看空

Worse-than-expected economic data implies S&P 500 downturn

已更新

Retail sales data, industrial production data, and capacity utilization data for March all came in quite a bit worse than analyst forecasts today. The Empire State manufacturing index for April also hit a record low, falling nearly 40 points more than expected.

Bankruptcies are also piling up this week at a much faster pace than last week. Publicly traded companies that declared bankruptcy include NASDAQ:FTR, OTC:HOSS, and OTC:LKSDQ. Also at imminent bankruptcy risk are NYSE:JCP, NASDAQ:CLUB, and . Lots of private companies have also gone into bankruptcy, including the XFL, True Religion, FoodFirst, Fairway, Pace Industries, Longview Power, and lots of small farmers in Wisconsin. The cities of Vancouver and El Cerrito are also on imminent bankruptcy watch.

These metrics suggest to me that the jobless claims numbers Thursday are going to be bad again. I also think the market is overly optimistic about the long-term economic outlook and the return to normalcy once the economy reopens. Zacks, for instance, is forecasting that most of the lost jobs will return once this is all over. I'm less optimistic that companies, having burned a ton of cash, will be able to rehire the people they laid off. Some jobs are also being automated as we speak.

Here's one example of the economic ripple effect the shutdown is going to have. Cities will lose 25-50% of their revenue this year, and they will somehow have to make up their budget shortfalls. Most of them will raise taxes, perhaps in the form of a temporary coronavirus tax. That will be a drag on economic recovery, which will take a lot longer as a result.

In terms of technicals, I expect at minimum a near-term test of the 20-day moving average, and possibly the ten-year trend line.

註釋

This morning SPX attempted a rally, but got rejected from from 20-day EMA.

Jobless claims came in slightly higher than expected, at 5.2 million. We now have lost 22 million jobs in the last four weeks.

Banks are having a particularly bad week after terrible earnings reports and terrible guidance.

OPEC this morning revised its 2020 oil demand forecast downward by 6.9 million barrels per day.

The Philly Fed manufacturing index fell to -56.6 vs. -37.5 expected.

All signs are bearish.

註釋

Correction to my last update: it got rejected from the 50-day EMA this morning, not the 20.

註釋

Add Yuma Energy to the corporate bankruptcy list.

註釋

Trump's aim to reopen the economy by May 1 arguably gives the market some reason for optimism, and SPX is shooting up in after-market trading. The details of the plan make me doubt that the May 1 target will be achieved, so it's possible that some of this optimism will fade, but I do think this may now head upward to the 200-day EMA.

註釋

The S&P 500's open wasn't quite as bullish as I expected this morning. It's certainly a positive open after Trump's announcement and the positive Gilead data, but crude oil is a major drag on stocks, with crude prices down 9%.

註釋

Looks like we won't even test the next-higher moving average before breaking down again. Here comes the downturn, folks. Brace yourselves, especially for pain in the energy sector. We had another publicly traded oil company go bankrupt over the weekend, and there will be more with oil under $12 per barrel.

註釋

The S&P 500 is holding above support today despite a 40%+ breakdown in oil. It won't last, IMO. S&P 500 dividend futures led the rally, and now they will lead the breakdown.

註釋

50-day moving average support finally broke, and we will likely break the 20-day support tomorrow. S&P could make new lows soon.

註釋

We've been hovering around this 50-day moving average all week, as we oscillate between bad economic data and news of more government intervention. Today's news: jobless claims slightly worse than expected, services PMI at all-time low, manufacturing PMI lowest in 11 years. And that's just in the US.

註釋

Adding to today's bad news, the Gilead drug remdesivir reportedly failed its trial.

註釋

Today we got rejected from the 20-week EMA. We're seeing lots of news articles containing the phrase "back to normal," and with state economies starting to reopen, we're going to see a shift toward stories about the logistical hurdles.

With stocks having tipped past the psychologically significant level of 20 forward P/E (and market cap 135% of GDP) this morning, it's possible we just hit the top.

But we're still above the trend line, and we haven't tested the 200-day EMA yet. *That's* the really important technical level, and that's where I'll buy some puts if we get that high.

註釋

SPX appears to have just broken its uptrend. The May 1 puts I purchased at the 200-day are comfortably in the money.

註釋

I've made a little money day-trading SPX options today in relation to the 20-hour EMA, so that's been fun.

In my past experience with playing trend line breaks like this one, we often get a move back above the trend line before reconfirming the breakdown. But in this case the 20-hour EMA puts a little downward pressure on the price, so we'll see.

If we do move back above the trendline, I will look for the next red bar close to confirm a resumption of the down trend, and then I will consider adding some more puts.

tradingview.com/chart/ykLZEnHc/

註釋