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Friday, January 31, 2020

Update 1/30 Virus woes

Investors suddenly realized there is a virus loose in the world.  I could  not figure out why they did not panic before today.  I am not sure why the panicked today since there seemed to be nothing new.

There was another tick distribution signal today.  Even bigger volume today than yesterday's big volume.  Breadth was -78%.  The volume looks like it could be capitulation, but the TRIN was only 1.9 so maybe not. 

The futures had been finding support at the 100 SMA, but closed well below that. 

The red count has reached oversold levels.  That can mark a bottom OR the beginning of a bigger correction. 

The U.S. had a briefing today.  There will be some mandatory and some voluntary (monitored) quarantine of people coming into the U.S. that have been in China in the last 14 days.  They also said it is definite the virus can spread without symptoms being present in the carrier.  They also mentioned the mortality rate was similar to a bad flu.  Notice those are things we thought were already known as I mentioned them here before.  I don't think there was any new information.  Why did everybody react today?

Today put the market in correction mode.  The bears have the edge until we can see some good odds of an important low being made.  The virus is going to cause considerable slow down in the Chinese economy, but investors should have already known that.  That was obvious many days ago (wasn't it?).  The cat was already out of the bag there.  Now we need to see if they can keep it contained to China.  The global economy has already been weak.  This could be enough of a shock to push it into recession.  Parts of the yield curve have become inverted again in the U.S.  A U.S. recession this year remains a possibility.  There is simply no way to quantify the full effects this virus will have.  I heard somebody on CNBC saying this would lead to massive stimulus which would rescue the economy.  In the last recession it was really China that helped pull the globe out of the doldrums with their massive stimulus programs.  Before the global recession China was growing 10% a year and only slowed down because of the global recession.  Now they are growing 6% a year and slowing.  If there is a global recession they will be the cause of it.  It seems unlikely stimulus will do much good until the virus runs its course.  Maybe we should have a little bit of caution here.

Have a great weekend.


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