June 9, 2020 - Financial Occultist

George Floyd funeral is starting

The the New York Stock Exchange and the NASDAQ exchange are observing a moment of silence for George Floyd. Floyd’s funeral is beginning. The moment of silence will last 8 minutes and 46 seconds. Him

Rest in peace…. Live in peace.

Spotting Bottoms

09-Jun-20 09:32 pm

Anirudh Sethi

Fake rallies
- At some point on the way down, the indices will attempt to rebound or rally. Bear markets normally come in 2 or 3 waves, interrupted by several attempted false rallies that usually fizzle out after 1, 2, or 3 weeks and occasionally 5 to 6 weeks or more [my note: created by both bargain hunters as well as big players going for the short squeeze].
Counting rallies and follow-throughs
- 1st day of an attempted rally is when the index closes up from the prior day (doesn’t matter if the intraday low is lower than the prior day).
- If the intraday low of the 1st day of the attempted rally is undercut in the subsequent days, then the rally fails and the count is resetted back to zero.
- As long as the days after the 1st day of the attempted rally stay above the initial intraday low of the 1st rally day, you are still in the rally process.
- Look for a “follow-through day” in the 4th to 7th days (inclusive) of the attempted rally. A “follow-through day” is when the index closes up 1% or more with a jump in volume from the day before. Market is then in a new uptrend.
- “Follow-throughs” after the 10th day indicate the turn may be acceptable, but somewhat weaker.
- An initial “follow-through” can occur on any one of the indices and is usually followed a few days later on another index.
False signals
- About 20% of the time they [the follow-through method] can give a false buy signal, which is fairly easy to recognize after a few days, because the market will usually promptly and noticeably fail on large volume.
- Most true “follow-throughs” will usually show strong positive action on good volume either the day after the “follow-through” or several days later. Convincing power and strength is what you want to observe.

Why not buy at the bottom of the cup? The Risk is Higher

09-Jun-20 09:28 pm

Anirudh Sethi

The objective is not to buy at the cheapest price when the probability of the stock having a huge move may be only so-so.
The objective is to buy at exactly the right time — the time when the chances are greatest that the stock will succeed and move up significantly.
I found through our detailed historical studies that a stock purchased at this correct “pivot point,” if all the other fundamental and technical factors of stock selection are in place, will simply not go down 8% (your protective sell rule), and has the greatest chance of moving substantially higher. So ironically, if done correctly, this is your point of least risk.
On the day the stock breaks out, its trading volume should increase at least 50% above its average daily trading volume.

European indices end the day with declines

09-Jun-20 09:18 pm

Anirudh Sethi

German DAX, -1.4%

The major European indices are ending the day with declines. A look at the provisional closes shows:

German DAX, -1.4%
France’s CAC, -1.5%
UK’s FTSE 100, -2.1%
Spain’s Ibex, -0.7%
Italy’s FTSE MIB, -1.3%
Portugal PSI 20, -1.63%

In the European debt market, the benchmark yields are moving higher, with investors shunning the risk year countries including Spain, Italy, and Portugal. France 10 year yields remain above the 0.0% level at 0.072%.

Another black eye for the WHO

09-Jun-20 08:24 pm

Analysis

Anirudh Sethi

What a fiasco

One of the reasons the bulls got so excited yesterday about the reopening trade was a comment from Dr. Maria Van Kerkhove, head of WHO’s emerging diseases and zoonosis unit.

She said “it’s very rare” to get asymptomatic transmission of coronavirus.

“From the data we have, it still seems to be rare that an asymptomatic person actually transmits onward to a secondary individual,” she said. “We have a number of reports from countries who are doing very detailed contact tracing … They’re following asymptomatic cases. They’re following contacts. And they’re not finding secondary transmission onward. It’s very rare.”

Today, the WHO is walking that back.

Officials say that they estimate that 16% of people who are asymptomatic can spread that virus and that it could be as high as 40%. They also said they regret that the comment that it’s “very rare”.

The two-day FOMC meeting gets underway

09-Jun-20 08:23 pm

Analysis

Anirudh Sethi

The Fed decision is tomorrow

The only thing worse than a two-day meeting is a two-day meeting on Zoom.

Here are three things to watch for from Powell & Co. After yesterday’s decision to expand the Main Street lending program it’s tough to envision that they will do anything remotely hawkish. The one argument the other way is that they announced the Main Street changes separately so the statement itself (and the overall message) wouldn’t be as dovish. That’s a bit too deep for the Fed, but you never know.

Anyway, maybe Powell is just trying to help us all out: it turns out that negative thinking leads to dementia. So take that bears.