The marketplace had its largest single day drop since 1987

Spy Index

Yesterday the marketplace had its largest single day drop since 1987. The Coronavirus is spreading globally and also the United States is de-activate. On a macro basis, international travel has been frozen. On a micro basis, restaurants, bars and schools are already closed. Gatherings in excess of 10 everyone is discouraged by the CDC. People are stockpiling food plus they are practicing social distancing. Global economies have learned to a screeching halt and central banks are flooding the economic climate with liquidity. The next few weeks will be critical.

Scientists think that the spread from the virus has to be contained immediately. If we can flatten the development curve with the virus we are going to buy some time. Biotech companies are scrambling to develop a vaccine and also the first dose from Moderna (MRNA) was delivered yesterday. We still do not know if it is effective or if they have unwanted side effects. I read that hydroxychloroquine has become just right in China and it has recently been effective in preventing infection. China continues to be documenting this and it is a part of their treatment protocol. This drug is quickly available plus it costs $0.20 per pill. It has become accustomed to prevent malaria and yes it can also be used to treat lupus and arthritis. People who are touring Third World countries happen to be taking it for decades. If it's relatively few side effects, I’m wondering why there's not widespread distribution.

Thermo Fisher Scientific (TMO) says that it is going to be producing 5 million test kits a week by April. Major companies worldwide are shifting production to create antibacterial soaps and hand sanitizers. It has been incredible to determine how governments and corporations work together to combat this concern.

If the herpes virus might be in the next 8 weeks the economy may have the opportunity to recover quickly. The government offers to offer relief to workers immediately. The actual distribution has not yet been determined, but it could be as fundamental as a government make sure that is out utilizing to enable them to cover bills when they are in your own home. McDonald’s knows that franchisees will require a success plus they are considering waving their leases although this unfolds. In short, everyone is trying to figure out how to financially “bridge” this instantaneous economic shutdown.

If the spread with the virus peaks within the next few weeks and it begins to taper off, I believe the marketplace will regain its footing. People need to find out that social distancing is working and this will provide hope. The financial and economic ramifications might be addressed once the herpes simplex virus is in order.

Central banks are guaranteeing each other’s currencies through swaps. They lowered interest rates inside a coordinated manner and fiscal stimulus has been implemented all over the world. In the US, our banks possess the strongest balance sheets they’ve been in higher than a decade.

The even worst scenario would be that the virus is constantly spread in an accelerated pace for greater than a few weeks. This would mean that the recovery will take much longer and that the “bridge loans” won’t last long enough to stop a credit crisis.

At this stage it is possible to virtually throw economic releases and earnings releases out your window. There isn’t enough data to know how that is likely to enjoy and no one continues to be via an event such as this. The most critical thing to observe may be the spread in the virus over the course with the next month or so.

I am personally encouraged. People realize the magnitude of the situation and they're “hankering down”. Governments and corporations will work together in greater comfort. In some strange way, I think that this virus is likely to make us all stronger.

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Swing traders must be in cash until we've got clarity. In the subsequent couple weeks we should monitor the spread from the virus so we should monitor any developments linked to treatments (new vaccines, hydroxychloroquine and plasma infusions). Once herpes is contained I believe that the economic recovery is going to be swift. Activity is not going to instantly return and it usually takes 12 months for people to get time for 2% GDP growth. There will be corporate casualties. Even though my outlook is optimistic, I can’t allow it to bias my trading. Price and volume will determine my trading activity, not my personal.

Day traders should expect volatility. Our tactic has become effective for decades and that we happen to be making great money every single day without taking any overnight risk. We will continue to observe for market reversals and we are going to find stocks with relative strength/relative weakness. We will utilize these stocks as surrogate market positions and we'll make use of the 1OP indicator to tell us when to be long or short. Option Stalker has been invaluable over these moves. Your objective should be to find several stocks that you want on the long side and 2-3 stocks you want around the short side. Don’t carry a lot more than two or three positions without notice and try to have the goal to get time for cash as quickly as possible. Trim your size that it is much easier to manage volatility. Set passive targets and take profits. Then wait for the following possiblity to create. Repeat.

There is longer-term support at SPY $235. Yesterday the SPY found support at $240. I believe $245 and $265 can also be key levels to look at. The S&P 500 has been throughout the board overnight which is currently up 20 points. Expect lots of volatility the rest of the week. Quadruple witching is Friday which should improve the movement.

Good luck.

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