# Market Bottoms



## ducati916 (21 March 2020)

This is what they look like.

This is the current situation:






Probably not there yet, but, having traded through 2/3, it can be recognised (probably not the absolute bottom tick, although in 2002 I did actually buy the bottom tick only to sell later that day) quite early when it does finally arrive. 


jog on
duc


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## InsvestoBoy (21 March 2020)

Here's a completely different take.

I saved this image from something Variant Perception did a while ago,






and I check it every month or so.

Last month, we were definitely ticking a lot of the Market Top Signs, and we had been progressively ticking more of them for the last couple of years!

Are we ticking Market Bottom Signs now?

I can see some signs from Corporate category will be appearing soon but nothing confirmed yet.

Valuations still quite high. As just one example of that, this chart from Otavio Costa at Crescat Capital shows that the recent plunge has only reduced US valuations as measured by Market Cap/GDP to the levels it was just before the GFC.





Europe and Emerging valuations are a lot better I guess.

Economic signals, a few possible ticks there but not enough.

A few signals from the Market category:
- Credit spreads are wide
- Frequent episodes of high volume selling and panic
- Volatility is high for a sustained period
- Closed end funds trade at discounts to asset value
- Market already down 20%

but in the Market category, people still love Momentum, Growth and Quality stocks! Other Market category signals around breadth and Coppock are not ticked yet.

I would say Sentiment is still quite high, people are trying to pick bottoms.


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## IFocus (21 March 2020)

The move down has been extremely sharp by any measure mostly driven not by fear but uncertainy IMHO.

Still early days secondary effects starting to come into view calls of depression in the US if radical action not taken from some analysis if that happens to the US it gets ugly as far as recovery goes cannot see v shape recovery no mater what..

Note Wu Han still in locked down that's the likely scenario for many areas around the world high possibility for large areas of the US.

Surely we will see a consolidation soon and then another leg down some time over the next 4 months to break the bulls to many still looking to buy for this to be any where near the bottom IMHO (again).


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## Knobby22 (21 March 2020)

I am sort of waiting for the bulls on this site to throw in the towel, then we will be close to capitulation.

I think it will be a double bottom. You have to be careful to not get caught in the centre rise known I believe  by chartists as the bum crack.


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## kid hustlr (21 March 2020)

Given how rapid this has all been surely it's not v shape recovery.

I agree with most that at some stage we will rally and then come back to the lows, it's at that point we will see whether the mkt can actually turn.

I'd like to see the European and australian views of these mkt cap/GDP and pe ratio equivalents as my understand was we were a lot lower before this started.

Anyone see a 1930's scenario playing out?


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## kid hustlr (21 March 2020)

@InsvestoBoy The market top side of that page has been going since 2015!


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## InsvestoBoy (21 March 2020)

kid hustlr said:


> I'd like to see the European and australian views of these mkt cap/GDP and pe ratio equivalents as my understand was we were a lot lower before this started.




I don't have the numbers in front of me but yes we were definitely lower and so was Europe.

A lot discussion about this over the years, mostly focused on sector composition.

Aus, Emerging and Europe indexes all more heavily weighted to traditional "value" sectors like Financials, plus more resource weighting in Aus and Emerging. So was it "justified" for US to be higher with Tech and Healthcare as bigger components? That is the question they were asking at the time.

The answer will only be evident over time, either tech can deliver on the market implied growth and RoE that it is priced for and valuation premium was justified, or it can't and it won't.


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## kid hustlr (21 March 2020)

Yep makes sense. Will be v v Interesting to see how the fangs come out of this as an example.


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## InsvestoBoy (21 March 2020)

kid hustlr said:


> @InsvestoBoy The market top side of that page has been going since 2015!




Definitely started to really get going after 2015, but I feel like by 2018/2019 a lot more of those boxes were getting ticket or double ticked!

What's the saying? Bottoms are an event, tops are a process...


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## InsvestoBoy (21 March 2020)

Here's another one I follow which I think shows no bottom yet.






NYSE Summation Index (which is approx equiv to the 19,39,1 MACD of cumulative A/D) passed from above 500 to below -500 in one brutal move.

https://www.mcoscillator.com/learning_center/kb/market_data/ratio_adjusted_summation_index/


> We want to see the RASI go from an oversold reading, below -500, up to a nice strong reading well above +500, and the higher the better. Failing to reach the +500 level is like a rocket that fails to achieve escape velocity, and then falls back to Earth. It is a sign that an uptrend is not strong enough to continue, and that the recent price lows are likely to be revisted.




What we have seen is essentially the opposite of the above quote, a very overbought reading of +1000 which declined to -1000!

Sooner or later there is going to be a withdrawal of supply, short squeeze, bear market rally, whatever you want to call it. If that move can't get get back above +500, well then we know whatever swing low was formed probably will get re-tested at least.


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## So_Cynical (21 March 2020)

3 days of no new domestic cases in China, so what 7 weeks since they hit the panic button in early February.

7 weeks to go from sheer panic to no new cases for 3 days.
~


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## ducati916 (22 March 2020)

So from Investoboy's list of market bottom factors, I'll pop in a number of charts etc that address some of them.

jog on
duc


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## ducati916 (22 March 2020)

MEDIA:
















The point that needs to be made is that (as per list) the media isn't that great at picking the bottom. However that needs to be distinguished from newspaper reports that actually provided very accurate reports (good news) that could and did signal the bottom was in. I have some examples that I will post later.

jog on
duc


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## ducati916 (22 March 2020)

Some Bear Market history and data:











jog on
duc


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## ducati916 (22 March 2020)

1987 v 2009:








Flat markets, with chop, can characterise the 'bottom'. This type of market (could) present difficulties to purely mechanical based traders? I'd be interested to hear their opinion on this (Skate, Peter, QFrog, et al).






jog on
duc


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## ducati916 (22 March 2020)

Previous Bear Markets

1921 was deflationary
1930 was deflationary
1948 was deflationary
1982 was inflationary
1987
2002 was deflationary
2008 was deflationary
2020 is deflationary

Which suggests that what 'worked' in previous deflationary environments may well be successful again.

jog on
duc


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## ducati916 (22 March 2020)

This is the ratio that is most accurate...it is however rather slow.











jog on
duc


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## ducati916 (22 March 2020)

So, what is the point of all the above?

Simply that (it may be the case that) trend trading as a strategy will need to be put to one side (assuming) that trend trading does not really work in choppy markets, which, from the charts can be seen that bear markets are choppy, going (net) sideways for (?) periods of time. This is not conducive to a trend trading strategy...or is it?

If this is the case, we will then require a 'different' strategy.

jog on
duc


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## qldfrog (22 March 2020)

Much appreciated, especially #15
When we think of trend trading, in a choppy market, it seems bad..but the time scale should be wide enough to allow good runs for a couple of months if you have tight exits.hopefully still money to be made..
i would be more worried in such a market trying a buy and forget strategy based on fundamentals
Time will tell but yes still working on exit, stale stop loss and trying to get some return from every monthly or longuer up trend .
This coming only from a beginner naive point of view.
Many here more experienced and knowledgeable
What i like with #15 is that it matches my recent searches: we are at best back to a reasonable mean market valuation circa 2016 level but with inflation and population growth here in Australia
This is not yet a bargain imho so my very light reentering.i expect further down...we have not even really seen the financial hit on profits yet


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## axyd (22 March 2020)

I would say average EV/EBITDA on SP500 would be good indicator to access where we are now (Howard Marks uses something like that to access market cycle).

Howard Marks mention he build historical chart for EV/EBITDA and then looks in what percentile we are now, compared to historical values.

Another plus for this approach is that you kinda focus not on hard things like predicting the future, but on easier thing - estimating how cheap are companies now and if it would make sense to buy it.

And, because there's a little chance to catching market down exactly, so you may start investing say 20-30% right now, and the rest in the next say 6 or 12 months. Kinda like dollar-averaging, although I prefer to call it time-averaging - seems to capture the meaning better.


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## IFocus (22 March 2020)

Knobby22 said:


> I am sort of waiting for the bulls on this site to throw in the towel, then we will be close to capitulation.
> 
> I think it will be a double bottom. You have to be careful to not get caught in the centre rise known I believe  by chartists as the bum crack.




If we just stick to the virus then a second wave is inevitable and likely larger that could be another series of lockdowns more severe than what we are seeing now then a second market leg down.

That's more like northern hemisphere winter lets say starting Nov.

If lock downs cannot be released for 12 months then second leg down anyway.

That's all before secondary impacts appear from actions taken unforseen from lock downs.


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## ducati916 (22 March 2020)

Volume at the bottom of Bear Markets: inconsistent.







Here, volume higher, dropping into the bottom and picking up on the rise out.






Volume (high) definitely marks the bottom.

The other Bear Markets:

1921 low volume
1929-1933 low volume
1949 low volume

2000-2002 market






Again, low volume marked the bottom.

jog on
duc


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## ducati916 (22 March 2020)

Trading the Bear (if you get it right) is very profitable:






jog on
duc


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## basilio (22 March 2020)

I don't believe any other market situation is comparable to what is happening now.
We are watching three distinct crisises unfolding

1) Collapse of economic activity across the globe throwing millions of people out of work and threatening entire industries
2) Exponential increases in deaths caused by the virus adding another element to economic/social/political risks
3) A credit crunch arising as  trillions of dollars of corporate and government debts become due while governments are  printing more money to keep the system from collapsing.

Trying to pick when these events will be resolved from past events seems unrealistic.
To a certain extent many other market crashes could be seen as crises of confidence. Restore confidence and economic activity can slowly recover.
But that won't work when the economy is locked down by the government to control a pandemic that seems unstoppable without a total society lockdown.


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## ducati916 (22 March 2020)

basilio said:


> I don't believe any other market situation is comparable to what is happening now.
> We are watching three distinct crisises unfolding
> 
> 1) Collapse of economic activity across the globe throwing millions of people out of work and threatening entire industries
> ...




The 2008 Bear was a financial bear. The recovery was a V.

The 1929-1933 Bear was very different, as was the 1970-1982 Bear, as was the 2000-2002 Bear. Interspersed were a number of Baby Bears, which were just blips by comparison.

I don't think we get a V.
I think we get extended chop.

I'm interested in strategies that actively trade these types of bear markets.

jog on
duc


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## Smurf1976 (22 March 2020)

basilio said:


> I don't believe any other market situation is comparable to what is happening now.



This is all moving incredibly fast.

10 days ago we were still trying to run a Grand Prix in Melbourne and we still had festivals running in Adelaide.

Now we're closing state borders and shutting down anything not deemed essential.

And so on. Events in the real economy are unfolding incredibly rapidly at this point.

The second wave of panic in my view will be when the markets realise that this is not a 2 - 4 week situation but it's going to be quite some time before there's any return to business as usual.


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## Smurf1976 (22 March 2020)

ducati916 said:


> I'm interested in strategies that actively trade these types of bear markets.



One thought I have on that, and I have no firm evidence it's just a thought, is that an index will probably respond more predictably than any individual stock in this environment since what's driving it all is the overall situation rather than something specific to any one company.

That's just a thought, others might have a firmer view on it.


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## basilio (22 March 2020)

I believe the situation is too volatile to effectively continue. IMV far too much of the current markets is about trading systems intended as quasi gambling situations.  Perhaps there should be a review of what financial products are still required  and for what purpose?


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## galumay (22 March 2020)

Like every other bull & bear market, you wont know until you are able to apply hindsight. 
Then every one is right.


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## sptrawler (22 March 2020)

galumay said:


> Like every other bull & bear market, you wont know until you are able to apply hindsight.
> Then every one is right.



Absolutely, this is where a long term plan that allows you to avail yourself of these opportunities, is paramount IMO.
A long time ago I read a book called 'sensible share investing', I think a guy called Austin Donnelly wrote it.
Like all the investment books, you only take from it, what strikes a chord with your personal beliefs or sits well with your personality.
The thing I remember from that book was, when you think the market is high and you wouldn't buy your favourite share, because you think it is too expensive it is time to start selling some.
The other thing he said, from memory was, never be 100% in the market and never be 100% out of the market.
Those two things sit well with me.


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## ducati916 (23 March 2020)

Smurf1976 said:


> One thought I have on that, and I have no firm evidence it's just a thought, is that an index will probably respond more predictably than any individual stock in this environment since what's driving it all is the overall situation rather than something specific to any one company.
> 
> That's just a thought, others might have a firmer view on it.




I agree. ETFs of sectors/industries or just broad based ETFs are what you would need to trade. As you say individual stocks would have that additional layer of risk.

jog on
duc


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## ducati916 (23 March 2020)

basilio said:


> I believe the situation is too volatile to effectively continue. IMV far too much of the current markets is about trading systems intended as quasi gambling situations.  Perhaps there should be a review of what financial products are still required  and for what purpose?




In the US that would be the quant algos.

2008 had this feel on the way down. It was relentless down bars day after day. Then it wasn't. 2002 was similar, longs just couldn't gain any traction, there would be a bounce, days, then more selling. That lasted for some time. It was hard to really do anything, long or short, as there was little to no follow through. Really daytrading was about it (for me) at the time.

To trade this market you actually need more volatility (via leveraged ETFs) that (assuming long only) that when they bounce, they bounce enough to unload positions or partial positions, as I am looking to build positions over time. This (in time) will be an excellent entry point for anything. So currently I am looking to build, unload a partial position on a bounce (to keep the red ink in some sort of control) and repeat until the market/world, returns to some sort of normality.

This means taking capital for a position, divide by 10 or 20 and add on the way down, selling some on bounces, repeat. It worked well in 2002 and really well in 2009. We'll see if it works in 2020.

jog on
duc


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## ducati916 (23 March 2020)

sptrawler said:


> Absolutely, this is where a long term plan that allows you to avail yourself of these opportunities, is paramount IMO.
> A long time ago I read a book called 'sensible share investing', I think a guy called Austin Donnelly wrote it.
> Like all the investment books, you only take from it, what strikes a chord with your personal beliefs or sits well with your personality.
> The thing I remember from that book was, when you think the market is high and you wouldn't buy your favourite share, because you think it is too expensive it is time to start selling some.
> ...




Pretty much what I do.

jog on
duc


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## ducati916 (23 March 2020)

galumay said:


> Like every other bull & bear market, you wont know until you are able to apply hindsight.
> Then every one is right.




In the market, you never know.

What you are doing however is:

(a) this could go down with a probability of (say) 90%, but it could only fall another 20%; or
(b) this could go up, with a probability of (say) 10%, but if it goes up it could move 40%.

At some point (a) will reach 20% and 5% and (b) will reach 60% and 500%.

By drip feeding into the market, you pay close attention and when the bear ends you are ready and already partially positioned.

jog on
duc


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## MovingAverage (23 March 2020)

ducati916 said:


> In the US that would be the quant algos.
> 
> 2008 had this feel on the way down. It was relentless down bars day after day. Then it wasn't. 2002 was similar, longs just couldn't gain any traction, there would be a bounce, days, then more selling. That lasted for some time. It was hard to really do anything, long or short, as there was little to no follow through. Really daytrading was about it (for me) at the time.
> 
> ...




While I have no doubt this is a reasonable strategy, but there is no way I have the mental strength to trade anything in this rapidly changing environment—leveraged ETFs...yikes. Love your posts


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## ducati916 (24 March 2020)

So (surprisingly) the VIX exceeded the 2008 high.

The VIX is a lagging indicator, but, provides some information. I don't think we'll see a higher reading this time out unless something really dramatic happens with COVID-19 in the US itself, which at this point is still possible.

The Russell is interesting and might be signalling a bounce:






It is broad and has an inside week (albeit nascent) that could form for a bounce this week. Time will tell. All the others (SPY, DIA, QQQ) were slightly lower lows to start the week. It is the shallowness of the new lows that might confirm the Russell.

The other 'tell' will be 'news', particularly bad news. How reactive to news at this point (watch the VIX) the market is to that news will provide important information as to how stable this level is (up or down). Normal markets operate at lower volatility (obviously).

jog on
duc


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## axyd (24 March 2020)

Yes VIX is a good indicator, I don't read news, just check VIX sometimes. It was terrifying couple of weeks ago to open the app and see VIX rise to ~50, and next week to ~70 and after one more week to ~80.

Don't think VIX is lagging. Otherwise it would be possible to profit by betting on VIX after SP500 fallen.


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## IFocus (24 March 2020)

5 weeks relentless selling, has to be close to the sharpest impulsive move down ever.

Trying to put into context what a bottom will look like while sizing up the damage both real and psychological to markets, participants, governments, businesses etc.

No bounce or consolidations or any technical hint maybe volume will give something at this weeks end. 

Any recovery looking to me to be a real grind at best


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## sptrawler (24 March 2020)

IFocus said:


> 5 weeks relentless selling, has to be close to the sharpest impulsive move down ever.
> 
> Trying to put into context what a bottom will look like while sizing up the damage both real and psychological to markets, participants, governments, businesses etc.
> 
> ...



I have been nibbling away, even if it falls more, how much? Another 10-15% at most?
Another 40-50% and there isn't a market left.


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## InsvestoBoy (24 March 2020)

ducati916 said:


> The VIX is a lagging indicator




huh?

What do you base this incorrect statement on?

It's literally the market implied volatility for the *next* 21 days. At worst it is a coincident "indicator".


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## Smurf1976 (24 March 2020)

ducati916 said:


> I don't think we'll see a higher reading this time out unless something really dramatic happens with COVID-19 in the US itself, which at this point is still possible.



On current trends this Friday 27 March (Australian time) will see the US surpass China's official infection numbers, currently at 81,545, with the US total reaching just on 100,000.

That's just assuming the current trend continues for the rest of the week. So it's just maths - keep following the current trend and that's what happens. 

My assumption is that the US markets probably won't be too positive about passing the big round number (100,000) and outranking China on this and it could trigger more selling. That is of course just an assumption which relies on there being anyone left who hasn't already sold and who isn't a "bottom drawer" type investor.


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## Knobby22 (24 March 2020)

The US government doesn't appear to care much about It's citizens. Did you see Trumps last speech about not trying too hard to stop it because it will effect the economy.


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## axyd (25 March 2020)

_The US government doesn't appear to care much about It's citizens. Did you see Trumps last speech about not trying too hard to stop it because it will effect the economy._
US is not alone. Basically every single country did the same.


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## ducati916 (25 March 2020)

InsvestoBoy said:


> huh?
> 
> What do you base this incorrect statement on?
> 
> It's literally the market implied volatility for the *next* 21 days. At worst it is a coincident "indicator".











In practical terms this is what I mean:

The 'high' in VIX is (approximately) 80.
There were a number of days almost 80, but lower, yet the market was lower.
We will not see a higher reading than that this time round (that is my bet).

We could however see lower lows in the US markets (stocks) with lower VIX prices.
Therefore, the VIX 'lags' in that it's not useful in defining the bottom of the market. We had exactly this same issue in 2008.

It is a useful measure in that as volatility declines there are greater opportunities for a bounce or a bottoming process, of which bounces are part and parcel. The VIX does provide that information.

jog on
duc


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## axyd (25 March 2020)

I don't think it's correctly to call it a "lag" usually lag means time lag, and it's not like that with VIX. It's a perception of a risk. VIX will jump instantly as soon as there's the SP500 change or if there's any surprising news.

It's more like a first derivative, showing expectations of investors about the rate of changes (of underlying assets like SP500) in the near future.

The problem with future telling based on VIX. VIX is the average of crowd expectation about the future. The problem is - crowd is not good at predicting the future.


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## InsvestoBoy (25 March 2020)

ducati916 said:


> View attachment 101670
> 
> 
> In practical terms this is what I mean:
> ...




This is the completely wrong interpretation of VIX.

VIX is not the inverse of price, it doesn't need to make a new high or low when the price does. It's right there in the name, it is the *Volatility* Index. It is a measure of market implied future volatility.

The S&P 500 could go to 100 and the VIX might remain below 20 the whole way down, if the move is in an orderly fashion.

Does that make it lagging?


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## qldfrog (25 March 2020)

axyd said:


> _The US government doesn't appear to care much about It's citizens. Did you see Trumps last speech about not trying too hard to stop it because it will effect the economy._
> US is not alone. Basically every single country did the same.



Including here with reactive and not proactive action


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## ducati916 (25 March 2020)

InsvestoBoy said:


> This is the completely wrong interpretation of VIX.
> 
> VIX is not the inverse of price, it doesn't need to make a new high or low when the price does. It's right there in the name, it is the *Volatility* Index. It is a measure of market implied future volatility.
> 
> ...




Sure mathematically you are correct.

But I stated that the way that I use it in gauging a market bottoming process, is a 'practical' usage. You don't like that, or want to use it another way, knock yourself out. 

At the end of the day this thread is only about trying to practically get in near the lows and thereby obtain advantageous positioning going forward.

jog on
duc


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## axyd (25 March 2020)

There's a so called the Secretary Problem in the Decision Theory https://en.wikipedia.org/wiki/Secretary_problem

It's about a similar problem - you presented with a series of opportunities, but you can see only the current opportunity and don't know about the future, and you have only one bet - and you need to decide if you should spend your bet on the current opportunity or keep it for unknown future opportunities that could be better or worse.


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## ducati916 (26 March 2020)

axyd said:


> There's a so called the Secretary Problem in the Decision Theory https://en.wikipedia.org/wiki/Secretary_problem
> 
> It's about a similar problem - you presented with a series of opportunities, but you can see only the current opportunity and don't know about the future, and you have only one bet - and you need to decide if you should spend your bet on the current opportunity or keep it for unknown future opportunities that could be better or worse.





And in that vein...I have commenced (profit taking) selling partial positions of trades entered. The assumption is that this is not 'the' bottom and is merely a bounce.

If it bounces higher, again, sell partial position, if lower, re-buy sold position.

At some point, there will be enough information that one can infer with reasonable probability that the bottom is in. Then, hang on for the big move.

jog on
duc


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## ducati916 (26 March 2020)

The bounce is (probably) in large part to this:

https://www.barrons.com/articles/co...-details-51585151305?siteid=yhoof2&yptr=yahoo

We will bounce (as currently) but for how long how far.

jog on
duc


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## ducati916 (27 March 2020)

So the bailout got passed. Stocks continued higher. Will the bounce last into Friday (US time), possibly. However you might see a ^ shaped market: higher into lunch and a bit of a selloff so that positions are not held over the w/e for 'bad news'.

I'll continue to sell into the bounce (as I believe it is a bounce, not a bottom) and rebuild cash positions ready to be a buyer again if we break previous lows.

I'm also looking at these chaps:










At some point, with trade in tatters and production inhibited, we'll see inflation in agricultural products.

jog on
duc


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## ducati916 (28 March 2020)

Another look at market bottoms:






The question now is: what 'type' of bear do we have? That could provide clues as to how close to the absolute (nominal) bottom we may already be.

jog on
duc


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## ducati916 (28 March 2020)

1918 Spanish Flu and the Market

The 1918 Spanish Flu was a global flu pandemic that affected nearly half of the world’s population at the time (or up to one billion people). The 1918 outbreak was the worst of the 20th century, and it fell under the H1N1 virus subtype, which is the same subtype as the current swine flu outbreak. It’s estimated that the 1918 flu killed anywhere from 20 million to 100 million people, which would have equaled a mortality rate of 2.5%-5% of those infected.

The 2009 swine flu is still new to the public, but it is beginning to stoke fear since 152 people have died from it in Mexico as of now. The current swine flu is nowhere near as bad as the 1918 flu pandemic, but we thought we’d look at what the US stock market did during that outbreak period. Below we have grabbed a chart from a CDC article on the 1918 Influenza that highlights deaths per 1,000 people infected with influenza and/or pneumonia, and overlayed a chart of the Dow Jones Industrial Average. 

There were three pandemic waves from 1918-1919, with the worst coming from October to December of 1918. While fear of the flu was widespread, the market really didn’t react too badly. Following the first pandemic wave, the market sold off a little bit, but then rallied during the summer months before topping out prior to the second wave. 

The market trended downward during the worst wave of the flu outbreak, but it only went down 10.9% from peak to trough, and then it rallied significantly during and following the third wave. World War I was also coming to an end in late 1918, so the end of the pandemic and the war probably contributed to the subsequent rally in stocks.






jog on
duc


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## ducati916 (28 March 2020)

Originally published April 2009:

GENEVA (AP) — Countries planned quarantines, tightened rules on pork imports and tested airline passengers for fevers as global health officials tried Sunday to come up with uniform ways to battle a deadly strain of swine flu. Nations from New Zealand to France reported new suspected cases.

World Health Organization Director-General Margaret Chan held teleconferences with staff and flu experts around the world but stopped short of recommending specific measures to stop the disease, urging governments to step up their surveillance of suspicious outbreaks.

Governments including China, Russia and Taiwan began planning to put anyone with symptoms of the deadly virus under quarantine.

Others were increasing their screening of pigs and pork imports from the Americas or banning them outright despite health officials’ reassurances that it was safe to eat thoroughly cooked pork.

Some nations issued travel warnings for Mexico.

Chan called the outbreak a public health emergency of “pandemic potential” because the virus can pass from human to human.

Her agency was considering whether to issue nonbinding recommendations on travel and trade restrictions, and even border closures. It is up to governments to decide whether to follow the advice.

“Countries are encouraged to do anything that they feel would be a precautionary measure,” WHO spokeswoman Aphaluck Bhatiasevi said. “All countries need to enhance their monitoring.”

New Zealand said that 10 students who took a school trip to Mexico “likely” had swine flu. Israel said a man who had recently visited Mexico had been hospitalized while authorities try to determine whether he had the disease. French Health Ministry officials said four possible cases of swine flu are currently under investigation, including a family of three in the northern Nord region and a woman in the Paris region. The four recently returned from Mexico. Tests on two separate cases of suspected swine flu proved negative, they said.

Spain’s Health Ministry said three people who just returned from Mexico were under observation in hospitals in the northern Basque region, in southeastern Albacete and the Mediterranean port city of Valencia.

Mexico closed schools, museums, libraries and theaters in a bid to contain the outbreak after hundreds were sickened there. In the U.S., there have been at least 11 confirmed cases of swine flu in California, Texas and Kansas. Patients have ranged in age from 9 to over 50. At least two were hospitalized. All recovered or are recovering.

New York health officials said more than 100 students at the St. Francis Preparatory School, in Queens, recently began suffering a fever, sore throat and aches and pains. Some of their relatives also have been ill.

Some St. Francis students had recently traveled to Mexico, The New York Times and New York Post reported Sunday.

Preliminary tests of samples taken from sick students’ noses and throats confirmed that at least eight had a non-human strain of influenza type A, indicating probable cases of swine flu, city health officials said. The exact subtypes were still unknown, and the federal Centers for Disease Control and Prevention was conducting further tests.

Hong Kong and Taiwan said visitors who came back from flu-affected areas with fevers would be quarantined. China said anyone experiencing flu-like symptoms within two weeks of arrival an affected area had to report to authorities. A Russian health agency said any passenger from North America running a fever would be quarantined until cause of the fever is determined.

Tokyo’s Narita airport installed a device to test the temperatures of passengers arriving from Mexico.

Indonesia increased surveillance at all entry points for travelers with flu-like symptoms — using devices at airports that were put in place years ago to monitor for severe acute respiratory syndrome, or SARS, and bird flu. It said it was ready to quarantine suspected victims if necessary.

Hong Kong and South Korea warned against travel to the Mexican capital and three affected provinces. Italy’s health ministry also advised citizens to postpone travel to affected areas.

Symptoms of the flu-like illness include a fever of more than 100 degrees Fahrenheit (37.8 degrees Celsius), body aches, coughing, a sore throat, respiratory congestion and, in some cases, vomiting and diarrhea.

At least 81 people have died from severe pneumonia caused by the disease in Mexico, according to the WHO.

The virus is usually contracted through direct contact with pigs, but Joseph Domenech, chief of animal health service at U.N. Food and Agriculture Agency in Rome, said all indications were that the virus is being spread through human-to-human transmission.

No vaccine specifically protects against swine flu, and it is unclear how much protection current human flu vaccines might offer.

Russia banned the import of meat products from Mexico, California, Texans and Kansas. South Korea said it would increase the number of its influenza virus checks on pork products from Mexico and the U.S.

Serbia on Saturday banned all imports of pork from North America, despite reassurances from the FAO that pigs appear not to be the immediate source of infection.

Italy’s agriculture lobby, Coldiretti, warned against panic reaction, noting that farmers lost hundreds of millions of euros (dollars) because of consumers boycotts during the 2001 mad cow scare and the 2005 bird flu outbreak.

Japanese Agriculture Minister Shigeru Ishiba appeared on TV to calm consumers, saying it was safe to eat pork.

In Egypt, health authorities were examining about 350,000 pigs being raised in Cairo and other provinces for swine flu.

The WHO’s pandemic alert level is currently at to phase 3. The organization said the level could be raised to phase 4 if the virus shows sustained ability to pass from human to human.

Phase 5 would be reached if the virus is found in at least two countries in the same region.

“The declaration of phase 5 is a strong signal that a pandemic is imminent and that the time to finalize the organization, communication, and implementation of the planned mitigation measures is short,” WHO said.

Phase 6 would indicate a full-scale global pandemic.


jog on
duc


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## ducati916 (29 March 2020)

So some charts:















So if it were to develop into a 1930 style depression, plenty of bounces and trading opportunities.

Re. oil, the current price war could create a price shock the other way. There is (or will be) a tremendous amount of supply destruction going forward. Yes, currently demand is low, but that will not be the case forever.

jog on
duc


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## ducati916 (3 April 2020)

Always have to be careful of 'averages' as the river that is on average 4' deep can hide many problems:

Since 1871, market downturns have recovered as follows:


33% of market downturns recover within a month
50% of market downturns recover within two months
80% of market downturns recover within one year
95% of the time those big "once or twice in a lifetime drops" return to even in three to four years.
Collectively, since 1871, the time it takes for the market to recover (top to trough to top again) is a mere 7.9 months.

jog on
duc


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## ducati916 (3 April 2020)

You want to see a bounce...any one of these that works and watch the market explode higher.





jog on
duc


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## ducati916 (3 April 2020)

So here we have the systems traders v the discretionary chaps: this pretty much mirrors the ASF community atm.






And we have 'insiders' buying their own stocks heavily:






I monitor the various systematic based strategies here on ASF, particularly Mr Skate's thread and systems, (although there were some discretionary purchases in there) which are currently not active. When the systems switch to buying (US based algos) there will be a further bull bounce. When the retail systems kick back in, we may well get an additional bounce or continuation of that initial leg higher.

The discretionary traders, relying on experience, gut feel, subjectivity, etc are actively in the equity market. Time will tell whether we are early and will get caught in a further downdraft, or, have secured some real bargains moving forward, hence the chart disclosing the insider purchases, as you would think that they have much harder data re. their companies currently.

Absent any deterioration in COVID-19, we will have the economic consequences to deal with. However these I doubt will create a lower low. The downturn in the economy (bankruptcies, higher unemployment, etc) will be mitigated to an extent through that reduced supply and resurgent demand as economic activity picks itself back up off of the floor.

The key will be whether the medical sector can get a grip on effective treatment and future prevention of COVID-19 to prevent a second wave of infections.

jog on
duc


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## ducati916 (3 April 2020)

So this chap has modelled the outbreak.






_Before I start, I want to explain what the tables above and below mean.


The figures underneath the percentages are dates. The dates are estimates of when the country, state or city will have experienced 10%, 50%, 90%, and 99% of the total COVID-19 cases that they will experience in the first wave.
The peak day is the day each has the most new claims.
“Expected Total” is my estimate for the total number of reported COVID-19 claims in the first wave.
“% pop” is the percentage of each population that will be reported as infected with COVID-19.
“% complete” is the ratio of estimated current total cases to estimated final total cases fo the first wave.
Pseudo-R2 is the percentage of the total variation in the total cases explained by my three-parameter nonlinear regression. Because the regression is nonlinear, it is not an F-statistic, and gives us only a spit-in-the-wind sense for how good the regression is. Some have asked if I could add error bands to my models and the answer is no, because the nonlinearity of the equation makes that difficult. I’m only working with Excel, and looking through my old Econometrics texts, they don’t have an answer for this one. Maybe I should start modeling in R.
_
jog on
duc


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## ducati916 (3 April 2020)

New claims (unemployment) released.







Pretty much doubled from the last report. If the market does not collapse, bullish sign.

jog on
duc


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## peter2 (3 April 2020)

Yep, the market commentators were gobsmacked when the number was released last night. I think the Americans will panic again when the numbers of deaths continue to rise, lock downs become more prevalent and they actually experience how their lifestyles must change for even a short period. I wouldn't rule out civil disturbances and with their levels of gun ownership things could get very ugly.


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## MrChow (3 April 2020)

I don't think there will be a significant new bottom in this phase as the market seems to have priced in a consensus projection of the shutdowns effects by a couple weeks ago.   When unemployment and death figures have been released since it has had no impact, if anything markets have been positive on those days.

But consensus (from the instos modelling) also seems to factor in a relatively smooth GDP comeback in the second half of year and that is the most likely weak spot where I can see surprises hitting.  EG.  Intermittent need for further shutdowns from secondary waves or a health issue turning into a credit crisis.  Big moves need volitility and shocks from the unknown.

If those things don't eventuate later this year I think we'll look back at this time as the quick bottom similar to 1987 rather than the elongated timelines of 1929, 2000, 2008.


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## ducati916 (4 April 2020)

MrChow said:


> I don't think there will be a significant new bottom in this phase as the market seems to have priced in a consensus projection of the shutdowns effects by a couple weeks ago.   When unemployment and death figures have been released since it has had no impact, if anything markets have been positive on those days.
> 
> But consensus (from the instos modelling) also seems to factor in a relatively smooth GDP comeback in the second half of year and that is the most likely weak spot where I can see surprises hitting.  EG.  Intermittent need for further shutdowns from secondary waves or a health issue turning into a credit crisis.  Big moves need volitility and shocks from the unknown.
> 
> If those things don't eventuate later this year I think we'll look back at this time as the quick bottom similar to 1987 rather than the elongated timelines of 1929, 2000, 2008.





I'm with you on this. Markets traded lower today (US) but volatility has not ramped up, still well above the lows. 

jog on
duc


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## ducati916 (4 April 2020)

March was a crazy volatile month. How volatile? Check out the chart.






Gotta love it.

jog on
duc


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## ducati916 (4 April 2020)

Re. valuations indicating a bottom:










Because the market dropped so rapidly, those valuations are against GDP as it was. Once everything has settled out and been adjusted, it may well be that the fall in GDP as against Market Cap, actually takes the valuation into 'value' territory.

You could work it out long hand using best guestimates as to how far GDP has fallen. My guestimate is that once it is all calculated out and adjusted, it won't be far off that value region.

jog on
duc


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## ducati916 (4 April 2020)

Some projections if you wanted to guestimate.






jog on
duc


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## axyd (5 April 2020)

I tried to use Earnings Yield as a prediction of Market Bottom and how cheap stocks prices are (hint - no, it's not good time to buy, stocks are not cheap)



What do you think?

P.S.

EV/EBIT ratio would be much better than Earnings Yield, but sadly there's no such data.


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## ducati916 (5 April 2020)

axyd said:


> I tried to use Earnings Yield as a prediction of Market Bottom and how cheap stocks prices are (hint - no, it's not good time to buy, stocks are not cheap)
> 
> 
> 
> ...





First and foremost I think most would agree that the US market from 2009 - 2020 was a secular bull market. The question therefore becomes:

Has (that) secular bull market ended, or, is the current situation a cyclical downturn in a (still) to be continued secular bull market. The alternative is that this is the start of a secular bear market.

Examples of secular bear markets are 1929-1934, 1969-1982, 2000-2003.
Cyclical downturns: 2012, 2016, 2019 (as recent examples) which had quick resolutions. 1987 was the classic cyclical downturn example (I never traded this one though).
Then we have the 2008-2009 example, which lasted approximately 1 year. I would call this a secular bear market, but of relatively short duration.

If this is a cyclical downturn, stocks will remain somewhat overpriced by almost any measure that you choose to employ, but they will start to trade higher again, irrespective.

How to distinguish in real time?

Now these are simply my observations, so take it as that:

(a) Secular bear markets start slowly, sucking longs in gradually who look for the bounce etc; and
(b) Continue this way for months (years); and
(c) Save their greatest declines (damage) for the end of the bear. This is the classic throwing in the towel. The most recent example of this was the 2008-2009 bear.

The reason for the slow start is that secular bears require a catalyst to ignite the fuse. That catalyst often does not arrive at the very start of the bear, it arrives a little way in.

Secular bears also (I think) require the wrong policy response from Central banks, Government, etc, which then magnifies and extends the bear.

It also helps if you can identify the cause of the bear: 2008-2009 was a credit issue. 1969-1982 was an inflation issue. 2000-2003 was a technology mania (like the railroads before them) that lacked earnings substance.

Cyclical downturns by contrast:

(a) Start fast; and
(b) Accelerate; and
(c) Bottom quickly, trapping the perma-bears.

The current issues are:

(a) Deflation;
(b) COVID-19

Has the current washout been sufficient to clear the decks? The (correct) answer to that question will identify whether this is simply a cyclical downturn, in which case we probably have bottomed, or the start of a secular bear.

COVID-19 was probably the catalyst. Unusually it arrived at the front end and was recognised fast. It will pass. What remains will be the deflationary environment. Normally a washout of this magnitude would sufficiently clear the decks of excess supply as a number of firms in each industry went under, Because through bailouts, excess supply is maintained, this process is not being allowed to happen. The classic example in the oil industry looks set to happen with a bailout of the shale producers, far better for the industry in the longer term to let them fail.

Will this policy response convert a cyclical downturn into a secular bear?

If you think yes, then hold fire as we will go lower, possibly significantly lower and the duration will extend in time. Eventually in a secular bear, fundamental valuations will provide definite information that value has returned to the markets and buy points will be quite easily identifiable.

I have my own thoughts on this which I will lay out in another post as this one is already getting long.

jog on
duc


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## qldfrog (5 April 2020)

axyd said:


> I tried to use Earnings Yield as a prediction of Market Bottom and how cheap stocks prices are (hint - no, it's not good time to buy, stocks are not cheap)
> 
> 
> 
> ...




I am not a video person..but followed the beginning.agree that historically we are not in bargain territory
Noone could say that 2016 market was undervalued and this is the level we are at, with a depression ahead...


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## Garpal Gumnut (5 April 2020)

Picking bottoms makes for smelly fingers.

gg


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## ducati916 (5 April 2020)

Some humour from the 2007-2009 period.



























*plus ça change, plus c'est la même chose*


jog on
duc


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## ducati916 (5 April 2020)

How do the numbers stack up today?






jog on
duc


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## hja (5 April 2020)

Garpal Gumnut said:


> Picking bottoms makes for smelly fingers.
> 
> gg



Even if you manage to wipe with a few sheets of toilet paper? (no hoarder)


----------



## hja (5 April 2020)

ducati916 said:


> *plus ça change, plus c'est la même chose*
> jog on
> duc



...et le pire cela devient... !


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## axyd (5 April 2020)

There's also problem - *how to preserve the wealth till that moment when stocks are cheap and could be bought at huge discount*.

It's not easy because there's no special "safe" asset - like "cash" to preserve the wealth. Holding cash (or short-term bonds) is no different from betting heavily on a single asset and taking huge risks.

So, we have the following storages for wealth (with risks):

- gold and silver (can fall).
- USD (inflation, fiat currency blowing up to zero).
- bonds (same as cash, plus risk of bond default).
- stock (can fall).
- PUT options  (market in panic and they are very costly now, the average price now is x5 of usual price).

The question is how to allocate the wealth among those storages to minimise risks and have robust and safe portfolio, resistant to all sort of unpredictable future events and prepared to take advantage of future stock fall.


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## Garpal Gumnut (5 April 2020)

axyd said:


> There's also problem - *how to preserve the wealth till that moment when stocks are cheap and could be bought at huge discount*.
> 
> It's not easy because there's no special "safe" asset - like "cash" to preserve the wealth. Holding cash (or short-term bonds) is no different from betting heavily on a single asset and taking huge risks.
> 
> ...



Says it all really. 

We are far from the end of all this kerfuffle I hate to say.

The main reason I prefer stocks long is that one can sell them tout suite.

Property is certainly cactus.

gg


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## ducati916 (8 April 2020)

Just looking at various factors from the 2009 bottom:






So the market and dollar (double bottomed/double topped) were a mirror of each other. No prizes for guessing that they are once again more highly correlated than they were a month ago.

There are of course fundamental reasons for this.

jog on
duc


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## ducati916 (9 April 2020)

Before looking at the 'dollar', a simple indicator that is robust (at tops and bottoms)





The 2009 example was clear and correct.






As it was in 2003.

Currently:






The indicator bottomed March 11, stocks on March 23. I find 'divergences' to be extremely powerful when looking for tops/bottoms.

jog on
duc


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## ducati916 (9 April 2020)

Insiders buying the 'dip' is a worldwide occurrence:


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## ducati916 (9 April 2020)

ducati916 said:


> Insiders buying the 'dip' is a worldwide occurrence:










Ooops, hit the wrong button there!

jog on
duc


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## ducati916 (9 April 2020)

Dow Theory:


_Under Dow’s theory the primary trend, once authoritatively established as bullish, is considered to be continuing in force until negated by a confirmed bearish indication such as would be the case when, after a reaction of full secondary proportions in a bull market, a rally fails to lift both averages to new high ground, and a later decline carries both averages below the preceding secondary low.”

William Peter Hamilton – “The movement of both the railroad (now the Transports) and industrial stock averages should always be considered together. The movement of one price average must be confirmed by the other before reliable inferences may be drawn. Conclusions based upon the movement of one average, unconfirmed by the other, are almost certain to prove misleading.”

William Peter Hamilton – “Dow’s theory stipulates for a confirmation of one average by the other. This constantly occurs at the inception of a primary movement, but is anything but consistently present when the market turns for a secondary swing.”

William Peter Hamilton – “When one breaks through an old low level without the other, or when one establishes a new high for the short swing, unsupported, the inference is almost invariably deceptive.”

William Peter Hamilton – “Indeed it may be said that a new high or a new low by one of the averages unconfirmed by the other has been invariably deceptive. New high or low points for both have preceded every major movement since the averages were established.”

William Peter Hamilton – “The two averages may vary in strength, but they will not vary materially in direction especially in a major movement. Throughout all the years in which both averages have been kept, this rule has proved entirely dependable. It is not only true in the major swings of the market, but it is approximately true of the secondary actions and rallies. It would not be true of the daily fluctuations, and it might be utterly misleading so far as individual stocks are concerned.”

Robert Rhea – “The most useful part of the Dow theory, and the part that must never be forgotten for even a day, is the fact that no price movement is worthy of consideration unless the movement is confirmed by both averages.”

Robert Rhea – “The Dow theory deals exclusively with the movement of the railroad and industrial stock averages, and any other method would not be Dow’s theory as expounded by Hamilton.”

Robert Rhea – “A wise man lets the market alone when the averages disagree.”

Robert Rhea – “When the averages disagree they are shouting ‘be careful’.”
_
jog on
duc


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## ducati916 (9 April 2020)

Returns in previous bears.






Bond, James Bond.

jog on
duc


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## ducati916 (9 April 2020)

So this is the anatomy of this crash and how you could have seen it coming.

23/24 Feb. 2020, US Stock Market sells off;
24 Feb. US$ sells off.
24 Feb. Japanese Yen moves higher.

_The yen’s unique properties in times of turmoil stem from the influence of Japan’s ultra-low interest rates (current benchmark rate: 0.5%). In normal times, that encourages investors to borrow in yen and buy pretty much anything else, from Brazilian stocks to Icelandic bonds to Australian short-term paper._

_When volatility increases or investors have to cover losses elsewhere, they unwind these maneuvers – called “carry trades” – and buy back the yen. That kind of unwind has gathered speed in recent weeks. What’s more, investors who aren’t involved in carry trades may be turning to the relative liquidity of the currency markets in search of a hedge as losses in other investments multiply._

_The yen does “offer some protection,” says Jens Nordvig, a currency strategist at Goldman Sachs. “It tends to go in the right direction when things go really badly.”_

_Of course, when things look up, the yen immediately changes tack: it weakened rapidly against the dollar this afternoon as stocks took off._

This article actually dates from 2008. Exactly the same thing happened back then.

9 March Japanese Yen tops out
9 March US$ bottoms out
MBS sell off






23 March US Stocks bottom
23 March US$ x2 top
23 March Yen x3 bottom
23 March MBS huge up day
23 March Congress discuss bailout






Charts of the above

Stocks






Yen






Dollar






Last time, the initial bailout was rejected:






We all know what happened next.

As stated at the start of the post, an investor could have been at least prepared for this from January. Now, had they also been watching for the 'carry trade' early warning, they could likely have got out almost as quickly as Mr Skate's GTFO indicator. But this is for another post.

jog on
duc


----------



## ducati916 (10 April 2020)

So from Oaktree:

_Before I close, just a word on market bottoms.  Some of the most interesting questions in investing are especially appropriate today: *“Since you expect more bad news and feel the markets may fall further, isn’t it premature to do any buying?  Shouldn’t you wait for the bottom?”  *



To me, the answer clearly is “no.”  As mentioned earlier, we never know when we’re at the bottom.  A bottom can only be recognized in retrospect: it was the day before the market started to go up.  *By definition, we can’t know today whether it’s been reached, since that’s a function of what will happen tomorrow.  Thus, “I’m going to wait for the bottom” is an irrational statement.* 



If you want, you might choose to say, “I’m going to wait until the bottom has been passed and the market has started upward.”  That’s more rational.  However, number one, you’re saying you’re willing to miss the bottom.  And number two, one of the reasons for a market to start to rise is that the sellers’ sense of urgency has abated, and along with it the selling pressure.  That, in turn, means (a) the supply for sale shrinks and (b) the buyers’ very buying forces the market upward, as it’s now they who are highly motivated.  These are the things that make markets rise.  *So if investors want to buy, they should buy on the way down.  That’s when the sellers are feeling the most urgency and the buyers’ buying won’t arrest the downward cascade of security prices.*



Back in 2008, on the heels of Lehman Brothers’ September 15 bankruptcy filing, Bruce Karsh and his team embarked on an unprecedented program to buy the debt of companies in distress.  They invested an average of roughly $450 million per week over the last 15 weeks of the year, for a total of nearly $7 billion.  Debt prices collapsed throughout that period, and they continued to fall in the first quarter of 2009 (along with the stock market).  But because the hedge funds facing withdrawals had been gated – and because the leveraged, securitized vehicles that would melt down had all been liquidated – large amounts ceased to be for sale after year-end.  In short, if we hadn’t bought in the fourth quarter, we would have missed our chance.



The old saying goes, “The perfect is the enemy of the good.”  Likewise, waiting for the bottom can keep investors from making good purchases.  *The investor’s goal should be to make a large number of good buys, not just a few perfect ones.*  Think about your normal behavior.  Before every purchase, do you insist on being sure the thing in question will never be available lower?  That is, that you’re buying at the bottom?  I doubt it.  You probably buy because you think you’re getting a good asset at an attractive price.  Isn’t that enough?  And I trust you sell because you think the selling price is adequate or more, not because you’re convinced the price can never go higher.  *To insist on buying only at bottoms and selling only at tops would be paralyzing.* 



On the contrary, I gave this memo the title Calibrating because of my view that a portfolio’s positioning should change over time in response to what’s going on in the environment.  As the environment becomes more precarious (with prices high, risk aversion low and fear lacking), a portfolio’s defensiveness should be increased.  And as the environment becomes more propitious (with prices low, risk aversion high and fear prevalent), its aggressiveness should be ramped up.  *Clearly, this process is one of gradual readjustment, not a matter of all-or-nothing.  It shouldn’t be the goal to do this only at bottoms and tops.*



So it’s my view that waiting for the bottom is folly.  What, then, should be the investor’s criteria?  *The answer’s simple: if something’s cheap – based on the relationship between price and intrinsic value – you should buy, and if it cheapens further, you should buy more.* 



I don’t want to give the impression that it’s easy to buy while prices are tumbling.  It isn’t, and in 2008, Bruce and I spent a lot of time supporting each other and debating whether we were buying too fast (or too slow).  The news was terrible, and for a good while it seemed as if the vicious circle of financial institution meltdowns would continue unchecked.  *Terrible news makes it hard to buy and causes many people to say, “I’m not going to try to catch a falling knife.”  But it’s also what pushes prices to absurdly low levels. * That’s why I so like the headline from Doug Kass that I referred to above: “When the Time Comes to Buy, You Won’t Want To.”  *It’s not easy to buy when the news is terrible, prices are collapsing and it’s impossible to have an idea where the bottom lies.  But doing so should be the investor’s greatest aspiration.*



As for the current episode, here’s some data from Gavekal Research’s Monthly Strategy piece for April, bearing on the question of whether the bottom was passed in March:



. . . markets rarely clear after one massive decline.  In 15 bear markets since 1950, only one did not see the initial major low tested within three months . . .  In all other cases, the bottom has been tested once or twice.  Since news-flow in this crisis will likely worsen before it improves, a repeat seems likely.



And here’s some data from my son Andrew regarding the movements of the S&P 500 index around the time of the last two big crises.  The first and second declines were followed by substantial rallies . . . which then gave way to even bigger declines:
_
And a chart for you to ponder:






jog on
duc
_

_


----------



## qldfrog (10 April 2020)

ducati916 said:


> So from Oaktree:
> 
> _Before I close, just a word on market bottoms.  Some of the most interesting questions in investing are especially appropriate today: *“Since you expect more bad news and feel the markets may fall further, isn’t it premature to do any buying?  Shouldn’t you wait for the bottom?”  *_
> 
> ...



All good, but what does one see as reasonable value?
Correlation between transport and share price is not exactly positive is it?
Depression are different from market crash as it affect the underlying economy
So while i do buy what i see as bargain.mostly overseas: BP Exon
I do not see that much to be crazy of here?
Banks? Companies selling now at 2016 prices?
Miners with reduced demand both structurally and economic cycle wise?


----------



## lindsayf (10 April 2020)

Great posts.
There seems to be a profound economic case for a new low.  There is almost a consensus on that.  Because of that, I am thinking that the low is probably in.  The market is good at wrecking consensus.  
I started buying over the last 2 weeks but keeping some powder dry because wtfk?


----------



## ducati916 (10 April 2020)

qldfrog said:


> All good, but what does one see as reasonable value?
> Correlation between transport and share price is not exactly positive is it?
> Depression are different from market crash as it affect the underlying economy
> So while i do buy what i see as bargain.mostly overseas: BP Exon
> ...





So when we have market meltdowns, particularly where they are quite fast so that the fundamentals are a guestimate moving forward (earnings), I don't buy individual stocks. I buy ETFs. I particularly like leveraged ETFs. I also like Close Ended Funds with big dividends, particularly if they have a consistent manager (ethos).

So I have bought: ERX, FAS, GGT, DFEN all at pretty close to the bottom. Only ERX is still showing a loss, got caught by the Arabs declaring a price war.

If you are going to buy individual stocks, then:
(a) Low P/B value (replacement cost of assets) that have in the past demonstrated high ROE (+15%);
(b) Low debt (allows debt to be added if required);
(c) High Quick/Current ratios (cash to stay in business/current liabilities);
(d) I like a high dividend (only if it frees up cash if it is cut).

jog on
duc


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## ducati916 (10 April 2020)

lindsayf said:


> Great posts.
> There seems to be a profound economic case for a new low.  There is almost a consensus on that.  Because of that, I am thinking that the low is probably in.  The market is good at wrecking consensus.
> I started buying over the last 2 weeks but keeping some powder dry because wtfk?




(a) Everyone and their granny pretty much knows that there is likely to be a recession triggered. This is priced in and not news. Positions being taken over the last week already have that priced in, therefore, it will take something 'new and bad' to push the market lower.

(b) The banks are weathering the storm well (so far). A serious issue develops out of nowhere with the financial system (banking) and that could constitute new and bad. At this point, the issue would have been their loan books, but with the Fed backstopping them, unlikely.

(c) We know bankruptcies will run up. Meh. The US has Chapter 11, they deal with this well and in any case it's not news.

(d) The virus will burn itself out over time. A vaccine or treatment will be developed. Over.

(e) Headlines will lose their ability to scare.

So as traders/investors we follow our plan. These opportunities crop up rarely, 10yrs between drinks is a while. Make the most of it. No need to be reckless, just follow your plan.

$1M spread across 10-20 positions at a 20%+ dividend yield gives a nice passive cash-flow going forward, particularly if those dividends grow over time.

jog on
duc


----------



## qldfrog (10 April 2020)

I noticed you invest mostly in the US which gives  you currency leverage and away from the scariest australian specific outlook
You have quite a valid view, a bit worried about leverage etf
You raised my interest in dfen and actually bpugh dome dn march but sold at a loss when i learned about the managing fund changing the multiplicator rules out of the blue on some of their similar ETFs
Will look at the others ETFs


----------



## ducati916 (10 April 2020)

qldfrog said:


> 1. I noticed you invest mostly in the US which gives  you currency leverage and away from the scariest australian specific outlook
> 
> 2. You have quite a valid view, a bit worried about leverage etf
> 
> ...




1. Pretty much 100% US

2. The leverage is (generally) fine. In real dislocations, sometimes they get a bit loose and unhinged.

3. Look at FAS:






Some real quality in there, all jumping around x3. FAS has been around at least 10yrs, probably longer. Made it through the 2007-2009 mess and performing nicely this time round also.






Gotta love this one!



jog on
duc


----------



## ducati916 (11 April 2020)

There seems to be a consensus that there will be a recession. Agreed. Do all recessions result in a bear market?






So in '53-'54, it did not.
In '57-'58, yes it did.






In 1960, yes it did.
End of '68-'69 into 1970 yes it did (see next chart).






Continued from previous.

What is noticeable is that bull rallies launched out of the recessions long before the recessions completed.






The other point worth noting is that often, the recession and bear start more or less at the same time (this could be hindsight though as the recessions are often plotted retrospectively).






Again, market comes out of bear long before recession resolves.






Not sure what happened on this one, but you get the idea.

Obviously we are going to incur a recession. The market will not however stay in bear mode for the duration of the recession. It could well be choppy, I'd be surprised if it wasn't, lots of negativity out there for sure. Markets (however) tend to look at causes rather than outcomes. When the cause is resolved, even though the outcomes linger...markets are off and running again.

jog on
duc


----------



## ducati916 (12 April 2020)

Earnings season kicks off next week in the US. Depending on how bad it is, this is where, if there is going to be a pullback, it could occur. We start with some of the big banks. But also in there we have rail transport (KSU) and on retail JNJ.

_*Earnings spotlight:* Johnson & Johnson (NYSE:JNJ), Fastenal (NASDAQ:FAST), Conn's (NASDAQ:CONN) and Amarin (NASDAQ:AMRN), JPMorgan (NYSE:JPM) and Wells Fargo (NYSE:WFC) on April 14; Bank of America (NYSE:BAC), Citigroup (NYSE:C), Goldman Sachs (NYSE:GS), PNC Financial (NYSE:PNC) UnitedHealth (NYSE:UNH) and Bed Bath & Beyond (NASDAQ:BBBY) on April 15; Abbott (NYSE:ABT), Rite Aid (NYSE:RAD), BlackRock (NYSE:BLK), Bank of New York (NYSE:BK), KeyCorp (NYSE:KEY) on April 16; Kansas City Southern (NYSE:KSU), Schlumberger Limited (NYSE:SLB) and Regions Financial (NYSE:RF) on April 17._

Along with the banks we have the credit card divisions of banks and charge offs on credit cards. With US unemployment going through the roof, this could also be a market mover if it is worse than expected. What's expected? Bad. If it's truly woeful, could get choppy in financials (FAS).

There are also updates on Biotech and their progress towards a vaccine. Any positive news out of any of these and the market could turn very bullish.

_*COVID-19 vaccines and treatments:* As clinical trials related to COVID-19 continue to ramp up, the focus next week will start to shift on which vaccines and treatments have the best chance to make it to mass production. There has been a lot of discussion about Gilead Sciences' (NASDAQ:GILD) remdesivir, Regeneron Pharmaceuticals' (NASDAQ:REGN) cocktail antibodies and Moderna's (NASDAQ:MRNA) vaccine candidate. Other companies racing ahead with vaccine trials at various stages include BioNTech (NASDAQ:BNTX), Pfizer (NYSE:PFE), Dynavax Technologies (NASDAQ:DVAX), Vaxart (NASDAQ:VXRT), GlaxoSmithKline (NYSE:GSK), Heat Biologics (NASDAQ:HTBX), Inovio Pharmaceuticals (NASDAQ:INO), Translate Bio (NASDAQ:TBIO), Johnson & Johnson, Arcturus Therapeutics (NASDAQ:ARCT), CSL Behring and Novavax (NASDAQ:NVAX). Treatment candidates are being worked on by privately-held CalciMedica, Amgen (NASDAQ:AMGN), Adaptive Biotechnologies (NASDAQ:ADPT), Takeda Pharmaceutical (NYSE:TAK), CytoDyn (OTCQB:CYDY), Roche Holdings (OTCQX:RHHBY), Regeneron Pharmaceuticals, Tiziana Life Sciences (NASDAQ:TLSA), Vir Biotechnology (NASDAQ:VIR), Eli Lilly (NYSE:LLY), Sanofi (NASDAQ:SNY) and more._

_*Spotlight on Moderna:* Moderna (MRNA) will host its Vaccine Day on April 14. Presentations from CEO Stéphane Bancel, Chief Medical Officer Tal Zaks and key opinion leaders will focus on mRNA vaccines and the company's core prophylactic vaccines modality._

Biotech news will be everywhere and watched really closely. Hints of a solution to COVID....well an already crazy volatile sector could become even more so.

_*Virtual biotech conferences:* The Needham and Company 19th Annual Healthcare Conference is going to a virtual format. Presentations are expected from Cardiovascular Systems (NASDAQ:CSII), Cara Therapeutics (NASDAQ:CARA), Iterum Therapeutics (NASDAQ:ITRM), Personalis (NASDAQ:PSNL), Invacare (NYSE:IVC), I-Mab (NASDAQ:IMAB), Zealand Pharma (NASDAQ:ZEAL), Altreca (NASDAQ:BCEL), Castle Biosciences (NASDAQ:CSTL), Esperion Therapeutics (NASDAQ:ESPR), Liquidia Technologies (NASDAQ:LQDA), Amphastar Pharmaceuticals (NASDAQ:AMPH), Genocea Biosciences (NASDAQ:GNCA), Trevi Therapeutics (NASDAQ:TRVI), KalVista Pharmaceuticals (NASDAQ:KALV), TrovaGene (NASDAQ:TROV) and X4 Pharmaceuticals (NASDAQ:XFOR)._

And from Barron's magazine, the warning that socialism is becoming far more mainstream in the US. With US elections coming up (almost forgotten outside of US) there is a not insignificant risk of a Bernie Saunders victory, if not in person, at least for the policies that he has espoused. This could have a significant impact on a number of market sectors going forward.

_*Barron's mentions:* There is a warning sounded that SoftBank (OTCPK:SFTBF,OTCPK:SFTBY) will need to take painful write-downs for its Vision Fund over the next few weeks. WeWork (WE), Uber (NYSE:UBER) and Oyo Rooms are just a few of the huge investments that have misfired for the fund. Amid the flurry of dividend cuts and payout suspensions, durable utility companies like American Electric Power (NYSE:AEP), Dominion Energy (NYSE:D), FirstEnergy (NYSE:FE) and NextEra Energy (NYSE:NEE) are seen as safety bets for dividend stability. _

_The cover story this week makes the argument that life won't be the same after the pandemic is over. "The pandemic is reshaping consumer, corporate, and government behavior. Long-held assumptions have been discarded. Deficit hawks have barely made a peep as policymakers spend trillions of dollars to stabilize the economy. Universal health care and social safety nets, once deemed too radical, are getting more mainstream attention," predicts the publications. Battle-tested investors are seen ending up being more cautious in what could be a reversal of the frothy last few years._

jog on
duc


----------



## ducati916 (13 April 2020)

So regarding GDP issues driving a recession:






The shock to GDP will be front loaded, meaning, it is quite possible that we have already seen the market lows. There may be pullbacks (almost certainly) but that the 'low' is already in.

jog on
duc


----------



## ducati916 (13 April 2020)

Following up on the previous post: market downturns (bear markets) are correlated to the duration of the recession.






Which makes sense when you think about it. So, if from the previous post, the recession is shorter in duration due to the front loading, then, the market is moving from (L, W, and U) recoveries closer to a V recovery.

jog on
duc


----------



## wayneL (13 April 2020)

If that was the bottom, I'm calling it the Fed Bottom.


----------



## ducati916 (13 April 2020)

wayneL said:


> If that was the bottom, I'm calling it the Fed Bottom.





Wayne, long time...

Absolutely the Fed bottom. No Fed intervention, absolute carnage. The question is how much farther can the can be kicked? As the US$ is still the reserve currency, I think it can be kicked, but it is getting dodgy.

jog on
duc


----------



## wayneL (13 April 2020)

ducati916 said:


> Wayne, long time...
> 
> Absolutely the Fed bottom. No Fed intervention, absolute carnage. The question is how much farther can the can be kicked? As the US$ is still the reserve currency, I think it can be kicked, but it is getting dodgy.
> 
> ...



Agree.

I've been so wrong in the past about how far they can can be kicked, so a little bit gun shy now.

I have moderate confidence that there will be an extreme diversion between the fed economy and the real economy this time... With quite a few caveats included.

It's in those caveats that have me very caveated (sic).


----------



## qldfrog (14 April 2020)

Woke up early and looked at the US..open on Easter Monday there
 bought some FAS at what i consider a discount
The US is down a bit and not especially pleased it seems, but talks of reopening softened the fall, even positive now on Nasdaq
Wonder how the asx will react..


----------



## ducati916 (14 April 2020)

qldfrog said:


> Woke up early and looked at the US..open on Easter Monday there
> bought some FAS at what i consider a discount
> The US is down a bit and not especially pleased it seems, but talks of reopening softened the fall, even positive now on Nasdaq
> Wonder how the asx will react..




Morning Mr Frog,

Some of the 'big' banks report this week. If there are no disasters, FAS should do very nicely. Given that these chaps are TBTF and would receive bailouts etc, it is a pretty safe bet down the road irrespective of what earnings are like this week.

jog on
duc


----------



## qldfrog (14 April 2020)

ducati916 said:


> Morning Mr Frog,
> 
> Some of the 'big' banks report this week. If there are no disasters, FAS should do very nicely. Given that these chaps are TBTF and would receive bailouts etc, it is a pretty safe bet down the road irrespective of what earnings are like this week.
> 
> ...



And thanks Duc for highlighting the history and so relative safety of the instrument itself.not talking about price which could collapse but i can assume that risk.


----------



## ducati916 (14 April 2020)

qldfrog said:


> And thanks Duc for highlighting the history and so relative safety of the instrument itself.not talking about price which could collapse but i can assume that risk.




My pleasure Mr Frog. 

jog on
duc


----------



## sptrawler (14 April 2020)

There seems to be a general upbeat tone in the media ATM, more talk of when we are going to start the economy back up, rather than if the economy will start up.
Could we be seeing a bottom ATM, with the bad news factored in to the prices, or is it the calm before the storm? 
I get the impression a lot depends on the next round of earnings news, the miners don't seem to be cutting back on production, China's manufacturing grew in March.
I think with the virus under control and the Government looking at starting to relax the control measures, we may possibly have seen the worse of the market drop.
The double dip we have been looking for, may not be as drastic as we first predicted, well this is my thinking ATM.
What is the general feeling of other members? Are my thoughts just wishfull thinking?


----------



## Iggy_Pop (14 April 2020)

sptrawler said:


> There seems to be a general upbeat tone in the media ATM, more talk of when we are going to start the economy back up, rather than if the economy will start up.
> Could we be seeing a bottom ATM, with the bad news factored in to the prices, or is it the calm before the storm?
> I get the impression a lot depends on the next round of earnings news, the miners don't seem to be cutting back on production, China's manufacturing grew in March.
> I think with the virus under control and the Government looking at starting to relax the control measures, we may possibly have seen the worse of the market drop.
> ...



I am inclined to agree but think we will still see a dip soon, but not back to the 23rd March lows, though we might go close. Agree will depend on earnings out looks during reporting season, and it is different to the GFC. While travel and tourism shares have been hammered, banks have taken a hit due to potential bankruptcies, consumer staples, materials and health companies have not been impacted. 
The federal and state governments have responded well to reduce the bankruptcies with the job seeker, job keeper allowances and rental support so will be interesting to see what the banks report. 
A successful vaccine would be the real game changer.

And some wishful thinking mixed in there

Iggy


----------



## $20shoes (14 April 2020)

For the S&P500 the technicals over the last week have been indisputably bullish. We can look at 2934 as a 0.618 retracement and see how bullish we look at this zone. On technicals alone you could well argue that a sustained low is in place. And a lot of Duc's fundamental data paints a bullish picture. 

But I can't help but think that there may be broader implications that are unfathomable or at least difficult to assess. 
At a societal level, is Covid19 going to cause a disruption to how we function for some time - does this cause a yawing gap between the haves and have nots, the cans and cannots and will neoliberal capitalism become anathema and give rise to a revised capitalism? 

Will international borders ever truly open, will stadiums ever be truly full again? Will you ever be able to safely visit your elderly loved ones? Indeed, if we were to live like this for 6 months will people have a yearning to work less and idle more? Will we lurch from periods of business as usual to periods of lockdown?  

Outside of economics, these are interesting points to ponder and I think the market has priced in a beachhead created by the FED and other like institutions. But these two articles raise some interesting points (actually the MIT articles have been a good read - worth the free email subscription) 

https://www.technologyreview.com/20...a-world-with-covid-19/?itm_source=parsely-api

https://www.technologyreview.com/2020/04/08/998785/stop-covid-or-save-the-economy-we-can-do-both/

From an Elliott perspective I do feel like we are close to a precipice and I might play some short term momentum, but im tipping to bearish at 2934. Though liekly that this leg may be part of a complex larger B wave that factors in a lot of the uncertainty and hesitancy we can expect for the next 1-2 quarters.

Was Feb 2020 a major top? I think so, until proven wrong.


----------



## $20shoes (14 April 2020)

$20shoes said:


> For the S&P500 the technicals over the last week have been indisputably bullish. We can look at 2934 as a 0.618 retracement and see how bullish we look at this zone. On technicals alone you could well argue that a sustained low is in place. And a lot of Duc's fundamental data paints a bullish picture.
> 
> But I can't help but think that there may be broader implications that are unfathomable or at least difficult to assess.
> At a societal level, is Covid19 going to cause a disruption to how we function for some time - does this cause a yawing gap between the haves and have nots, the cans and cannots and will neoliberal capitalism become anathema and give rise to a revised capitalism?
> ...




The MIT sign up page is here if anyone is interested. 

https://forms.technologyreview.com/coronavirus-tech-report/


----------



## Dona Ferentes (14 April 2020)

sptrawler said:


> There seems to be a general upbeat tone in the media ATM, more talk of when we are going to start the economy back up, rather than if the economy will start up.
> 
> Could we be seeing a bottom ATM, with the bad news factored in to the prices, or is it the calm before the storm?
> 
> What is the general feeling of other members? Are my thoughts just wishful thinking?



I'm thinking it's the phoney war. This is a nasty nasty virus. Even these (drastic) measures aren't fully working, sure the curve has been flattened, but vaccines are a way off. And what if it mutates (others did)? But a seized up economy is beyond disastrous; food kitchens and social breakdown?


----------



## Garpal Gumnut (14 April 2020)

Uncertain times.

Not the time to be picking a bottom. 

gg


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## sptrawler (14 April 2020)

Dona Ferentes said:


> I'm thinking it's the phoney war. This is a nasty nasty virus. Even these (drastic) measures aren't fully working, sure the curve has been flattened, but vaccines are a way off. And what if it mutates (others did)? But a seized up economy is beyond disastrous; food kitchens and social breakdown?



That is at a social level, but I'm seeing a lot of light engineering still operating in W.A around the Canning Vale area, it seems to be hitting retail, hospitality and tourism mostly.

Fully agree on the the virus being nasty and it wont be got rid of easily IMO, but there may be a possibility a vaccine might not be developed the reported re infections aren't a good sign and it may be one of those things we have to live with.
Just a thought.


----------



## ducati916 (15 April 2020)

sptrawler said:


> 1. There seems to be a general upbeat tone in the media ATM, more talk of when we are going to start the economy back up, rather than if the economy will start up.
> 
> 2. Could we be seeing a bottom ATM, with the bad news factored in to the prices, or is it the calm before the storm?
> 
> ...




1. With the media I try and distinguish just opinion from data that indicates improvement. There are charts on this thread that look at media involvement historically.

2. Might be, might not be. No one really knows. We are all just guessing. The important thing is: do you have a plan.

3. Economies will reopen. That will happen even if there is a wave 2 and increased deaths.

4. The virus will burn out of its own accord irrespective of what government does/does not do. This problem should have been addressed certainly in 2009 if not long before.

5. I am trading 'as if' the bottom is already in. Whether that is right or wrong will only be known in time. However, if I believe circumstances are changing, I'll change my position.

jog on
duc


----------



## ducati916 (15 April 2020)

Iggy_Pop said:


> I am inclined to agree but think we will still see a dip soon, but not back to the 23rd March lows, though we might go close. Agree will depend on earnings out looks during reporting season, and it is different to the GFC. While travel and tourism shares have been hammered, banks have taken a hit due to potential bankruptcies, consumer staples, materials and health companies have not been impacted.
> The federal and state governments have responded well to reduce the bankruptcies with the job seeker, job keeper allowances and rental support so will be interesting to see what the banks report.
> A successful vaccine would be the real game changer.
> 
> ...




The bad news was front and centre. Everyone and their dog understood that GDP, earnings, etc were going to take a bad hit. Hence the speed of the decline. If things are worse than first expected and more 'prolonged' could be a qualifier, then possibly we go lower than current lows.

The speed of government intervention (whether you agree with it or not) has been similar to 1987. In 1987 the government via the Fed stepped up very quickly, as they have in this current crisis. Think back to 2008, they actually let LEH fail before they started to realise the extent of the issue. They came very late to the party.

Market events are in part, liquidity events. Liquidity is an issue a Central Bank can solve.

jog on
duc


----------



## ducati916 (15 April 2020)

$20shoes said:


> 1. For the S&P500 the technicals over the last week have been indisputably bullish. We can look at 2934 as a 0.618 retracement and see how bullish we look at this zone. On technicals alone you could well argue that a sustained low is in place. And a lot of Duc's fundamental data paints a bullish picture.
> 
> 2. But I can't help but think that there may be broader implications that are unfathomable or at least difficult to assess.
> 
> ...




1. For the current situation, I would agree, the technicals are bullish.

2. Also true. But we can only trade or not trade and have a plan to deal with circumstances or developments as they play out. Hence the look back at various bear markets: not so much to predict (although we all try anyway) but rather to see what is possible and to formulate a plan to deal with your positions if it all goes Pete Tong.

3. I would say almost certainly. Look at the US Democratic candidates. Socialism. Should Saunders be elected, we could have another US market imbroglio with falling prices as a result.

4. I would say yes and faster than you think. We (as a species) have incredible optimism to our own invulnerability.

5. I'll read them later, ta.

6. Not my cup of tea, but, we'll see. However the secular forces of this bull market are still in place. What we have currently is a cyclical bear driven by a specific event. These secular forces have been in place since 1982. They are however, very long in the tooth.

jog on
duc


----------



## ducati916 (15 April 2020)

Dona Ferentes said:


> I'm thinking it's the phoney war. This is a nasty nasty virus. Even these (drastic) measures aren't fully working, sure the curve has been flattened, but vaccines are a way off. And what if it mutates (others did)? But a seized up economy is beyond disastrous; food kitchens and social breakdown?




Which is why, at some point irrespective of deaths, the economies re-open. Suicide is not an option.

jog on
duc


----------



## ducati916 (15 April 2020)

Garpal Gumnut said:


> Uncertain times.
> 
> Not the time to be picking a bottom.
> 
> gg




Which is certainly a valid viewpoint and for many newer traders, absolutely the correct one. It will be a tricky and treacherous market.

jog on
duc


----------



## ducati916 (15 April 2020)

sptrawler said:


> That is at a social level, but I'm seeing a lot of light engineering still operating in W.A around the Canning Vale area, it seems to be hitting retail, hospitality and tourism mostly.
> 
> Fully agree on the the virus being nasty and it wont be got rid of easily IMO, but there may be a possibility a vaccine might not be developed the reported re infections aren't a good sign and it may be one of those things we have to live with.
> Just a thought.




Just to provide the historical context:







jog on
duc


----------



## frugal.rock (15 April 2020)

Garpal Gumnut said:


> Uncertain times.
> 
> Not the time to be picking a bottom.
> 
> gg




We have seen a bottom, whether it's thee bottom, is the question.
For intraday or short term trading, it's been a good bottom. There's been good bounces. Closed out my record highest profit trade today, so it's not all bad.
A thought occurred, it seems that there may be a growth of interest in trading and the stock market in general. New money.
Maybe some people are cashed up and nowhere to go style of thing?
We have seen increased interest and newer newbies on the forum...

In my case, the portfolio doesn't tell me the bottom is in, but have nearly got it back to 0% drawdown overall by actively trading, and I know I started late due to fear.
For the intraday future, I have fomo ATM.

We all generally accept that this may or may not be thee bottom, however the instos and richies will be sure to create another one...or 2. 
The great divide?

F.Rock


----------



## ducati916 (15 April 2020)

So Wells Fargo (WFC) reported today:

_NEW YORK (AP) — Wells Fargo's profits plunged nearly 90% in the first quarter as the bank set aside billions of dollars in preparation for consumers and businesses defaulting on loans due to the coronavirus pandemic.

The company said Tuesday that it boosted its loan loss provisions — or the money set aside to cover potentially bad loans — to $3.83 billion from $845 million a year ago as borrowers suddenly face the possibility of going broke because the U.S. economy has effectively shut down in a matter of weeks. Wells' earnings dropped to $653 million, or 1 cent per share, from $5.9 billion in last year's first quarter.

“We all know we haven’t seen anything like this before,” Wells Fargo CEO Charlie Scharf said on a conference call.

The San Francisco-based bank said it had revenue of $17.1 billion in the quarter, down from $21.6 billion for the same period in 2019. The numbers fell well short of Wall Street expectations; however, those targets became considerably less reliable as analysts struggled to assess the impact of the shutdown.
_
And look what happened:






Essentially, nothing. Now we will need to see how it develops, but I'm thinking not much more. Everyone knew earnings were going to be bad.

This is time to take the 'big bath' and throw everything bad into this Q's earnings. Get it all off the books. Then moving forward, red roses.

jog on
duc


----------



## ducati916 (15 April 2020)

And JNJ

_Johnson & Johnson, anticipating significant impact from the COVID-19 pandemic, slashed its 2020 sales forecast by billions of dollars and cut its profit expectations by about 15%.

It's one of the first major U.S. corporations to report first-quarter earnings and likely a harbinger of things to come as the outbreak disrupts the global economy.

The world’s biggest health products maker on Tuesday said it now expects 2020 revenue of $77.5 billion to $80.5 billion, down from its January forecast of $85.4 billion to $86.2 billion. It also forecast adjusted earnings per share of $7.50 to $7.90, down from the January forecast of $9 to $9.15 per share.

Despite that, the company increased its quarterly stock dividend, for the 58th consecutive year, from 95 cents to $1.01 per share.





_
jog on
duc


----------



## qldfrog (15 April 2020)

It is a dilemma.i am overall bull in the USA, bear here
Australia economy is mining,tourism, education aka selling $degrees to o/s future migrants, coffee making and real estate.
We remove 3 of these what is left
Mining does not employ many people and output will have to slow due to less demand for our export.
I can wish RE will hold but the odds?
So it will be a carnage economically here, more than elsewhere
How can the asx even try to parallel the US market is beyond me, but i have been wrong so often


----------



## wayneL (15 April 2020)

qldfrog said:


> It is a dilemma.i am overall bull in the USA, bear here
> Australia economy is mining,tourism, education aka selling $degrees to o/s future migrants, coffee making and real estate.
> We remove 3 of these what is left
> Mining does not employ many people and output will have to slow due to less demand for our export.
> ...



I think if RE craters it will be exceptionally bad here and already (if we look past Corelogic's creativity) there are signs of big trouble.


----------



## sptrawler (15 April 2020)

wayneL said:


> I think if RE craters it will be exceptionally bad here and already (if we look past Corelogic's creativity) there are signs of big trouble.



In Sydney, Melbourne it needs to, the ponzi scheme over there has needed pricking for some time IMO. It does nothing for the economy, drives  up the price of wages therefore services and encourages further speculation.
Like I said time to blow that market out of the water IMO, short term pain for long term gain, on many fronts.
Just my opinion.


----------



## wayneL (15 April 2020)

sptrawler said:


> In Sydney, Melbourne it needs to, the ponzi scheme over there has needed pricking for some time IMO. It does nothing for the economy, drives  up the price of wages therefore services and encourages further speculation.
> Like I said time to blow that market out of the water IMO, short term pain for long term gain, on many fronts.
> Just my opinion.



I agree. But central banks (and gu'mints) have different ideas... and a printing press.


----------



## Garpal Gumnut (15 April 2020)

wayneL said:


> I agree. But central banks (and gu'mints) have different ideas... and a printing press.



Until the cartridge runs out of ink.

gg


----------



## ducati916 (16 April 2020)

So most of the big banks have reported now:

_The banking subsector fell as the biggest U.S. lenders set aside billions of dollars to prepare for an expected flood of loan defaults as the coronavirus pandemic all but halted business activity. The flight from risky assets also hit Treasury yields.

Shares of Bank of America and Citigroup Inc dropped as they joined JPMorgan Chase & Co and Wells Fargo & Co in reporting a slump in first-quarter profits.






_
Hardly a surprise that they fell, more that they fell so little, which again suggests most of the bad news has been already priced in. The banking sector seems to be the sector that has weighed on the overall market. 

My guess, we get a bit of churn and then next week banks start to move higher.

jog on
duc


----------



## ducati916 (16 April 2020)

Just in regard to the banks: so the Fed offers to buy all debt, impaired or otherwise and the writing is on the wall as to the probability for a recession and impairments. Why would you not sell (potentially) impaired loans to the Fed and clear them off of your Balance Sheet?

Of course you would. 

Then in Q1 earnings you reserve for impairments (that have now been sold) and report as such. In Q2 earnings, those reserves can reappear on the Balance Sheet for a nice upside surprise.

Now I have no idea whether that has actually happened, but I would't be shocked if it were.

jog on
duc


----------



## ducati916 (17 April 2020)

Just another example of a crash






This was a pretty quick recovery however.

*Current news

_NEW YORK (AP) — The government’s lending program for small businesses is on hold.

The Small Business Administration said Thursday that it reached the $349 billion lending limit for the program, after approving nearly 1.7 million loans.

Thousands of small business owners whose loans have not yet been processed must now wait for Congress to approve a Trump administration request for another $250 billion for the program. Lawmakers have been haggling over whether to extend the program as it stands now, or whether to add provisions that, among other things, would help minority businesses. It’s unclear when they might reach an agreement that would allow loan approvals to continue.
_
Down the road, if loans are not approved, I see litigation. Essentially, government decrees that I cannot work and then fail to compensate me for that...in the US, that could become very contentious.


jog on
duc


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## ducati916 (17 April 2020)

So we have had negative headlines with bank earnings, economic data, etc. The market has absorbed it reasonably well. Nothing major as far a declines go.

Now we have some positive news, albeit heading into the w/e, always tricky...but it will be interesting to see how the market reacts to some positive news.

_Among the items: Boeing announces the resumption of airline production with about 27K workers at its Puget Sound-region facilities next week. Shares are up 7.5% after hours (after losing 8% in the day's regular session).

The White House has put pencil to paper and put out its phased guidelines for reopening the economy. No dates are given, with the president leaving that detail up to individual governors. More coming at the coronavirus briefing later this evening.

The Mayor of Jacksonville, FL has announced the partial reopening of beaches as of 5 PM ET on Friday.

Gilead is running higher on hopeful buzz from a study out of Chicago for its remdesivir in severely ill COVID-19 patients.

Uber and Lyft are each ahead about 6% after hours following Uber's announcing Q1 and Q2 charges which perhaps weren't as bad as feared.

S&P 500 (NYSEARCA:SPY) futures are up 2%, and Nasdaq (NASDAQ:QQQ) up 2.5%.
_
jog on
duc


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## ducati916 (18 April 2020)

Just another historical chart:






Never really considered the 2000-2010 as a lost decade before. Puts the current market into a totally different perspective. Some of the best returns have been available to investors during this period. Of course you would need to buy near the bottom and rebalance near the tops: which is eminently possible, just not easy.

Beware Economists:






Both are still active, but I'm not aware of their calls or even if they have made any.

Last nights 'good news' started out well and then fell away, likely due to fear of holding over the w/e and news that has market impact being released over the w/e. That has been (through the 2008 market) a pretty standard pattern.

jog on
duc


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## ducati916 (20 April 2020)

So last week we had some of the big banks report. Their earnings (reserves) were execrable. Yet, the market absorbed them without a murmur and finished higher.

This week:

_Earnings season ramps up next week with major companies like Delta Air Lines (NYSE:DAL), AT&T (NYSE:T), Coca-Cola (NYSE:KO), IBM (NYSE:IBM) and Lockheed Martin (NYSE:LMT) set to give their varying outlooks on the pandemic and the road ahead. _

_All told, about a fifth of S&P 500 companies will report results before the closing bell on Friday. Investors already know that profit will be down in Q1 and Q2. The bigger questions are if share prices properly reflect the downturn and how well balance sheets will hold up. _

_On the economic front, updates on existing home sales, new home sales and durable goods orders are due to drop, as well as another jobless claims report (~4M anticipated). Sports fans will get a small dose of action when Disney's (NYSE:DIS) ABC and ESPN air the NFL Draft on April 23-25. _

I'm interested in LMT as it is a member of DFEN and will give a heads up as to how that sector might look going forward. IBM for tech (although its no longer the bell-weather it once was) and KO for the consumer sector, might give some indication of their respective sectors.

As to economic news, fuhgeddaboutit, it will be bad. Everyone knows it will be bad. I doubt the market even blinks. 

Parsing the earnings/economic reports is separating the signal from the noise. Of course, by the time we see the reports etc, the market is already moving/moved, so decisions have to be made after the fact. You simply have to decide if the move is signal or noise and adjust your positions moving forward. It helps to have a (firm) grasp of what happened in previous downturns. From there you apply (a subjective) measure or comparison to the current news.

Is it (truly) different this time?

jog on
duc


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## Iggy_Pop (22 April 2020)

I have found a post on another forum  - _"an interesting article on the VIX, which suggested, after an analysis of bear markets since 1990 that (with two exceptions, being after 9-11 and around the bankruptcy of LTCB) the VIX almost always hits its high well before the bear market registers its final low. The average lead time of the VIX’s peak to the bear market low was 90 days, so as the VIX hit its latest peak on March 16, the projected low is June 14._ " and also on a site https://www.thestreet.com/opinion/when-the-bear-market-will-hit-bottom
where their view is a 75 day lag after the VIX peaks, so between the two articles, a potential low somewhere in early June, assuming the VIX does not go higher again.
Seems like the correction / next downleg is starting this week with maybe a low in June??

Iggy


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## ducati916 (22 April 2020)

Iggy_Pop said:


> I have found a post on another forum  - _"an interesting article on the VIX, which suggested, after an analysis of bear markets since 1990 that (with two exceptions, being after 9-11 and around the bankruptcy of LTCB) the VIX almost always hits its high well before the bear market registers its final low. The average lead time of the VIX’s peak to the bear market low was 90 days, so as the VIX hit its latest peak on March 16, the projected low is June 14._ " and also on a site https://www.thestreet.com/opinion/when-the-bear-market-will-hit-bottom
> where their view is a 75 day lag after the VIX peaks, so between the two articles, a potential low somewhere in early June, assuming the VIX does not go higher again.
> Seems like the correction / next downleg is starting this week with maybe a low in June??
> 
> Iggy




That is definitely what I have noticed, although I don't really count the days.

jog on
duc


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