Go Ahead…I Dare You!

Monday, 30 March 2020
Adelaide, Australia
By Bernd Struben

  • Markets
  • Not so fast…
  • Bear Market Rally

Where, oh where, are all the unruly teens?

Not the ones blithely ignoring the social distancing guidelines. You’ve likely seen enough of them.

And not the ones embracing self-isolation, blissfully glued to their devices. (You won’t have seen them.)

No, I’m talking about the teens who sneak out after dark, and annoy their neighbours with this prank:


Port Phillip Insider

Source: Wikimedia Commons / Dwight Burdette

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This Michigan homeowner has fallen victim to TP–ing. That’s where kids — you have to hope it’s only kids — throw toilet paper rolls over trees and houses for a lark.

It’s a fairly common practical joke in the US. And lately I’ve been wishing it would catch on here in Oz.

Go ahead, teens. I dare you!

But every new dawn reveals the trees in our front yard sporting their normal foliage…with nary a square of TP in sight.

Sigh.

So like most Australians, we’re relegated to regular pop-ins to the supermarket.

Like fishing, you tend to have better results in the early hours. With no guarantees. And like fishing, there are strict catch limits. Not just for TP. But for a growing range of items, like long life milk, pasta…and alcohol.

With too many Aussies having resorted to panic buying, these measures are a necessary evil. But they also present a potentially deadly catch-22.

As social distancing and self-isolation become the new normal — for now — a trip to the store becomes our Achilles’ heel. With the coronavirus spreading, weekly or even twice-monthly shopping trips make a lot more sense than daily visits.

Yet, to date, the lack of immediate supply of some goods to meet the surge in demand means twice-monthly trips to the store simply aren’t feasible. Hence shops like Woolies and Coles are seeing as much, if not more, foot traffic than ever.

This will all pass in time.

But for now, we urge you to shop safely…and as infrequently as possible. And if you’re older, ask a younger family member or friend to do it for you. Unemployment levels are on the rise. You could likely advertise for a personal shopper to drop all your items at the front door.

This isn’t the type of advice I ever expected to be sharing with you in Port Phillip Insider. But these are strange and trying times. And while we’ll get through them together, things are likely to get darker before the dawn.

With that in mind, we always like to hear from our readers. How are you coping with all the new restrictions put in place to combat the virus? How have you adjusted your investment strategies? Questions for us or tips for your fellow readers? Send them to letters@portphillipinsider.com.au.

Now onto our regular beat…money…

Markets

Over the weekend, the Dow Jones Industrial Average closed down 915.39 points, or 4.06%.

The S&P 500 closed down 88.60 points, or 3.37%.

The Euro Stoxx 50 Index closed down 119.13 points, or 4.18%. Meanwhile, the FTSE 100 lost 5.25%, and Germany’s DAX closed down 368.44 points, or 3.68%.

In Asian markets Japan’s Nikkei 225 is down 627.67 points, or 3.24%. China’s CSI 300 is down 1.80%.

The S&P/ASX 200 is up 183.67 points, or 3.79%.

West Texas Intermediate crude oil is US$20.82. Brent crude is US$23.75 per barrel.

Turning to gold, the yellow metal is trading for US$1,627.73 (AU$2,634.29) per troy ounce. Silver is US$14.39 (AU$23.29 ) per troy ounce.

One bitcoin is worth US$5,916.45. That’s down 12.2% since I last wrote to you on Thursday.

The Aussie dollar is worth 61.79 US cents.

Not so fast…

At the end of last week, the mainstream financial news was trumpeting the rebound. Indeed, we were told, this was the shortest bear market in Wall Street history.

These pronouncements came after Wall Street enjoyed its strongest one-week gains since a big rebound week during the GFC. The S&P 500 ended up losing 3.4% on Friday, yet still finished the week up 10%.

Here in Australia, the ASX 200 had its best three-day performance since inception. The index gained 12.5% between Tuesday’s opening bell and Thursday’s closing bell.

Not bad if you’re an active trader with a functional crystal ball and were in the market for just those three days.

Not quite so good if you’re a mere mortal and were invested for the entire week. With heavy selling dominating on Monday and Friday, the ASX 200 finished the week a mere 0.5% higher.

Now a gain is a gain. We’ll take what we can get. And at time of writing the ASX is again in the green, up 3.8%.

But let’s not lose perspective here. It’s still down 29.3% since the recent 20 February peak.

And for some longer-term perspective have a look at the yearly chart for the ASX 200 below:


Port Phillip Insider

Source: Google Finance

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On the far left side you can see the savage sell-off following the global financial meltdown in late 2007. On the far right side you can see the steep losses suffered since the true potential impact of the coronavirus began to crystallise.

We haven’t reached post GFC lows yet. That would require another 32% fall from here.

But notice how much steeper the fall is than during the GFC inspired panic selling.

Also notice that if you’d invested an equal amount in Australia’s top 200 stocks back on 26 October 2007, you’d be nursing a 26.9% share price loss today.

Now maybe the worst of the coronavirus stock market losses have already occurred.

Or maybe not.

Yes, the stock market is just that…a market of stocks. Some medical, technology and essential services stocks may weather the storm well. As may gold stocks. A few may even rise in a freefalling market.

However, our editors and analysts are unanimous in urging caution. Now is not the time to go blindly snapping up ‘bargains’. That time will come. But as the normally bullish Ryan Dinse tells us:

Bear markets frequently stage huge one-day rallies, only to fall over soon after. Those types of days suit traders with short-term strategies. Day traders, algorithmic traders and the like…

Of course, at one point, the bottom will come in and one of these rallies will hold.

But right now, we just don’t know what kind of rebound this will be.

Will it be a sharp V-shape recovery as government stimulus kicks in and the virus is cured quicker than anticipated?

Will it be a long fall with a number of false rallies like the Great Depression of the 1930s? That market took three years to bottom out.

Or will it be something different?

No one knows for sure.

You’ve got to be ready for anything on that front but at the same time always be looking to trade where the odds are in your favour.

As Ryan points out, no one knows for sure how and when this rebound will play out. But ‘something different’ to anything we’ve seen before is a good bet.

Tomorrow I’m planning a video interview with Vern Gowdie to get his latest perspective on the market outlook. If it’s processed in time I’ll share it with you then. If not, look for that on Wednesday.

Video update…What to expect from this rally?

Below Pivot Trader’s trader Murray Dawes shares his latest trading tips and insights.

Today, Murray looks at the bear market rally that’s got everyone talking about a possible bottom in the markets. But what do the charts say?

Scroll down and click on the image below to watch Murray’s latest video now.

Cheers,
Bernd

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Bear Market Rally

[Click on the picture to see Murray’s analysis of the current state of play in the S&P 500 during the crash.]

After suffering one of the sharpest selldowns in history, markets are starting to find some footing.

But there is no guarantee we’ve seen the worst of it.

In today’s Week Ahead update, I give you a bird’s eye view of the S&P 500 using the monthly chart. I show you the key moving averages that have traced out every bull and bear market for the past few decades.

I also show you my technique for defining trends using the three standard deviation Bollinger Band.

You need to create your own lines in the sand when trading the markets and I have a few unique techniques that I use to give me a sense of overall market direction.

One of the key things I look at is the most recent buy or sell pivots in different time frames.

They can come in very handy.

We are about to get confirmation of a monthly sell pivot in the S&P 500. Once that’s in place, I can move to a more bearish footing going forward, expecting to see more bouts of volatility after short squeezes have run their course.

By making calculations on the range of the monthly sell pivot candle I can work out where the key areas are where I want to look for opportunities.

If you’re interested in trading the markets short term, or even just looking for a level where you can offload some risk, you will have something to gain by noting down the levels I reveal in the video above.

Regards,

Murray Dawes,
Editor, Pivot Trader