It’s been a while since I looked at stocks, largely because with Trump running things the only decision was “hold or buy the dips”.
IMHO, that’s now changed. We have companies that either are shut down or will be. First will be airlines & cruise ships. Then hotels, oil & gas and more.
Anyone dependant on China for sales or on tourism is up first. China is quoting June for new orders and our ports are now empty. Companies who can’t make it to June without new inventory or sales will either have big layoffs and poor profit reports, or be bankrupt.
Right behind them, shipping from China, ports, trucking, and rail shipping will also slow. Since rail & trucks also carry our produce, they get hit less.
Then with little product and fewer customers, retail starts to take a hit. With major gatherings shut, sports and conventions hit the skids, and hotels & restaurants with them. With China fuel buys shut down, and our trucking & rail winding down, oil demand will plunge (now down about 1/4 already). As sickness and deaths ramp up, insurance companies take the hit, spreading the pain to the financial sector..
I’d been unwilling to embrace this point of view, hoping the USA would be ahead of the Covid-19 epidemic. However, given that we have had exponential growth of cases in the USA and after a month or screwing around STILL do not have effective mass testing or community isolation in place, odds are now high that this ends badly.
Present evaluations are high after a very long positive run. Poised for bad news to knock it down, and we have bad news.
The FED cut interest rates by 1/2% to about 1.5%. Stimulus is high and not much to show for it. Low Fed rate will not put people in airplanes nor fill ports with Chinese goods nor fix a sick workforce. “Good luck with that”.
So, what’s the chart now?
Not good. About 1.5 weeks ago prices fell off a cliff. Volume spiked. All three simple moving averages were violated along with PSAR. MACD rolled over to red on top and is below 0. DMI is red on top.
All the indicators are in “be out” configuration. I’d expected The Fed to throw money at this, so didn’t say to be out before. Now they have cut rates and you can’t see much result.
That bottom gold XOI line is the oil & gas index. Clearly tanked. Eventually a bottom, but not yet. It does show that China isn’t buying yet, so isn’t back to production yet.
IMHO, best to be out and preparing to bottom fish when things are darkest.