Big Picture

Our overall Primary Trend Indicator remains Neutral.   As previously noted, our data continues to show weak global GDP amid effects from the advancing COVID-19 virus.   Overnight the US Federal Reserve along with 6 other central banks cut in coordination interest rates and announced quantitative easing programs to stimulate economic activity and financial system flexibility.  The key indication to watch for is how fast the virus is spreading at in the US and Europe and how fast the death rate is.  We believe that investors should remain overweight in cash, with some gold while having some cash available for tradable opportunities.   Over the next few days to few weeks stock markets will get a boost from this coordinated stimulus measures but should be viewed with caution.   If the virus spreads and gets exponentially worse, we may be at the beginning of a deeper stock selloff.

Changing Fundamentals

-Fed cuts rates to near zero

-Trump praises surprise move as boost to Wall Street

-New York City public schools to close this week

-U.S. reports 3,125 cases, 61 deaths

Focus List

Investors return Monday with a heavy dose of weekend news flow on COVID-19 and global central bank responses.  This week in stock markets, investors and traders will focus on the pace of news flow out of the US.  Specifically, the advancement of COVID-19 including new positive cases and deaths and at the March 18 decision by the US Federal Reserve to again lower interest rates on top of last weeks surprise decision to cut 50 basis points.

Equity markets are currently pricing in a cut of between 50-100 basis points.  If the 50 number comes in, markets could sell off but if the 100 number comes in we can see a case for stocks to bounce further higher.  Investors can take advantage of the volatility to take short term long positions and sell into the strength.  It could also be a good time to sell losing positions which may not recover as well as other stocks.  Our data still shows more downside to come before we can have clear information on economic growth and corporate earnings.

Significant risks exist in the financial system including high yield corporate debt, sovereign debt and overnight repos.  News overnight shows the US Fed cutting interest rates to 0% and the IMF supporting with $1 Trillion cash facility to asset the financial system.  Stock Markets are indicating a 10% decline and safe haven assets such as Silver and Gold are down 20% and 5% respectively.

Investors need to remain in defensive posturing.  Stock Markets will likely move lower before moving higher.