getting better. Be safe, stay healthy and do your best to preserve capital! 

Markets across the globe have been hammered this week as pretty much everythingr that could go wrong did. With coronavirus impacting the U.S. and other countries in the West, what most saw as mostly an Asian supply chain hiccup has turned into a plummeting consumer demand story as well. New travel bans, mass cancelations of sports, music, and other events, and a clampdown on large gatherings in many cities is seeing a plunge in demand for travel, tourism, and hospitality. Some analysts think the disruptions could cause a bigger shock to the airline and hotel industries than the impact of the September 11 attacks. This shock is likely to spill over into other service industries as consumers tighten their belts and hunker down at home to wait out the virus outbreak. Investors are growing increasingly nervous about global containment measures after Italy this week decided to close all stores in the country with the exception of pharmacies and grocery stores. Wall Street worries that more widespread measures of the same sort could slam the global economy into recession, especially if Washington decides the disease is rampant enough in the U.S. to warrant similar measures. Washington is expected to roll out a "virus relief" package but it's unclear when lawmakers can get it done or even what will be in the final legislation. Senate Majority Leader Mitch McConnell said the Senate will stay in session next week, rather than leaving as previously planned, in order to take up any legislation that emerges from negotiations between the House and the Trump Administration. Investors are also expecting the Federal Reserve to again cut its benchmark rate at its policy meeting next Tuesday and Wednesday. If you recall, the central bank announced an emergency half percentage point rate cut last week but many economists expect them to trim again next week but at least another 50 basis points. Some are even calling for a full percentage point cut but that might make investors overly nervous. The Fed's benchmark rate is now in a range of 1%-1.25% and a -1.0% cut doesn't leave much for the central bank to work with if they need more firepower down the road. It’s worth remembering that the market turmoil stemming from coronavirus fears is not only because of how the disease has already affected the global economy but because of uncertainty over how it will affect areas that are just starting to see cases, including the U.S. It may take a couple of months before the full impact is reflected in U.S. data but there are a few things analysts are looking at now to try to gauge what might be up ahead. The big one is weekly jobless claims, as the U.S. labor market is hands down the most significant aspect of the economy. New weekly claims data, released every Thursday, can be noisy and unpredictable but the numbers have continuously hovered near historic lows all year. A big jump in new claims obviously indicates trouble in the labor market. In fact, the number of job losses is probably going to be a lot more important than the monthly job gains during the height of this crisis. Another biggie is Consumer Sentiment, the latest of which actually comes out today and will reflect the situation during early March, when the coronavirus was really starting to gain mainstream attention in the U.S. The University of Michigan's closely watched survey is published twice a month so it's one of the most up-to-date measures of the American consumer available. The Institute for Supply Management's purchasing manager survey's for both the manufacturing and services sectors also reflect pretty current conditions and will be watch closely for signs of declining activity. Regional Fed data, like the Empire State Manufacturing Survey due out next Monday and the Philadelphia Fed Index next Thursday are also going to provide timely insights. Next week is actually pretty busy on the data front but it's likely investors are going to brush most of it off as an irrelevant rearview. Those include Retails Sales, Industrial Production, Business Inventories and the NAHB Housing Market Index on Tuesday; Housing Starts and Building Permits on Wednesday; and Existing Home Sales on Friday.

Corona Updates: 

• There is heightened concern at the White House after a picture emerged of a top Brazilian government aide, who has tested positive for coronavirus, standing right next to Donald Trump at Mar-a-Lago last weekend.
• UK prime minister Boris Johnson said that many families “are going to lose loved ones before their time”, as he indicated a shift in the government’s approach to coronavirus from “contain” to “delay”.
• Canadian Prime Minister Justin Trudeau’s wife Sophie has tested positive for coronavirus. Trudeau revealed he is self-isolating after his wife returned from a visit to the UK with flu-like symptoms, including a fever.
• Argentina is going into virtual shutdown with the announced suspension of the arrival of all flights from the US, EU, UK, China, South Korea, Japan and Iran for the next 30 days.
• Every member of the Spanish cabinet is being tested for coronavirus after the country’s equality minister, Irene Montero, became the latest politician to test positive for the virus.
• Walt Disney World Resort in Florida and Disneyland Paris Resort will be closing through the end of the month, starting at the close of business Sunday, the Walt Disney Company announced. The decision came hours after the announcement of the planned closure of Disneyland in California. Additionally, Disney Cruise Line will suspend all new departures beginning Saturday.
• Princess Cruises said it would suspend voyages of all its ships for two months.
• New York state Governor Andrew Cuomo announced on Thursday that New York would ban all gatherings with 500 or more people.
• Disturbing satellite images of mass graves in Iran suggest the scale of the outbreak there is worse than authorities are admitting.

U.S. Launches Retaliatory Airstrikes Against Iraq: The US carried out airstrikes on Thursday against multiple Iranian-backed militia sites in Iraq, according to the US Defense Department. The strikes come one day after the US assessed an Iranian-backed group was responsible for a rocket attack on a base where coalition forces are located, killing two American service members and one British service member. The strikes come months after the US and Iran were brought to the brink of war in early January. While the situation appeared to deescalate in the weeks following Iran's retaliatory strike on a base housing US troops in Iraq, tensions have flared up once again between Tehran and Washington. There have been multiple rocket attacks in Iraq in recent weeks, but Wednesday's was the first to cause a US death since December, when a US contractor was killed. That death prompted retaliatory US airstrikes against Iranian-backed militia targets in Iraq and Syria. Read more HERE. 

These Industries are More Likely to Shed Jobs if the Coronavirus Pandemic Worsens: Coronavirus is officially a pandemic, the World Health Organization said Wednesday — and job experts say that news may spell trouble for some U.S. workers more than others. Consumer-facing companies will be the first hit if the novel coronavirus spreads across the U.S., but as the government continues to raise awareness about the virus and promote the best ways to guard against it, some employers may be reluctant to let their staff go just yet. One reason: It’s expensive to retrain and rehire. The manufacturing and construction industries will be more likely to hold off on making any big decisions on layoffs but the same may not carry over for people working in the food, hospitality and transportation sector. Supply-chain disruptions due to the coronavirus are likely to increase the cost of business for manufacturing and construction companies. In the manufacturing industry, many employers are actually struggling to fill openings. But if the situation worsens, smaller manufacturing and construction companies may have to lay off workers, especially if they are unable to ship goods out. Health-care workers will likely experience an increase in demand for workers. Before COVID-19, there was already a shortage of over 1 million health-care jobs. Read more HERE.

Bearish Investor Sentiment Syrockets: The American Association of Individual Investors holds weekly polls of its members, asking if they are bullish or bearish. Traditionally when bulls are most heavily outnumbered by bears (indicated by numbers below zero on the chart), it indicates a bear market. Yesterday's release showed the percentage of individual investors expecting stocks to fall over the short term is at its highest level in seven years. Bearish sentiment soared +11.7 percentage points to +51.3%. The last time pessimism was this high was on April 11, 2013 when it hit 54.5%. Markets suffered their worst week of the year up to that point a week later, though 2013 as a whole ended up being the best year for the S&P 500 in 16 years. The historical bearish sentiment average is 30.5%. The greatest bearishness in the survey’s history came immediately before the low point of 2009. Excessive bearishness relative to bullishness can be a signal that the market could be oversold and is poised to move higher. Bullish sentiment in the week plunged -9.0 percentage points to just +29.7%. The drop more than reversed last week’s gain and put optimism at its lowest level since October 9, 2019 (20.3%). The level of neutral sentiment is unusually low, according to AAII (more than one standard deviation below the historical average). Historically, such readings have been followed by below-average and below-median returns for the S&P 500 over the following six- and 12-month periods. (Source: AII)

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