by thewallstreet
Subjects we will cover:
- COVID-19 – Projected peak of daily deaths/resources needed.
- Oil deal.
- Fridays and Weekends.
- Good / Bad news ahead.
We start with facts:
- Projected peak in daily deaths is due in 2 days, 04.12 according to covid19.healthdata.org/united-states-of-america
which is where most are looking at. The projection is priced in long ago.
This is why this weekend is crucial: If we continue with daily deaths according to the projection, the result will have no effect on markets, since there won’t be any surprise at all. If we see a drop in deaths in the following weekend, which is highly unlikely imo as daily peak resources needed in hospitals is due tomorrow, we might see slightly good signs of another week of recovery on markets – but as we saw in the previous week, there are some bloody days popping up with deaths climbing even when we thought we already peaked.
Another scenario: Projections are wrong and we continue with climbing daily deaths, markets will have to adjust for new projections, we get a drop.
Conclusion: Slight chance of markets moving upwards, regarding COVID-19 developments, Slight-medium chance of moving downwards. - The oil price war drama just adds fuel to the fire. I mean, 03.08 when SA initiated an oil price war with Russia, SPY was already on down trend, but this turned into freefall, when markets opened the next day 03.09, we got circuit breakers and -7.6% eod. -7.8% on DOW etc. VIX jumped almost 30%. The recent oil deal was probably closed few days ago, as I don’t think the two countries whose economies are so much dependant on oil prices, will have their next few months income determined by 2.5 hours virtual meeting. There were some posts here to how even 10-15m bpd cut isn’t even enough as storages are getting full. Oil prices will tank and then slowly recover. Even if there will be a 20m bpd cut, this is slightly more than the 15m bpd cut already expected, which is just bad news. We also have Mexico who doesn’t want to cut production.
If Mexico or other countries eventually “agree” to cut production, we will get the ‘good news’ and oil will go higher even if their production cut will have near to zero effect on the overall world production, since markets will react to the news. This might be a strategy of OPEC+ to raise the prices, as Mexico might already agreed to cut production, but are waiting to release the ‘good news’ at their timing. - Fridays and weekends.
During volatile times as we are now, with high uncertainty in the markets, people tend to take their money out of the market before the weekend, since bad news might come and they can’t react or respond. It is just safer to keep the cash and decide to put the money in the markets or out during the week. That’s how the average person thinks, which I will call “stupid money”. I’m not talking about market makers here, which will determine the price according to other things or have some insider’s information about another stimulus bill incoming.
We will look at the S&P 500 last 7 fridays, while keeping in mind the High price of each friday, as this before-the-weekend-selloff sometimes happening during the last hours of the trading week, starting from:
02.28
Opened 2916.9
High 2959.72
Closed 2954.22
Total from high to close: -0.185%
VIX closed at 40.11
Almost no selloff = Stupid money inside the system.
Next week (till next friday opening): S&P stayed the same overall.
03.06
Opened 2954.2
High 2985.93
Closed 2972.37
Total from high to close: -0.454%
VIX closed at 41.94
Small selloff = Stupid money inside the system.
Next week: S&P dropped 17%.
03.13
Opened 2569.99
High 2711.33
Closed 2711.02
Total from high to close: -0.011%
VIX closed at 57.83
Almost no selloff = Stupid money inside the system.
Next week: S&P dropped 15%.
03.20
Opened 2431.94
High 2453.01
Closed 2304.92
Total from high to close: -6.037%
VIX closed at 66.04
Huge selloff = Stupid money leaving the system.
Next week: S&P recovered 10%.
03.27
Opened 2555.87
High 2615.91
Closed 2541.47
Total from high to close: -2.845%
VIX closed at 65.54
Moderate selloff = Some stupid money leaving the system.
Next week: S&P stayed the same overall. small drop.
04.03
Opened 2514.92
High 2538.18
Closed 2488.65
Total from high to close: -1.951%
VIX closed at 46.8
Moderate selloff = Some stupid money leaving the system.
Next week: S&P recovered 11.5%.
04.09 (yesterday, not a friday but end of trading week)
Opened 2776.99
High 2818.57
Closed 2789.82
Total from high to close: -1.020%
VIX closed at 41.67
Small selloff = less stupid money leaving the system.
Next week: ???
Why I even look at these? Idk, I’m a retard like you. But imo this indicates the confidence people have on the market while leaving their money inside for the weekend. I might add later what happened Mondays just after weekends.
Anyway, we see that when there is huge confidence and people doesn’t take their money out before the weekend, we see that the following week the S&P tends to fk them (assuming they kept the money the following week till next friday, we didn’t look at what happened mondays).
In the last 4 weeks we see a decreasing of selloff’s during fridays. Confidence is building up, more stupid money inside the system. This alerts me as nothing really changed since two weeks ago. FED printers were working then, and are working now. I don’t see anything good to legitimize this increase in confidence. Eventually the stupid money inside the system will feel the S&P drop the following week. This might happen in the next week, or, if we get to a -0.5% (or less) friday selloff – the week after it.
- Good and Bad news ahead: IMO, we exhausted most of the good news already, and looking forward – there are more bad news to come instead of good news-
Politics, Sander’s dropped. Trump will most likely win election. Markets reacted. Priced in. If we get any news in this topic – it will most likely be bad news for markets.
COVID 19 – as mentioned before, projections are priced in. If we peak now instead of the next two days projected – it is good news with small impact. Because it is just two days ahead of projections. Also mentioned this is highly unlikely to happen. If anything, we will get bad news about projections not being met, daily deaths might increase and markets will react for new projections.
Vaccine found – unlikely to happen soon. [=Good news, which will happen in the long term]
China opened up their lockdown – we will get bad news of COVID-19 second wave there soon.
Oil – Bad news already announced. I can see good news incoming the following weeks – more countries join the production cuts, etc. But this sector can really surprise us any day. You should also take into account the delay before good news will be announced. If there won’t be any good news soon, oil will keep going down.
Unemployment – 6.6M priced in. Short term – I can’t see anything good to decrease that immediately.
FED – We got another $2.3T stimulus, which was priced in markets during last week. Unlikely to get another stimulus the next week – markets will react to that imo. FED buying ‘junk’ bonds just indicating that the FED has no more firepower left and is shooting everywhere. This also indicates that the market situation is really bad, these desperate acts by the FED wouldn’t come so easy and so fast if the situation wasn’t crap.
FED printers still working, which can further push markets to $spy infinity, but spy at $300 it will be so close to ATH that we will see a selloff imo.
TL;DR: More bad news than good news in the upcoming two weeks. Freefall next week or in two weeks. or not, and this will be like all the previous DDs we’ve read lately.
Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence.