Well folks, Friday was the first tick down and if things had gone a certain way we’d have gotten a bounce today with which to take some more profits or short (for those who would short without major setups). I finally stopped letting COVID-19 bully me into into a bear view, instead deciding it was time for a bear phase of some magnitude despite the flu in the headlines 24/7. But… Mondays. I’ll adjust to a minor degree but reserve any major moves for later, given the theoretical balance built into the portfolios.
If the futures hold up SPX is projected to open below its 50 day moving average, Dow would tick a lower low to January’s low well below the SMA 50 and NDX would drop toward its February 4th gap up, but not quite fill it (while remaining well above its SMA 50).
Going to the other way, gold is screaming northward and the gold miner ETF GDX is up about 3.5% in pre-market. So the balance (with high cash levels) routine is working well, again, in pre-market anyway.
I will not usually short without setups. Yesterday we noted that some US stocks and many global stocks I watch had begun creeping below the 50 day averages, in some cases bouncing to test those breakdowns. Those tests look to confirm a bear phase (of mini or later, perhaps maxi magnitude) today. But with the volatility violence (in both directions) sure to follow in the coming weeks there should be opportunities to raise cash, short, buy and/or take profits, depending on the sector, region, industry, etc.
While I’d love to be sitting short the stock market this morning, that is not realistic. What has been realistic is balance in anticipation of any outcome. So today it is COVID-19 amplified. We will navigate the developing hysteria as best as possible in the short-term and keep an eye out on the horizon, which could include much higher gold and gold miner prices, a profit taking opportunity in them, a buying opportunity in stocks, a full lean counter-cyclical in cash and precious metals or some combination of the above. It’s too soon (for me, at least) to put an exact thesis in play.
But the markets are in motion and that is a good thing. In Q4 2008 they were massively in motion and the opportunities that came from that were immense. This may not be that type of cataclysm (unless of course, it is), but markets in motion like this call for balance, risk management, patience and ongoing work to refine the view of what is setting up out ahead.