Market Swings Back Down

Zacks Ultimate,

This is Brian Bolan filling in for the Ultimate Editor Jim Giaquinto. Jim always picks the best days to have me fill in. If there was only something that I could write about…

Investors continued to sell stocks as some of the worst fears of the COVID 19 are coming true. We have seen the total shutdown of Italy and investors are positioning themselves as if the US will do the same.

The Fed made another interest rate cut and initiated a quantitative easing program in the amount of $700B. The QE is in addition to the other stimulus actions taken recently by the Fed.

It wasn’t just the Fed cutting rates, this was a coordinated move by several central banks. The Bank of Canada, the Bank of England, the Bank of Japan, The European Central Bank and the Swiss National Bank moved to improve liquidity via swap arrangements.

The other week when we had the “Emergency Rate Cut” many started wondering what the Fed knew that we didn’t. The truth is that they don’t know something we don’t, with the constant flow of information on twitter and snapchat most people are very well informed (if they want to be).

The Dow Jones Industrial average dropped 2997 points or 12.9% today. The S&P 500 lost 324 points or 11.9%. NASDAQ dropped 970 points or 12.3%.

Declining stocks outpaced advancing stocks by a margin that is just about as big as I have ever seen. There were basically 10 stocks trading lower for every one that was higher. If that makes you wonder who was moving higher today, then you are not alone. The other day when we traded down by about 10% I noticed that biotech stocks were in favor and they were peppered throughout the list of advancing stocks.

Today we saw gold and her miners doing pretty well. There were also some biotechs, but far less than the other day. I do want to mention Peloton (NASDAQ:PTON) as being one of the winners. Guess while we are quarantined, we can ride our exercise bikes.

The VIX

The VIX is commonly referred to as the fear gauge and it spiked today. Back in the financial meltdown days of 2008 the VIX hit 89… but that was a clear signal to go ahead and buy stocks. After that high was hit, the measure fell back to the 20 range over the course of a year.

Will that happen for us? Absolutely. The virus is not a permanent thing, it is going to run its course and things will get back to normal. President Trump said that the Virus could last through July or August… let’s hope he is wrong.

So the measure of fear is telling us that this virus is almost as bad as a global meltdown of our banking system. I see the high today was 83.56 and we closed at 83.27 +25.44 (43.9%). That is something else one day after Trump declared a national emergency and pushed the Dow Jones to its single best day ever.

Portfolio Action

TAZR was active today, adding 3 names. Two of the names are triple leveraged bullish names and the third is too. 3x the tech market is the TQQQ and 3x the broader market is SPXL. Those are easy enough, but Kevin Cook has TAZR subscribers going short the VIX! This is such a good idea as I noted early how high the fear gauge has gone.

Stocks Under $10 ran a promotion over the weekend and that means I was adding a new name to that service today. Frontline (FRO) is a Zacks Rank #1 (Strong Buy) and has good earnings estimate revisions and has posted some good growth of late. There was also an uptick recently in shipping rates thanks to increased demand from the Saudi’s.

Options Trader Kevin Matras decided to take profits on JD.com (JD) and Pegasystems (PEGA) the gains were 69% and 87% respectively. Be sure to read Kevin’s write up for more information.

Jim will return tomorrow.

Have a good evening,

Brian

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