Slowing the Bleeding

Unless you’re hiding under a rock you know last week was a mess for the markets. Coronavirus grabbed headlines and panic set in for investors.

At this point, markets are pricing for recession. Trying to make sense of what’s happening is essentially a guessing game. Whether it is or is not likely to happen, the price tells us all we need to know for now.

What we do know is we just saw the worst week in the markets since 2008.

Let’s get to the stuff folks are asking about:

  • Is it over?
  • How bad can it get?
  • What should I do?

First, is it over? There is no way to tell. Anyone that says they know has something to sell.

How bad can it get? Well, as the saying goes, markets can remain irrational longer than you can remain solvent. So it could get worse. But the better question, how much worse? The numbers are moving so fast it’s difficult to get a handle on this. But read on, we’ll try to unpack some critical pricing levels.

What should I do? While none of us can predict the future, we can all take a deep breath, get a hold on our emotions, and make sure we’re using logic and data rather than emotion to drive our decisions. If you’re part of the BigFoot club, that means sticking to a process.

Now, the numbers… just what the heck is happening?

Last week we blew through most every support level on paper. So technical analysis is pretty shaky right now. Stock prices fell… hard. Looking for where things may bounce is pretty much a guessing game. Looking for support… well, we have to look pretty far back in time. So the numbers are less reliable than we’d hope.

Interestingly enough, not a single macro has turned negative for BigFoot. We did see the S&P500 index get an algo-sell. But both the DJIA and NASDAQ only shifted to wait.

If we end March below 3160 the Market Macro should flip negative. But there’s a long time before the end of March. A lot can happen in a situation like this where we’re trading more on conjecture than data.

Here’s what we can look for… note on this week’s charts, no red/yellow/green. Nope, those imply a generally decent probability of likelihood to occur. This week, we’re into the ‘maybe’ zone.

Support appears to be at 2910/2771… and yes, you read that right. There’s virtually no support in between (not to say markets won’t find support in this range, it’s to say there’s nothing material showing up in the charts).

Finding support numbers this week is tough

Longer-term, you can see how far back we have to look to find support.

To find solid support we have to look back close to 2018. That’s pretty shaky.

This week’s price behavior will be important. It’s possible there is a bounce given how over-sold things are. However, it will take some time to shake off the ‘stank’ that this market has taken on over the last week. People are scared, and the behavioral shifts will likely hit the economy. The effects of this behavior are yet to be determined. Suffice it to say, we’ll be talking about this event for some time, even after it passes, as either an excuse or a reason for odd market behaviors.

Hang in there. Keep a cool head. And remember, equity markets are very efficient at transferring money from the impatient to the patient…