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The year is 2020. A new virus is spreading across the planet like a wildfire. More lethal than the flu, highly contagious with no cure. Stocks markets collapse, global economies are shutting down with billions of people quarantined to their homes and millions losing their jobs overnight. What do you do? What DO you do?

While it sounds like the script of a bad disaster movie, it is nevertheless the world we suddenly find ourselves in. If you’d outlined this script to anyone just a couple of months ago nobody would’ve believed you.

But here we are and everyone has to adapt and get on with it.

Everyone searches for answers. Is it a short term thing and a big recovery is just around the corner with the help of unprecedented monetary and fiscal stimulus, or will the monetary and structural consequences be so severe that a larger recession, depression even, is inevitable?

The Big Battle is unfolding right in front of us.

Markets, following the biggest crash off of all time highs since 1929, also just managed the sharpest rally since 1933. A bear market rally similar to many seen during the 2008 crisis?

Or a V shaped bottom similar to December 2018?

A retest of the lows for a “W” bottom, or the beginnings of a much more sinister stair step descent to new lows? Lots of questions, but few answers amid evolving data points that do not offer clarity where the current shock will settle.

Fact is the long term monetary and fiscal consequences of the current interventions will reverberate for years to come. Fact is also the global recession that was already at risk of playing out in 2019, but was delayed by aggressive global central bank action, but has now come to fruition anyways. Sparked by a trigger that has rendered all these policy actions of the past year ineffective and meaningless.

And now the forces of intervention have gone straight the MMT route. I urge caution once again:

Since the advent of cheap money the crashes are getting worse. 2000 was bad, 2008 was worse and now 2020 is even worse than 2008. The trend is your friend? Not so. The trend suggests ever cheaper money, ever more debt and ever more interventions lead to ever more severe consequences and all is reliant on the forces of intervention to retain their efficacy and double, triple, quadruple down, a proposition whose wisdom is highly debatable.

Many now say the shock will be short lived and the market is a forward discounting mechanism and will look to brighter things to soon to come. If the market is a forward discounting mechanism why did this just happen:

My view: Flexibility over certitude. Anyone expressing certitude about what will or will not happen has access to information I don’t have or perhaps they are simply projecting of what they would like to see happen.

What I do know is that technicals are working and they help guide us through this complex jungle and I’ll demonstrate that in the video below. But technicals also have to negotiate the complex web of artificial liquidity which is now entering markets to a degree never before seen in human history, even dwarfing the interventions of 2008/2009.

This week’s technical market assessment:

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5 replies »

  1. Wall Street got to gorge on the (M)agic (M)oney (T)ree in 2009, and now again in 2020…so why should Main Street not get some of this free gravey? If you think of it logically, it will never work long term. Yet since we have made the money fairy real over the last 10 years via central bankers handouts to the super wealthy via QE and ZIRP policies, why stop at a $2.2 trillion dollar stimulus. If we all believe in magic money fairies, it will work for and unknowable period of time. Of course it will not work forever…that was never the point when we started this mess when we broke the gold standard and followed it up with “Deficits don’t matter” in the early 1980s. This is a 50 year process,that has magically worked for half a century “so far’…

    Speaking of certainty, I am betting the wealthy elites will be taking this virus much more serious, perhaps worrying more about their own health verus the DieForTheDow mentality thrown at the peasants. Having a 56 CFO at Jeffries die from the virus is very sad and scary, and a huge reality check that this is going to affect each and every human on this planet, no matter how much money or resources you have to fight this pandemic. We are in this together, in the end this will make us stronger and wiser for the next time a pandemic hits that has a higher death rate of say 10-30% (MERS), verus the 0.5% (Korea) to 10% (Italy) “current” death rate of the coronavirus. In a weird way, this could be the shot across the bow that saves our species in the future…

    Jeffries CFO dies from virus complications at age 56:

    https://www.bloomberg.com/news/articles/2020-03-29/jefferies-group-cfo-dies-from-coronavirus-complications?srnd=premium

  2. Like a timmerman square tank, China has flattened the virus data in their country by a factor of 15x to 40x (according to UK analysis) per:
    https://www.businessinsider.com/coronavirus-boris-johnsons-government-reportedly-furious-with-china-2020-3
    The UK is paying the price from believing the Chinese data. Why would China do this? Why would they not, as instead of falling behind as a country deperate to lead the world someday, now the world will fall behind in unison, if not faster and further, thus long term it is advantagous polictically and economically if coronavirus spreads across the entire world for China. With a 70% overweight culture, teen vaping epidemic, and a society that believes in indivudual rights over the collective, America will suffer far worse than China during this pandemic. Other governments will catch on soon enough…as China fudged the data beyond reasonable doubt.

    Conspiracy theory? Maybe. Yet “IF” America has 200,000 deaths in three months, with 400% less population than China, will you still believe China had only 3,000 deaths? In summary, I would throw out the China data in your health and investment decisions, as it is suspect and misleading at the very least…

  3. Enjoy your trip to York. I’d take the A1 route, it’s likely to be empty, is more direct and less boring. If pubs were open you could break about halfway at “Jackson Stops”, Stretton which did excellent stilton ploughmans back in the day:
    http://www.thejacksonstops.com/

    It gets its name from the estate agent’s sign that was outside for years many, many, many decades ago, while it couldn’t find a buyer. Will be nice weather, at least. Hope she’s not too yappy.

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