As the carnage continues with stocks now ignoring anything the Fed throws at them — and the Fed has pretty well thrown everything it has used in the past and is now moving into bailout mode — where is the US stock market crash likely to to stop falling? So far, it’s been limit-down all the way.
My best case scenario for the US Stock Market Crash
I am completely convinced it won’t end better than this, and I think it is only likely to be a resting platform unless the Fed leaps into strategies I’ve been talking about in Patron Posts that are currently illegal.
This level is based on the zone where the bull stopped running for two years and churned sideways as a place it hung out when the Fed stopped QE. That was back when I said the market would crash because of the end of QE, and it didn’t quite do exactly but, but the bull was broken. The market stalled for two years, so not really a bull in my books — at best a bull in a coma).
With the Dow ignoring the Fed’s kitchen-sink solutions again today and ending down more than an unlucky 1300 (at 1,3338, having touched again on 2,000 down intraday), it looks like we’ll enter the market’s old hang out in the rectangular safety zone sometime this week….CLICK for complete article
“If you own 10% equities, as we do, and the market falls 100%, you will lose 10%. That said, you have 90 cents on the dollar to buy equities for free.” – Michael Lebowitz
Let me explain his comment.
Last week, we wrote a piece titled: Risk Limits Hit. When Too Little Is Too Much in which we discussed reducing our equity risk to our lowest levels.
For the last several months, we have been issuing repeated warnings about the market. While such comments are often mistaken for “being bearish,” we have often stated it is our process of managing “risk,” which is most important.
Beginning in mid-January, we began taking profits out of our portfolios and reducing risk. To wit:
‘On Friday, we began the orderly process of reducing exposure in our portfolios to take in profits, reduce portfolio risk, and raise cash levels.’
Importantly, we did not ‘sell everything’ and go to cash.
Since then, we took profits and rebalanced risk again in late January and early February as well.
On Friday/Monday, our ‘limits’ were breached, which required us to sell more.”
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Back in December, someone in China made bat soup (at least according to the officially accepted narrative that doesn’t get you banned on Facebook, Twitter, etc), and the rest is history: in the next three months, the global equity market has lost $24 trillion in value, more than the $22 trillion in US GDP. And here is a staggering chart from BofA putting the crash of 2020 in its historic context: in the past month, the US stock market has crashed faster than both the Great Depression and Black Monday, and in terms of the total drawdown, the crash of 2020 is now worse than 1929 and is fast approaching 1987….CLICK for complete article
The month of March has been brutal so far for investors, but short sellers are making a killing off on the volatility caused by the COVID-19 coronavirus outbreak.
There is currently $154 billion in aggregate ETF short interest, 90% of which is in U.S. domestic ETFs, according to S3 Partners. S3 analyst Ihor Dusaniwsky said Tuesday there are 216 U.S. ETFs with short interest of at least $25 million.
Most Shorted ETFs
By far the most heavily shorted ETF is the SPDR S&P 500 ETF Trust. The SPY ETF tracks the S&P 500 and represents a simple bet against the U.S. stock market and/or a hedge against long positions in U.S. stocks. Here are the top four most shorted U.S. ETFs, according to S3: CLICK for complete article
After multiple sessions of panic selling, the markets caught an up-draft after US President Trump declared a national emergency over the coronavirus, thus freeing up $50 billion in federal aid to help contain the rapid spread of the pandemic.
As stocks accelerated gains in the final hours of trading, posting the biggest one-day lift since the financial crisis, USA Today reported traders and analysts saying that Trump’s remarks removed some of the uncertainty hanging over financial markets.
“The change in tone shows that the Trump administration is taking this more seriously now,” said a senior portfolio manager at Atlanta-based GLOBALT Investments. “This still isn’t over by any stretch, but it’s a better sign.”
Too right. Even with Friday’s rally, the S&P was down 8.8% for the week and all the gains US stocks accrued in 2019 have been wiped out. All three indices are now in a bear market, defined as a drop of at least 20% from all-time highs…CLICK for complete article