Trading the Indices on Fundamentals

I'm not surprised you took profits on your short and not surprised if you're playing a nice long from here too, but a bit surprised if you're now 'fundamentally' long.

Just in my small social circle of friends here in Norway - most foreign business trips are cancelled throughout May for now. I just saw how one of the two airlines here in Norway is cancelling a lot of flights in the comings months. I also know someone working in the flight industry who's received notices of potential layoffs in the immediate future.

So, it's clear to me that already at this point the virus is having real effects on the economy which might worsen in the days to come.

Seems to me like we're in a nice position for initiating a short into the next down leg which I think is coming in not too long. Maybe next week.
 
Laissez Faire said:
but a bit surprised if you're now 'fundamentally' long.
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I'm torn between my gut feeling and what market players perceive. Investors are aware that there will be lay-offs and diminishing earnings, I think we all agree on that, however, they convinced themselves that after 4 to 6 months of pain all will be fine so in the market tradition of being forward-looking, they are pricing stocks on the "fine" part.

On the other hand, my gut tells me that it's no were certain that all will be fine in 6 months, and until there is a vaccine or at least a cure for the virus, there exists a high level of uncertainty, sell-offs are in order when uncertainty exists, this is another market tradition so I should be bearish.

Markets are bullish while I feel I should be positioning myself with a bearish strategy. In trying to be professional and taking evidence over emotions, I'm going along with the market's perceptions, for now, however, I got heavy hedges ready to kick-in if DOW hits 24,403 with further smaller hedging at 23,762. I guess I could just sit on my hands and do nothing but I chose to go the bull route with "protection" to bring me to net short again if my gut turns out to be a better predictor than markets.

Today when DOW reached 27k, I did in fact let emotion take over temporarily and did take profit on some longs, I'm still net long but at a lesser magnitude. Also, I still hold shorts in the CAC, DAX & HSI.

I have taken note of Dario's warning but before I make a 180-degree turn I want to see whether Dario is putting money where his mouth is or whether he's just making headlines. As always, timing is more important than being right, for now, I think a bullish outlook is the right one as fundamentals are not yet showing a lasting economic downturn.
 
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Something I left out to above that plays into the scheme is that although market players are aware that there will be lay-offs and diminishing earnings they also expect the Fed to have their back during the 4 to 6 months of pain before all becomes "fine" again (which might not happen).

The litmus test will be the 2nd quarter reporting and the then "atmosphere" around the elections that could show markets are grossly overvalued... by then I hope to have closed off most longs and might well change my tune based on real fundamentals of the time instead of the distorted ones currently in effect.

I wish Jamie Dimon a speedy and full recovery.
 
Nancy spoke and has spelled-out what was suspected all along... she has been bitter towards Trump and opposes him on everything because "as a man" he conspired with other men to take away the presidency from a woman (Hillary), then she used the same argument to feel sorry for Warren because men conspired to push her out of the race. What load of unprofessional baloney coming out of the mouth of the most powerful woman in the world! News to Nancy and all women... YOU REPRESENT THE MAJORITY OF THE POPULATION, YOU ARE NOT THE MINORITY, DEMOCRACY IS IN YOUR FAVOUR, you have the numbers to make things happen, there is no male conspiracy, if it does not happen it's because you lack something that prevents it from happening, this has nothing to do with male conspiracies. Wake-up Nancy!
 
If anyone doubted the economic impact of the coronavirus, they need to look at this chart while keeping in mind that just about every business relies on China's supply line, even pharmaceutical companies do a lot of their production in China. The chart shows that Chinese manufacturing has halved, meaning that acute shortages of everything are imminent. As the consumer might consider unavailability of something just an inconvenience, for the business that sells the item it means lost revenue that in most cases can't ever be recouped.

China NBS Manufacturing PMI

5e5f084eaa0d3c367aa476fb_China%20NBS%20Non-Manufacturing%20PMI%5B1%5D.png
Source: tradingeconomics.com / National Bureau of Statistics of China

Since Trump's election, he has been telling business to stop relying on China and start doing their own production locally... a message that for 3 years has fallen on deaf ears, perhaps a limited amount of what Trump preaches should be taken seriously. Maybe, when we pass through this virus and come-out the other side, things will be placed differently when the next black swan hits.
 
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FXtrader8911 said:
If anyone doubted the economic impact of the coronavirus, they need to look at this chart while keeping in mind that just about every business relies on China's supply line, even pharmaceutical companies do a lot of their production in China. The chart shows that Chinese manufacturing has halved, meaning that acute shortages of everything are imminent. As the consumer might consider unavailability of something just an inconvenience, for the business that sells the item it means lost revenue that in most cases can't ever be recouped.

China NBS Manufacturing PMI

5e5f084eaa0d3c367aa476fb_China%20NBS%20Non-Manufacturing%20PMI%5B1%5D.png
Source: tradingeconomics.com / National Bureau of Statistics of China
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FYI, those numbers are a week old. We know. :-)
 
DOW (futures) are now firmly in correction and another -4% will send US markets in bear territory.

Diff between Mar & Apr VIX is 8 units indicating sell-off is overdone
 
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Quite a challenging Monday, would have been immensely easier had the US futures not been suspended until the cash market opened. I used the DAX as a proxy to give an indication of the opening US gap, it worked and so was able to set orders & hedges, in all a good day with over $56k taken... could have been less frustrating and more profitable had I been able to enter the hedges (at better prices) before the cash market opened

I do think a lot of panic selling took place y'day, already markets were spooked by the virus, it did not need the oil price war on top. Hopefully, this flushed the markets and so give more orderly movements going forward. The difference between the March & April VIX futures is the highest I have seen (over 7 units), I this as an indication that markets will stabilize shortly (unless another black swan appears)
 
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On Tue Trump promised some "big" announcement on a tax stimulus to help those affected by the virus, markets closed on a high, then, he failed to show at the scheduled press conference for the announcement so overnight we are seeing close to -3% on US Futures. I bet Nancy was behind the scenes rubbing her hands in pleasure over the correction and telling Trump she won't give a penny of tax relief, the same thing she said for the wall, that's probably why Trump missed the conference.

Futures are showing a lot of indecision, after dropping 3% they began a range between -2% & -3%, this will probably continue till the cash open, if by then Trump still hasn't announced anything we might see a renewed sell-off. I don't think the Fed can do any more so it's up to Trump and the finance team to come up with something that will keep the consumer spending, failing this, recession talk will begin and a self-fulfilled prophecy will materialize. The virus is not a fiscal problem, the Fed is powerless to negate its effects on the consumer nor to fix the supply chain, I hope Trump realizes this, stops telling the Fed what to do and instead come up with a plan himself which has substance, not just an "I told you so" statement (he indeed did tell business to stop relying on China but business ignored that). Perhaps a "Manhattan" type project to produce a vaccine might be the thing grand enough for Trump to do and take credit for "saving the world".
 
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