2020-03-29

Monday Game Plan

I'm watching the 2650 area on the S&P 500 Index. It lines up with the 38.2 percent fibonacci retracement on this downturn. Above that line, it would also break the downtrend resistance line. Then I think a run to 2700 gets underway. Slightly above that is the cyan support line from the 2009 Satanic low. That would also be a good fail point. Barring good news about the virus in the short-term, I don't think the market will move much beyond that.

Bitcoin looks weak here, a test of $5500 support area incoming. At this moment, I do not think it will hold. As an indicator of speculative excess, the implication for broader markets is bearish.

I still hold long-term positions in gold mining shares, but I'm heavily long calls on DUST, an inverse gold miner fund. Net bearish in my overall exposure. Given the compression of time in this bear market, I could reverse that position as soon as tonight with offsetting futures positions. But that's where I am heading into futures open in about 90 minutes.

Coronavirus Overblown? Look at Some Numbers

When coronavirus first came out, we didn't know much about the virus itself. It was clearly an economic threat though, if countries followed China's example. Whether justified or not, on an individual level it made sense to anticipate a big hit. As I put it, look at how people react to the flu each year, the media hypes it and pushes everyone to get vaccinated. The early data on coronavirus said there would be a freakout. It happened.

The media and health authorities ignored the risk. The CDC wasn't looking for community spread until late February. It was only looking for China travel links until then. Media and various political figures called travel bans racist. They said masks don't work. Health authorities said masks don't work. The globalized supply chain was hit and many people learned their nation, including the supposedly power U.S. economy, couldn't produce masks or basic medicines. Then these same media and health authorities swung into panic mode and ordered China-style lockdowns in the United States. At the same time, "the mainstream" learned about the virus. Average people (and especially journalists and even doctors when it comes to statistics) are horrible at math. Insane figures were going around that projected absurd death totals. They didn't take into account that quarantine measures slow the spread, but even without quarantine, some numbers were nuts. Even Fauci is out there claiming 100,000 to 200,000 deaths now. I expect that total could be hit when this virus infects the whole population, assuming no precautions or treatments. The death rate is almost always highest to start because a novel virus has no known treatment and there is no immunity to it.

Christopher Blading runs through the numbers in a new post. The tl;dr is the R0 rates indicate higher than reported infection rates and that depresses the severity/morbidity of the virus. Evidence from some countries (excerpted below) suggest this might be where the numbers are headed long-term. There are obvious outliers such as air pollution in China and Northern Italy, or a massive intentional travel and high population density such as NYC, that could explain much worse outbreaks. There also may be a genetic component. Some ethnicities may be more susceptible than others. There is probably also a weather component and if your local area is going to end up using quarantine policies, it still makes sense to prepare for it. When the herd moves, you get out of the way.

Balding's World:How Fast is Corona Spreading and How Many Undetected Cases Are There?
Iceland has taken a broad population sample that now comprises nearly 5% of the entire population. There is not much detail about the specific testing criteria but the reports are that it was designed to test for corona in the population and not merely sick at the hospital or a medical clinic. According to Icelandic data available from the government, they recently listed 963 confirmed cases for a positive rate of 6.6%. Sounds bad right? Actually, because of the testing criteria, most people did not even know they had corona because they did not feel any worse. Out of the 963 cases only 19 needed hospitalization and only 6 needed ICU care. In other words, while there have been some tragic outcomes, corona is already much more wide spread and it has no or only mild impact on most people who tested positive.

In Holland, a similar thing happened. Hospitals in the Netherlands started seeing reports of corona and had a couple staff members fall ill from corona. To make sure their staff was protected, the conducted a broad population testing on medical staff to see how prevalent corona was among front line personnel. According to their data, after testing 1,353 they found 86 positive tests for corona a rate of (tell me if this sounds familiar) 6.4%. Only half had a fever and most positive cases continued working because they felt either no different or symptoms were so mild. Notably under existing criteria 40% of positive cases would not have been even tested because they did not have a known risk factor.

Westchester county in New York implemented an aggressive testing plan. Their tests were largely by self selected individuals and needed to pass a criteria screening protocol so it is different from Iceland and Holland in key ways. However, they have tested 29,000 people. What have they found? They registered 7,187 positive result for a 25% positive rate. This large jump in positive rate is expected from self selected individuals that pass a screening protocol. So what is the severity? 73 hospitalized and 12 deaths in county. In other words, from positive cases in Westchester county, hospitalization rate of positive cases is running at 1% and deaths are running at 0.26%.
There is another case of broad population testing. The first resident of Vo, Italy died from corona in late February. Local officials being aware of corona virus spreading in China with the help of a local university opted to quarantine and test the entire city of roughly 4,000. Now it is worth noting that Vo is a small remote town in north eastern Italy. It is not one of the major cities which would have lots of international traffic. 89 people out of 3,300 or roughly 3% of the population tested positive after they discovered one death. There is no additional data but they do not report additional tests and actually advised people against going to the hospital unless they had severe problems. Testing two weeks later revealed positive tests dropped to roughly 0.5%.
The Y2K melt-up scenario is still in play.

Here We Go Again: GCL to Build One Solar Plant to Meet 50pc of Global Demand

Will the demand be there?

Caixin: China's GCL to Build World’s Biggest Solar Panel-Making Plant
The Chinese manufacturer plans to invest 18 billion yuan ($2.54 billion) to construct a facility in eastern Hefei province that will be able to produce 60 gigawatts of solar panels a year, GCL System said in a filing to the Shenzhen stock exchange on March 27. It didn’t provide a timeline.

The plant’s maximum output is double the 30 gigawatts of capacity installed in China in 2019, and would be able to supply to almost 51% of solar installations worldwide. The project will boost GCL System’s ability to produce panels more than nine-fold from 7.2 gigawatts, according to data from BloombergNEF. The world’s biggest solar-panel maker, JinkoSolar Holding Co,. has 16 gigawatts of capacity.
Note this GCL trades under symbol 002506 in Shenzhen, not the 3800 in Hong Kong.

Another firm is GCL New Energy, symbol 0451 in Hong Kong.

PV Magazine:China walks away from state bail-out of GCL solar project business

Another company owned by the parent Golden Concord Group (GCL) is a traditional power company GCL Energy Technology that trades in Shenzhen under the symbol 002015.

2020-03-28

How Does QE Affect the Dollar?

Coronavirus Update: Moving North, Be Prepared, Kill the CDC

I thought Italy would break its curve two weeks ago, more certain last week, and there's still no clear break yet. The U.S. is looking towards Easter as a hopeful peak with full quarantine measures in New York.

I was hoping for a quick lift of the virus. It looks like weather will have to cooperate after China closed movie theaters this week. This is a bad sign for service industries such as casinos and restaurants. Maybe less so for theme parks. As for the weather, here's a post from earlier in the week: Is Coronavirus Weather Related?

One reason why I recommended stocking up early (and why I started buying supplies in January), was that even if you don't have coronavirus in your area, shortages will occur because of supply/demand disruptions in other areas. Out of an abundance of caution and lacking other information to disprove the theory, I accept the hypothesis that coronavirus is highly infectious around the 45 to 50 degree temperature range, or 10 degrees Celsius. The yellow band on this April map shows where the average temperature is 10 Celsius. Areas in green and moving into yellow are where coronavirus outbreaks will happen next if the theory is right. The news is saying Detroit and Chicago are at risk in the USA, and they are moving out of green and into yellow this month. Also seeing a lot of news about Germany, Sweden and Russia, all of which fits the pattern. New Orleans, Texas/Dallas and Atlanta are seeming outliers, but if this theory is right, those should clear up quicker than expected. You can read the paper that proposed this theory here (clicking this will open/save a PDF): Temperature and latitude analysis to predict potential spread and seasonality for COVID-19

The flipside of hoping warmer weather will lift the virus in cities such as Atlanta, New Orleans and New York, is that this also means cities such as Toronto are going to be hit hard if they do not practice extreme social distancing or quarantine. If you live in an area moving into the 10 Celisus, 45 to 50 Fahrenheit range, the next month will be crucial period for you and your govt/health authorities. If you can get masks, if you can stock up on food and medicine, do it now.

A report out of France said to use Tylenol/acetaminophen/paracetamol. Not ibuprofen. The said there was evidence the latter could intensify a Covid-19 infection. I don't know the truth of this information, but I haven't seen any rebuttal of it. Moreover, the reliably wrong institutions such as WHO and CDC, say there's no evidence for this. Well, they found no evidence of a covid pandemic. They also said masks don't work.

Masks work. N95 are best. You don't need a lot of masks if you plan on working from home and staying home as much as possible. I reuse 1 mask if I need to go out or take a trip to the supermarket.

Back in February, about 5 days before they changed the guidelines, I saw shocked the CDC wasn't looking for community spread or even foreign cases from anywhere but China. Now after telling the American public for 6 or more weeks that mask wearing isn't necessary, they may recommend or even require it.
On the bright side, if everyone wears masks the economy can restart with a far smaller risk of new outbreaks. Also, this agency needs to die. I'm sure it has some good functions, but these can be preserved while the rest is destroyed. More troubling, the CDC is probably one of the better run government agencies in the U.S. federal government. The incompetence on display is present in every area of government, including the military. President Trump seems to be a less competent executive in these matters because he lacks experience in government, but the problem is replacing him with someone who can actually improve things. A politician from inside the system such as Biden will intensify the incompetence in the rest of the government as I discussed in Will Coronavirus Kick off the 4th Turning? I only touch on one piece of the puzzle there, a big surface piece that most can see. I believe America's problems are fundamental in the extreme. They go far beyond left-right politics to basic concepts such as "What is Truth?" Modern America is a nation of Pilates.

2020-03-27

China Will Cut RRR and Interest Rates in April

iFeng: 央行最新定调!明确下阶段六大目标 降准降息何时再现?4月落地概率大
Clarify the next six goals of monetary policy in April or reproduce the cut in RRR and interest rates

As usual, this regular meeting also makes arrangements for the next step in monetary policy. The meeting pointed out that it is necessary to track changes in the world economic and financial situation, strengthen research and analysis of the international economic situation, strengthen international macroeconomic policy coordination, and focus on doing their own business. Specifically propose the following goals:

1. Innovate and improve macro-control, and prudent monetary policy should pay more attention to flexibility and moderation, and place support for the real economy's recovery and development in a more prominent position. 2. Use a variety of monetary policy tools to maintain reasonable and adequate liquidity and maintain overall price stability.

3. Effectively play the role of precision drip irrigation of structural monetary policy tools, make good use of the 300 billion yuan special reloan, the 500 billion yuan re-loan rediscount special line of credit, and the 350 billion yuan policy bank special credit line to guide financial institutions to increase their efforts Credit support for maintenance of supply, resumption of work, production, poverty alleviation, spring ploughing, animal husbandry, and foreign trade.

4. Deepen the structural reform of the financial supply side, guide the sinking of service focus of large banks, promote small and medium-sized banks to focus on their main responsibilities, and improve the modern financial system with high adaptability, competitiveness, and inclusiveness.

5. Make great efforts to clear the transmission of monetary policy, continue to unleash the potential of reforms to reduce the real interest rate of loans, guide financial institutions to increase their support for the real economy, especially small and micro enterprises, and private enterprises, and strive to achieve financial support for private enterprises. The contribution of private enterprises to economic and social development is adapted, and the supply system, the demand system, and the financial system are formed into a mutually supporting triangular framework, which promotes the overall virtuous circle of the national economy.

6. Further expand the high-level two-way opening of finance and improve the ability of economic and financial management and risk prevention and control under the conditions of opening up.

From the overall position of monetary policy, combined with the latest deployment of the Political Bureau of the Central Committee, the next step in monetary policy will continue the current tone and rhythm, and the central bank's attitude towards loosening monetary policy is still cautious and restrained.

Zhang Ming, director of the International Investment Office of the World Economic and Political Research Institute of the Chinese Academy of Social Sciences, said that the Chinese government should rely on large-scale fiscal easing policies to deal with the economic downturn and unemployment pressure. . In the next stage, China's monetary policy should be relaxed in a rhythmic and targeted manner in accordance with the needs of the development of the domestic economic situation. The current monetary policy in China should not be pushed too hard. The burden of hedging the epidemic, stabilizing the macro economy, and promoting the steady development of financial markets cannot be all placed on the People's Bank of China. For the negative effects of potential large-scale credit expansion, we should also pay attention to relevant historical lessons.

Many analysts believe that the central bank's marginal monetary policy environment will pinch the point at which the policy will land, and the next observation window for RRR cuts and interest rate cuts will be in April.

The Next Shoes

Some of these charts I haven't adjusted the trendlines. Some I have played on the long-side at times. The title of this post refers to stocks such as Alphabet (GOOGL), Visa (V) and Netflix (NFLX) that could be the next shoes to drop in this market should selling move from the weak to everything. Many of these are from a list of companies with hefty China sales.

Emerson Busted Trendlines

Ronald Couldn't Hold the Gap

Holy Schnikes!

Trendline from 1984 busted.

Diamonds High

Bad News: China Closes Movie Theaters

Vanity Fair: China Closed All Its Movie Theaters Again
While the Chinese government didn't specifically cite coronavirus concerns, the expectation is that the theater closings were ordered amid fear that another outbreak could hit the country. Over the last two weeks, as cases in China have dropped, the country has slowly begun easing quarantine restrictions. Just this week it was revealed that China had announced it would lift the lockdown on Wuhan, the city most closely associated with the coronavirus pandemic, by April 8.
Service industries may be hit for longer than expected.

Hopefully, the virus is most virulent in the 45 to 50 degree range (aounrd 10 Celsius) and warmer spring weather depresses the spread.

2020-03-26

Is Coronavirus Weather Related?

Live Science: Why is Germany's COVID-1 death rate so much lower than other countries?
Science: The new coronavirus is finally slamming Russia. Is the country ready?

If the weather is playing a role, coronavirus outbreaks should burn out quickly in NYC, Atlanta, New Orleans. It should migrate towards Detroit, Minneapolis, Toronto, Montreal. In Europe, more outbreaks should appear in Northern European countries and Russia. As seems to be the case.
By May, the northern-most parts of North America, Europe, plus Russia, should report the most outbreaks. Emergence in the Southern Hemisphere could begin later in the month.

Top picture from: Temperature and latitude analysis to predict potential spread and seasonality for COVID-19

2020-03-22

Azithromycin & Hydroxychloroquine Show Promise In Fighting Coronavirus

Great news from a limited sample. This treatment was mentioned by Elon Musk and President Trump. Governor Cuomo said his state is sourcing 10,000 doses.
Hydroxychloroquine and azithromycin as a treatment of COVID-19: results of an openlabel non-randomized clinical trial

How far and how fast will stocks rally if this treatment works?

PBoC Deputy Governor Says Too Early to Call It Financial Crisis, RMB Will Be Stable

iFeng: 一行两会重磅发声!人民币汇率、物价、A股、房地产…这些问题都回应了
Chen Yulu, deputy governor of the People's Bank of China, said that the recent spread of the international epidemic has affected the turbulence in the international financial market. Indeed, we see that stock markets in Europe, America, and many emerging market economies have fallen by an average of about 30%. This situation has also attracted great attention from the international community.

It is too early to conclude that the world has entered a financial crisis.

The international financial crisis usually has three basic characteristics: First, whether there is a continuous panic decline in the international financial market across markets. The second is whether a large number of financial institutions have failed, especially systemically important financial institutions. The third is to see if the operation of the global real economy has been seriously damaged. At present, in response to the intensification of international financial market turbulence, many countries have successively introduced some countermeasures. The effects of these measures have yet to be observed.

The overall price situation will gradually ease

Chen Yulu said that the overall price situation will gradually ease, and it is expected to gradually decline in the second, third and fourth quarters.

The actual financing cost of Chinese enterprises has fallen

Recently, many international central banks have adopted interest rate cuts. Will China's central banks follow suit?

As far as China's situation is concerned, Chen Yulu pointed out that the previously issued 300 billion yuan special re-loan key guarantee enterprises have exceeded 5,000, and the loans obtained have exceeded 200 billion yuan, and the actual financing cost is only about 2.27%.

At the same time, the People's Bank of China is also actively guiding the market interest rate downward.

The corporate loan interest rate level has dropped significantly. At present, the general loan interest rate is 5.49%, which is 0.61 percentage point lower than before the LPR reform. For the next stage of monetary policy, Chen Yulu pointed out that monetary policy is mainly to grasp the strength, rhythm and focus in stages, and always maintain a reasonable and adequate liquidity; give full play to the unique role of structural monetary policy; give full play to the role of policy finance, Make good use of the 350 billion yuan of special policy bank credit lines; increase support for small and medium banks to supplement capital and issue financial bonds; continue to advance LPR reform.

It is expected that the exchange rate of RMB to USD will still fluctuate around 1: 7 in the future

Chen Yulu said that due to the recent international epidemic, there have been relatively large fluctuations in the international foreign exchange market. Although the RMB exchange rate has also fluctuated, on the whole, it has remained basically stable at a reasonable and balanced level.

The exchange rate of RMB against USD is expected to fluctuate around 1: 7 in the future, with depreciation and appreciation, and continue to float in both directions.

The foreign exchange market is running smoothly, and the exchange rate expectations are also stable. Xuan Changneng, deputy director of the State Administration of Foreign Exchange, also stated that there is no basis for a significant devaluation of the yuan.

Chinese Stock Market Regulator Says Low Valuation, Low Margin, Low Foreign Participation Explains Lower Volatility

iFeng: 证监会回应六大市场热点!估值处于历史低位、外资占比不足4%
Li Chao, vice chairman of the China Securities Regulatory Commission, said today that since the normal opening of the A-share market after the Spring Festival, government departments have played the role of market mechanisms without administrative intervention, and the market's self-regulating function has been better exerted, compared with overseas capital markets. China's capital market has shown strong resilience and anti-risk capabilities. At present, market liquidity is reasonable and abundant, and valuations are at historically low levels. Generally speaking, the impact of the external environment is phased and will not change the stability and improvement of China's capital market. the trend of.
Does anyone think China's government left the market to its own devices?
There are some reasons why the market has held up better, mainly for the reason shown in the chart above: the A-share market is still in a bear market and is sitting near major support. This has taken leveraged, foreign and speculative capital out of the market:
□ The capital market has reduced the level of market capital leverage, and the total amount of leveraged funds has decreased by 80% compared to the peak in 2015.

□ Equity pledge risk The measures of reducing stocks and controlling increase were adopted, and the number of listed companies with a high proportion of pledges decreased by one third compared with the peak period.

□ The direct impact of fluctuations in the international financial market on China's market is mainly in two aspects: investor psychology and capital flow. At present, investors are generally stable and rational, and the total amount of foreign capital flows is not large.

□ At present, foreign capital accounts for less than 4% of the circulating market value of A shares, and the proportion of transactions is not large. The flow of foreign capital has disturbed the A-share market, but there is no subversive and fundamental impact.
According to CSRC, 98% of listed company workers have returned to work and more than 80 percent of listed SME employees.
□ A quick survey of 2,700 listed companies shows that the return rate of listed companies has exceeded 98%, and the return rate of employees of small and medium-sized listed companies has exceeded 80%.

□ The CSRC has conducted research and demonstrations on the GEM reform and solicited opinions within a certain range. The GEM reform will focus on the main line of registration system reform, and related work is progressing in an orderly manner.

□ The reform and opening up of the capital market will not be affected by the epidemic situation. We will vigorously promote the implementation of the "Twelve Reforms" and vigorously promote reform and opening up.
Li Chao says stocks are cheap:
Point five: The overall valuation of A-shares is low and liquidity risk is relatively low

According to Li Chao's analysis, compared with the overseas market, the A-share market has shown less volatility in the near future, showing stronger resilience, mainly due to two reasons.

First, from the perspective of the internal structure of the A-share market, the overall market valuation is relatively low. At present, the price-earnings ratio of the Shanghai Composite Index is no more than 12 times, and the price-earnings ratio of the Shanghai Stock Exchange 50 is less than 9 times. Historical vertical comparisons are at a relatively low level. The value of A-share investment appears, liquidity is abundant, and the risk is relatively low.

Second, from the perspective of the macroeconomic environment, China ’s epidemic prevention and control is at a different stage compared with countries in overseas markets. At home, the impact of the new crown pneumonia epidemic on the capital market is gradually being digested, and companies are returning to work and production. Beyond 98%, the situation of small and medium-sized enterprises is also relatively optimistic. The survey data of the China Securities Regulatory Commission on small and medium-sized listed companies shows that the return rate of employees of these companies exceeds 80%.

Li Chao said that these two factors have released positive signals. Generally speaking, the macro economy also has a foundation for rapid recovery.

Coronavirus & Markets Potpourri: Economic Phase Change and Yuan Deval Incoming

This is a kitchen sink post. Any discussion of markets is not intended as trading advice. It is a collection of my current thoughts on the market. I am positioned for a bounce on Monday, but everything is conditional on fast moving events. If the market goes lower on Monday, I'm afraid there's 15 percent downside from there in the short-term, and that also escalates the probability that we're in a straight-down bear market that will drop ~65 percent from the peak. That said, long-term trends are approaching reversal or phase change levels, where we either return to normal or establish new economic relationships. It's important to be focused on the long-term if you're not a trader. Charts such as Dow/gold and the Dow versus hourly wages will be worth keeping on hand.

Additionally, markets are moving so fast that it's hard to know "where we are." It's important to see the context of what's happening across many different markets. When the S&P 500, copper and euro all point to a major turning point, you pay attention. If some things sound contradictory, it's because I'm keeping an open mind about different possibilities. This post isn't to tell you what to think, only to express what I'm thinking about. Hopefully it proves useful. Finally, I thought that what is happening now would unfold in 2016, but it was aborted. I thought 2018 might mark the start of it. Nope and nope.

With coronavirus, I see far too much panic these days. It's partially why I think the long-side will see incredible short-term gains. This sounds nuts even to me, but I think the market is primed for 15-20% upside in one day if there's a combo of good news and a short-squeeze. I'm becoming less confident in this forecast though. Monday might be the breaking point.

As for China, yuan devaluation seems more likely as discussed below. I have linked a bunch of older posts. My approach to the market is to wait for events like now. I've spent about a decade focused on Chinese yuan devalution, the end of quantitative easing, combined with the social and political signs that would accompany it, applying my interpretation of Socionomic theory. Rising nationalism, the election of a populist president such as Trump (See this 2014 post: Immigration Issue Set to Explode in America; Prepare for Political Volatility)

I also posted my premature goodbye in August 2019: China Crisis Repeating a Familiar Pattern For the Last Time
I was wrong about the 2014 crisis turning into a major global downturn. Whether central bankers arrested it or not, it terminated in early 2016. The signs of a 1937 event were there, but there was not follow through. I'm always open to the possibility I could be wrong again, but I don't think the next cycle will be similar. If I'm right, I believe we have arrived at the base camp of Everest. What I've written about over the past 8 years or so, had led up to the moment. The preparation is done. The main event is here. If I'm wrong, then I'm wrong about how it ends because I don't expect another stimulus out of China. It's too late, the political, economic and financial situation around the world won't allow for another coordinated kick of the can. We are crossing the event horizon into a new future for China, the United States, and the world order.

The Long Goodbye

This blog was started with the intention of writing about Chinese stocks, believe it or not. It turned into a meta joke over time as that is one of the least discussed topics on the blog. Perhaps there is another couple of years of activity on this subject, but I sense the end is beginning for this blog. It will finally be time to get a new address (maybe on a whole new planet) and a new topic that is years in the making. Already, my long portfolio is increasingly filled with junior gold and cryptocurrency miners. In the end, the biggest emerging markets of the next 10 to 20 years might be right at home.
For myself, everything that's happening is what I've been thinking about for a decade. I'm already thinking more and more about the next 10 years, even as events finally unfold in the present. This is why I'm not going to do a large post discussing everything going on right now. This blog has been that, my prior thoughts (and bad timing, yes I've taken a beating on many of those miners) are here if you want to poke around.

Back in August 2019, I looked at the ratio between gold and copper: Copper, Gold and The End of Growth. I laid out two scenarios for this ratio, which is currently at 60-year extremes:
The optimistic scenario is the 2016 copper/gold low. There will be a bit more selling, a bit more yuan depreciation, maybe another 20 percent correction in U.S. stocks to test or even break the 2018 low. Copper/gold hits the 2008 low, but rebounds as China fears abate. The ratio rebounds and we find out this is the first half of a 20-year bottoming process.

The pessimistic scenario is the 2008 low doesn't hold and the early 1980s low looms. That move requires going beyond 700. That's huge for global markets and could entail major dislocations such as a major China crisis, but then comes the much larger question.
Is this a massive 40-year basing pattern for the gold/copper ratio? Gold soared relative to copper during the 1970s. A measured move off this basing pattern would carry gold to more than 1200 times the price of copper. That could mean $2 copper would trade alongside $2,400 gold or $10 alongside $12,000. The more probable move, in my opinion, is the former. A doubling of gold and stagnant or even falling commodity prices as growth evaporates.
Copper was around $2.60 per pound then. It closed at $2.17 on Friday.
Or looking at copper alone, a move to $1.40 seems possible. In a major deflation scenario and a 725 ratio, gold trades at $1000. At a 1200 ratio, gold trades around $1,700.

Copper is trading right at the .618 fib from the 2008 low to the 2011 high. A break and the next stop is trendline support just above $2.25. Break that and $1.40 opens up.
Barring major stimulus in China or a sudden inflationary surge (maybe the virus lifts early and all this stimulus comes rushing in), copper has one support left at the 2016 low, but it doesn't look that strong to me in the current macro environment.
In the short-term, copper is a good indicator for the market. If copper is going through $1.90, the chance for a relief rally are slim. A bounce will require a stop by $1.90 at the latest. Interestingly, the downside risk should the stock market break lower on Monday is around 15 percent. A drop of that magnitude in copper would take it to $1.84, which is in the ballpark. A rally here could be huge. I would look for copper to rise back to test $2.50, the S&P 500 back to the 2700 area at least.

I don't place too much emphasis on gold and copper themselves in the longer-term. The larger context is the global financial system and the China-emerging market growth story. Gold is a proxy for monetary changes. Copper is a proxy for commodities-driven growth in basic infrastructure and real estate. A breakout in gold/copper isn't a sign to put on a long-gold short-copper trade, it's that the next 10 years probably aren't going to look like the last 10, at least not until copper hits $1.40 or even plunges all the way back to $0.60 per pound.
Moving on, I've discussed a "Y2K" scenario here a few times, most recently last week:
Action in the forex and commodity markets is echoing with 1997-1998.

Nasdaq peaked at 2028 intraday on July 31. It fell to a low of 1475 on August 31, a drop of 27 percent. It rallied nearly 17 percent, then sold off again. It lost 23.6 percent in the second wave. The total drawdown at intraday low was 33 percent. The bottom was in early October, making for a nine-week crisis.

Few are thinking about a positive outcome, but there was real panic in summer 1998. The Federal Reserve organized a bailout of Long Term Capital Management. If coronavirus were a similar situation in time (with larger percentage moves), the bottom might come around the last week of April or first week of May. I'm not proposing that is going to happen, but it's worth keeping in the back of your mind. The final leg up was caused by Fed liquidity and also the destruction of the bears. Skeptics were calling the market a bubble before 1998, they were betting against Internet and tech stocks. The euphoria rally that followed was in part driven by the failure of a bear market in the face of a 33 percent correction.

The economy isn't heating up into a cyclical peak this time. Growth has been terrible for 11 years. Social mood isn't climbing into a major peak. It is arguably expressing a depression on par with the 1930s and even 1920s Weimar Germany. But the potential for an explosive bull move is not out of the cards yet, not until the virus pushes the economy into a clear recession that will not lift with the virus.
This scenario fades the longer quarantine policies are in place, and as long as economic production is dampened by fear of the virus. On the other side, massive government stimulus efforts could spark buying if the virus lifts early. The U.S. is talking about $4 trillion in stimulus now, or 20% of GDP.

There is even an echo of 1998 as we now learn the Federal Reserve bailout out hedge funds in September 2019. That was the reason for repo: Confirmed: Fed Bailed Out Hedge Funds Facing Basis Trade Disaster

On cornavirus, absurd death totals are being passed around, talking about upwards of 1 million or more deaths, which assume all quarantine efforts fail. I don't think that will be the case. The possibility of the Y2K scenario, and for a rip roaring relief rally will fade if containment efforts fail or take longer than expected, but right now I see hope is at a premium. People who are panicking could be proven correct, but I think the evidence says they will be wrong. Having said that, I think new highs for the market are gone. A "Y2K" move will be a final explosive bear market rally that will be your last chance to exit this bear market at attractive prices.

On the economy, I don't recall a similar recession where restaurants closed first. GDP will be misleading if the virus is contained or lifts early because consumption can resume quickly. It's much harder to restart production at factories (as China is showing) or major projects such as building a new factory. As long as the shutdown is short, consumption will jump quickly. Savings rates should soar with many people staying at home and not spending money on eating out, drinking in bars, etc. People who are bad with money might find their savings accounts flush with cash in a month if they continue working. The chart below shows gross output from Q3 2019. This measures all economic activity in the economy. Consumption is a smaller slice of total activity. If service-sector businesses such as restaurants get aid and the higher stages of the economy don't have to shut down, a deep recession or depression will be at minimum delayed.
Thanks to coronavirus, many domestic industries such as farming and (eventually) tourism and hospitality, will need to hire domestic labor instead of using cheaper imported labor.

MetroUK: Farming industry urgently needs workers to feed UK amid coronavirus crisis
DailyMail: Farmers call for sacked hospitality workers to be turned into army of Land Girls - and boys - to help pick fruit and veg because travel ban means they have lost thousands of foreign workers
‘Last year 98 per cent of harvest staff were from outside the UK. We are now very concerned about securing enough workers to help harvest our vital crops and get fresh fruit and vegetables to the public.

‘To help, in the next few days the berry industry will be mounting a large-scale recruitment campaign to encourage people who are in the UK and looking for work because of the current economic impact of the coronavirus to come and work on our farms.
Right now, people are not thinking about this offsetting labor demand, nor are they considering how political trends such as nationalism will very likely make these shifts permanent with new restrictions on foreign labor and immigration. Major changes are coming. Trade deficit and nations with high immigration are going to see their domestic industries and domestic industry boom in the wake of this crisis, particularly in the U.S. where onshoring medical production is only the start.

Speaking of hope with respect to coronavirus, here is a Governor Cuomo of New York press conference from March 21. He sounds very confident, like he finally has a handle on this. Case growth will continue, but this is not a man who thinks everything is spiraling out of control. he looked more shell-shocked in prior conferences.

Evidence from South Korea, China and Japan shows the disease can be contained. South Korea is reaching its potential turning point: South Korea Says Next Two Weeks Crucial in Its Virus Battle
Prime Minister Chung Sye-kyun said public behavior in the next 15 days will determine whether South Korea will win its fight against COVID-19. Failure to obey restrictions could lead to a ban in gatherings or legal action, he said in a national address on Saturday.

Chung’s appeal to the public comes hours after South Korea’s Centers for Disease Control and Prevention warned of a rising fatality rate. After reporting several hundred new cases every day at one point, South Korea seemed to have passed the worse when the number dropped to below 100 a day this week. It later trended higher again.

“We’ve seen sporadic group infections from some churches, care homes for senior citizens and a call center. We’re also seeing a higher risk of imported cases,” Chung said. “Companies are at the crossroads of survival and failure, while self-employed and mom-and-pop stores are suffering indescribably.”

Chung said the government aims to deliver a “visible” accomplishment before the start of April, when schools are scheduled to reopen.
Wuhan has had no new cases for 4 days. Delivery service companies are restarting: 武汉快递企业全面复工
According to the postal administration of Hubei Province, the express delivery companies in Wuhan will gradually resume work from March 20, and strive to reach 60% of the resumption of work by the end of March, and reach 90% or more in mid-April; other cities and prefectures serve as low-medium risk areas And strive to reach more than 90% in early April. As of March 19, each of the delivery companies had accumulated a total of 38,731 emergency vehicles in and out of Wuhan, 9,4527.7 tons of medical and living supplies; Post, SF, and JD.com delivered 6,586 pieces of baggage to the Han Medical Team for free, and a total of 115,004 pieces of baggage.

On the 21st, some citizens have started using courier services. Since then, citizens will begin to receive parcels. It is understood that during the epidemic prevention and control, citizens receive and send parcels mainly in a "non-contact" manner. The timeliness of parcels will be affected compared to usual times. We also hope that citizens will understand and remind them to take precautionary measures when receiving parcels.
Medical advice from France and Spain.
From France: Do not take ibuprofen! Only acetaminophen. French cases of young people dying from COVID19 involved ibuprofen. The French think it makes the disease 5x worse. Coronavirus and medication

From Spain: Drink warm liquids frequently. If you leave your home, the virus can stick to hard and clothes. Disrobe and shower. Attack any inkling of a sore throat with vitamins on hot liquids. Advice from Spain

Apparently some medical professionals are being told not to wear masks at work because it "spreads fear and panic." Unbelievable.
Panic is not the problem
. This reminds me of the anti-racism fight from a month ago, when "avoiding Asians" (aka social distancing) was a bigger threat than the virus. Deadly virtue signaling caused Covid-19 to kill Italians (Opinion).

This might go behind the paywall, but great stuff from David Llewellyn-Smith at MacroBusiness. Much more at the link: Welcome to the Second Great Depresssion
When the UK’s political and economic weight dramatically declined through the first 30 years of the 20th century so did this mechanism. And to make matters worse, when 1929 arrived the US was not ready to shoulder the burden of global leadership. When trouble came, it closed its trade borders. The globe was leaderless and deprived of all external demand.

This analysis has two important points to make about our current situation. The first is that for the past couple of business cycles, the world has enjoyed a remarkably similar parallel in its macros settings. As the US boomed through the late nineties internet economy then again through its post-millennium housing bubble, capital flooded in, causing some to argue that the widening current account deficit was a result of a surplus of investment opportunities. The result was an imports boom, which boosted the peripheral or emerging markets, in particular China.

Then, as the US weakened, and monetary and fiscal policy was eased, capital flooded outwards to emerging markets, again especially China.

The second point to draw from Kindleberger is that the UK/US global leadership impasse is a clear parallel with the US/China today. The US is no longer willing, or in a position, to be the engine of global demand; the political price for its working classes is too high. Equally clearly, China is not yet of sufficient size, power or sophistication to lead the world into a new economic era through an open economy.

Indeed, it is worse than that. The Chinese system is a half-pregnant capitalist autocracy with completely different priorities to those of a liberal democracy which will lead to even more perverse political economy outcomes.

We can see this already today in the remarkable, and shocking, push to blame the US for the Chinese derived pandemic. Rather step up as global leader, the Communist Party of China has ordered its diplomats to spread the vicious lie that America planted the virus in Wuhan.

Let me reiterate, it’s not not ratbag media or fringe nutjobs or shadowy psy-ops at work. The CCP diplomatic corp is doing this. It is an open declaration of psychologial war.

Such an extreme gambit exposes where CCP thinking is at. It has clearly concluded that its relationship with the world is about to collapse. That the trade deal with the US is dead. Indeed, that its relationship with the US in general is over. And that it is worth sacrificing because the Party’s prospects are better if it can channel public rage offshore, away from itself.
He goes through examples in different countries. I don't have time to search through all my posts, but I have discussed how China is similar to the USA in 1929 and the USA to Europe. The USA was a major exporter, a creditor nation, with a credit bubble, stock and real estate bubbles. It sank into depression as demand collapsed. Aside from the stock market valuation, China hits all the notes. Europe devalued more quickly and emerged more rapidly from depression. Indeed, it was European devaluations, dubbed "begger-thy-neighbor," that helped make the depression more severe for the USA. It wouldn't devalue, and end the depression, until 1934. What followed was horrendous economic policy that trapped the nation for another 7 years, but that's another story... Additionally, the U.S. dollar was undervalued relative to the pound in the 1920s, an intentional policy of the UK and US central banks. Similarly to how China undervalued the yuan for many years. I saw this parallel after reading America's Great Depression by Murray Rothbard during the 2008 financial crisis. Central banks have held this at bat for 11 years, but now it seems the next phase could be underway.

This post is also relevant again: The Logic of Strategy: Yuan Devaluation and the Road to Trade War
Whichever path is chosen, the economic and geostrategic paths will line up. An economic crisis in China will add the economic component to the emerging geostrategic China policy. A geostrategic decision to confront China economically would set in motion an economic crisis that would propel the strategy forward since China would respond in kind. The decision to halt rare earth exports to Japan and the widespread anti-Japanese riots of recent years already show how China will respond. A major confrontation from the U.S. would require an even larger policy response. Luttwak lays out some possible policy choices, starting with small ones such as banning technology transfers in a limited area such a military or telecom. I fully expect that were a Chinese crisis and devaluation to accompany another recession in the United States, the push for tariffs would find a bipartisan majority in the House and Senate.

Yuan devaluation is inevitable as soon as China enters a serious financial crisis. If the government refused to devalue, the nation would go through a 1930s style deflationary Great Depression. China is unlikely to allow the market to take the yuan lower in a panic collapse like a replay of 1997. At some point, it would announce a large devaluation designed to end the selling and the crisis. This will be called a political act in the United States (those who understand the economics will nonetheless spot the political opportunity) and the political push for protectionist policies will be too attractive to be ignored. The United States will retaliate with sanctions and the world will follow. This will put even more pressure on the Chinese economy and lead to a massive rise in nationalist sentiment (either that or anti-CCP sentiment, so expect the CCP to redirect it into nationalism). A chill wind will blow across the Pacific that will last a generation or more.
What are the odds of yuan devaluation if China no longer believes it can or should sustain good relations with the United States?

Recent posts related to China and Forex

Bad Idea: Chinese Buying Steel Bars Instead of Gold
Massive Generational USD Basing Pattern Complete
The Bear Market Moves to Forex
Forecasting Through the Tumbling Australian Dollar

That last post gives additional color to the picture I'm painting for the markets. Any asset will have a bull and bear case. Sometimes it's indeterminate (in between major support and resistance). Sometimes it's reaching a critical juncture where it will hold or break major support or resistance. What I'm seeing in the charts is confirmation across assets. The euro and yen are at major support areas that, should they break, would signal this bear market plunge will continue. Longer-term, I think these will break because I believe a bear market has started. But the timing could be months later if the market bounces here and DXY slides below 100.'

I'm seeing crazy possibilities with the euro and yen: EURUSD 0.50 and USDJPY 200. When I look at Australian dollar crosses, they also point to some crazy moves. Some don't make sense in combination because there is a three-body problem when looking at forex crosses, but some line up with what I see in USD crosses. USDCNY looks like it is going much higher and AUDCNY looks like it could be headed to 4.00 soon. If that happens, and USDAUD looks headed to around 2.25, then USDCNY would be 9.00. I can't emphasize enough that these are still potential futures.

More broadly, gold in US dollars looks like US dollars versus the world. Here's both since 1980. Dollar bull markets coincided with gold sell-offs. But this time, gold bottomed after the initial rally in the dollar index. Since then, gold has continued it's basing pattern and the DXY has developed a bading pattern. However, as shown above in the generational USD basing post, the dollar has broken out versus most emerging market currencies. A chart of gold in foreign currencies shows the same. The chart below is the ratio of SPDR Gold Share (GLD) to Invesco U.S. Dollar Bearish (UDN), the inverse of DXY which covers the major currencies. In emerging market currencies, gold and the dollar have already achieved incredible breakouts into full blown bull markets. My expectation is all state-issued fiat currencies will burn, but the U.S. dollar will be last. All of them could be falling versus gold and other assets though.

If the market is going to bounce, I look for biotech to do well.
If the market is going down, I expect stocks that have held up well, such as the biotechs above, but more likely a stock such as Netflix (NFLX) will bear the brunt of new selling as investors start liquidating everything.
The S&P 500 Index hit 61.8% fibonacci support on Friday, measured from 2009 low to 2020 peak. The next leg down would take it to 50% retracement and the 2016 level.

Other posts you may find of interest, that relate to larger macro issues. From early and late 2018: 2018: The Pivot Year Correction or Bear Market? Find Out Soon. Much of what I said is still relevant, but my timing was wrong.

Also the idea that the stock market tracks the Fed's balance sheet is relevant again: Does Fed Balance Sheet Matter. If it doesn't matter anymore, the Fed can't stop the bear market.

Breaking 7 discusses USDCNY breakout. Did not come in 2018. Looks highly probably now (I have open positions on this).

Finally, to emphasize how the wrong people (or with a wrong worldview/ideological framework in place because as Taleb argues, they lack skin in the game) are in power from the top to the bottom of society: central bankers don't know what's going on. Jeff Snider argues for global collateral from the Fed, in addition to ending the world of hidden balance sheets and rehypothecated assets. The Solution Is To Stop Being Backward
And then when it’s all said and done, remake the system so this cannot possibly happen a third time. Blockchain establishing the lineage and parameters of all collateral in use, in real time, no more repledging and rehypothecations. Nothing wrong with repo and wholesale, but it’s long past time to institute some discipline within them – with policymakers who actually know how they work.

Real reform that starts with finding people who could possibly be good at the job, open minded and honest enough to view the monetary system from a scientific rather than ideological perspective. Enough with the PhD Economists, time for some real bankers again. Clean house.

Final random thoughts. Credit spreads have blown out, even investment grade bonds tumbled last week. That needs to stop for a bounce in markets. Bitcoin and other cryptocurrencies have held up well. Not sure they can continue in the face of another wave down, but their rally could be a sign a bounce is coming because those markets are on the bleeding edge of speculative activity. Bitcoin is up 50 percent from its low and bounced on Thursday/ It has held the gains thus far. Market internals also turned favorable on Thursday, which is why I was looking for a bounce on Friday. They also looked good for much of Friday before deteriorating.


2020-03-20

I Hope I Nailed It

Feb 29: Market Correction: Done or Ready to Run?
I've been heavily short in the market, but covered a lot of positions today and even took some long positions such as QQQ and short TLT. The VIX came close enough to tagging its downtrend. My speculative thought is the market will bottom when a large city such as New York City announces an outbreak and quarantine measures. However, that might not come for some time. I think today was probably an overreaction caused by not taking this virus serious. Plenty of people were shrugging it off on Monday even after outbreaks hit South Korea and Italy. I don't think we've reached full panic/capitulation by the "it's just the flu" people, but a news-driven correction needs news. On the other side, signals such as the VIX say a bounce is likely.
This was my buy signal and what I told offline folks to look for: a negative divergence between news and the market. It might already be happening as NYC announced a near full quarantine today. Stocks sold off, but crude has ripped again. Stocks haven't broken down. I fell extremely bullish, but not emotionally. If it sinks, I'll dump my positions and re-enter later. My guy sense of the market (informed by sentiment, charts, news, etc.) is that a tradable bear market relief rally has started.

Chinese Exporters Fell Helpless, Orders Plummet

Caixin: 外贸业订单骤降 两周内从招工困难变无工可复
Most foreign trade companies interviewed by Caixin feel helpless: "The European market is completely off fire", "the market is very bad, the world feels paralyzed", "the whole may be more serious than in 2008".

  On March 16, data released by the Ministry of Commerce stated that the resumption of work of key foreign trade companies across the country showed accelerated recovery. Except for Hubei, 66.7% of key foreign trade companies across the country had a recovery rate of more than 70%. The Ministry of Commerce also reminded that the foreign trade industry may face a reduction in orders.
Remember the bullish argument for China is that their consumers are going to buy all this production instead of Western consumers. If the Chinese want different products and services, they have a lot of malinvestment.
Huang Wei, vice president of Li & Fung Group's Shanghai branch, one of the world's largest apparel import and export companies, told reporters that customer cancellations began in early March and became more intensive by mid-term. More and more orders are expected to be cancelled in the future: " Brands have no confidence in the next batch of development. The styles they are developing should be reduced. The large-scale production orders should be delayed (delayed) or canceled. We are now dealing with such problems every day. Frequency Will get higher and higher. "
Only a month ago, Western buyers were rushing to get goods because they worried about shortages in China. Now they don't want anything:
"Some time ago we were urging us to ship, but now we are not allowed to ship," the head of a jewelry processing factory in Yiwu, mainly engaged in foreign trade, also felt the pressure from early March. From last week to this week, there have been 5% of orders were cancelled. Even orders that were not cancelled are also considering shrinking or delaying shipments: "It has always been normal before. Last week, there was an Italian order that suddenly said no, and there were originally orders for April shipment. Orders are required to be delivered two months later and will be taken in June. "
According to the person in charge, March at the turn of the spring and summer is the peak order in the calendar year. Not only will a large number of orders be released in the spring and summer, but also autumn and winter orders will begin to be booked. 30% to 40% of orders will be gone.
Capital goods companies see the slowdown stretching till the end of Q3:
 Upstream companies felt the crisis earlier. A foreign trade company engaged in the import and export of textile machinery told reporters that according to the current situation in Europe and the Middle East, it is estimated that it can be basically calm until September, so that the order for the whole year will be ruined, even if the fourth quarter is normal, for mechanical and electrical products, Actual implementation will also be delayed until next year, so more than 80% of business will be affected. "
Businesses are optimistic about the domestic market, but are waiting for the recovery:
However, the person in charge of this company believes that although the foreign trade industry is more difficult, employment difficulties will not occur: "Our goal remains the same, or an annual growth rate of 20%. The domestic market has begun to start in the second half of the year, and the pressure is behind."

  The consensus of the above-mentioned clothing factories and jewelry factories is to stop hiring first. "Of course we will not increase production capacity and then recruit new workers. This is definitely not appropriate."
Sounds like some Chinese companies may try exporting mask kits:
On the other hand, he hopes to take advantage of the epidemic situation to better maintain customer relationships: "Although masks cannot be exported, if some original materials are needed by the original customers, we can also buy them. I think this is also a business opportunity . "
Finally, not everyone is doing nothing. Some are taking the opportunity to move while others are sitting:
 The person in charge of the aforementioned Yiwu Commodity Factory believes that the epidemic situation will not last for long. Therefore, he invested in new projects in the two workshops and plans to work hard in the second half of the year: "It has never been easy to do business for so many years, so (at this moment) It ’s not too difficult. "

DXY U.S. Dollar Back of Napkin Chart

This is an old chart of DXY I have. I didn't adjust anything, it's as is. Keeping on the theme of my earlier post today, what I see is an analog to the late 1990s. But what took 3 years in the late 1990s has already on its way to 6 years this time.

Note: I was wrong about this analog before. I thought this breakout would start in the 2017-2018 time frame and would be ending by late 2019 and into 2020, keeping with the prior bull cycle. If the dollar matched the prior cycle, this bull market would be terminating here or shortly hereafter. If not, something much larger is indeed underway.

Bad Idea: Chinese Buying Steel Bars Instead of Gold

Bloomberg: As Gold Plunges, Chinese Investors Find New Haven in Steel Rods
Investors in China have found an unlikely new hiding place from the chaos engulfing financial markets.

The price of steel reinforcement bar, the somewhat unglamorous but ubiquitous commodity used to strengthen concrete, has risen almost 5% over the past month in Shanghai. Over the same period, gold -- the traditional haven amid turmoil -- has dropped more than 5% as investors sell to cover losses in other markets.

Rebar’s unexpected ascent as a financial sanctuary comes as Chinese investors bet that Beijing is going to embark on a massive bout of stimulus to help prop up the country’s economy in the aftermath of the coronavirus, boosting demand for raw materials used in construction.

...“We are calling rebar, ‘rebar gold’ these days, as it has became a haven asset during this global crisis,” said Wu Yijie, an analyst at Shanghai Dalu Futures. “We believe the Chinese government will greatly bolster infrastructure spending as they did post-SARS to boost domestic consumption.”

Chinese investors may also be drawn to steel futures because they can only be traded in China, making them more reflective of what’s happening locally and less exposed to the same forces that are ravaging more global markets like copper. China also has greater influence over pricing, Wu said. The country produces and consumes about half the world’s steel.
Short-term who knows, but the chart below is screaming major top. Australia and iron ore miners are also going to be hammered when this blows. And if it doesn't, it will take massive stimulus that will trigger a breakout in USDCNY...

Sunny Weather Delays Dollar Moon Shot

Two recent posts looked at the U.S. dollar bull market. In Massive Generational USD Basing Pattern Complete, I posted the broad trade-weighted U.S. dollar index. The series has been discontinued (DTWEXB at Fred), but replaced with DTWEXBGS. That's the one I'm tracking now. This is not a tradable index, but is instead weighted by America's trading partners. The Canadian dollar, Mexican peso and Chinese yuan are heavily weighted in this index, along with the yen and euro.

The other was The Bear Market Moves to Forex. The yuan, yen and euro all indicated the USD rocket was on the launch pad, fueled and ready for takeoff.

Imminent breakouts often fail at this juncture. Back in November 2019 I posted Plug Pulled on Latin America, showing the Brazilian real on the cusp of a breakdown. You can see that tagging of the horizontal in November 2019, a pullback that ended in the first week of January, followed by the ensuing move that completed the pattern and unleashed a massive breakout.
Below are the USDEUR,USDJPY and USDCNY showing similar setups. Extremely bullish outbreaks will occur if and when (I think when) these patterns complete. I do not believe they are ready to move though. The macro and sentiment backdrop isn't ready. A breakout rally in the dollar here would accompany accelerated financial market panic. It would open up a climactic crash scenario. Everything fails, right here right now. A move of this size will unleash a panic, but everything else is saying bounce here.

Other charts indicate extreme fear, which often marks the end of a selling panic. The U.S. stock market has spent 4 days around the current price level—albeit in a wide range. Beaten down stocks have started seeing big rallies. Major stimulus from governments is coming. There is extreme panic around this virus. I've seen absurd projections for deaths and infections as mainstream people run the math that I was doing here in January when there was no evidence that quarantines worked. (I also laid out my Coronavirus Initial Thoughts here.) The charts, sentiment, macro and my gut say we are already in a trade-able bottom.
For myself, I'm heavily positioned on the long side. I have taken a small long position on the Mexican peso, platinum, and U.S. markets. I have calls on stocks and funds (real estate and oil). Below is a chart of the peso. If that is a small inverse H&S forming, the measured move will take it up to the 0.4378 area, which sets up a larger basing pattern. Bullish setups have failed for several days, but I'm seeing similar setups in U.S. stocks and elsewhere. I think the panic is done for now, but I will quickly move to flat if there is another wave of sustained weakness because the forex charts above indicate if this keeps going, they will add rocket fuel to the fire.
I expect The Dying Dollar System will go on dying by deflation (inflation and currency devaluation for the rest of the world), but not just yet.

2020-03-19

Massive Generational USD Basing Pattern Complete

Hate to be conspiratorial because this is probably some technical reason, but the broad USD trade-weighted index was discontinued right before it broke out.

Taco Energy

Possible bull setup, need completion through horizontal.

The Bear Market Moves to Forex

A lot of charts are at reversal or breakout points.