Huge intraday reversal sends the Dow tumbling 600 pts! So let’s recap, the morning appeared to stabilize. US equity markets were bucking the global trend. The Dow rising 400+ pts by 10:50 am with the others in tow. It all seemed “OK.” The virus, while NOT under control the way some would have you be- lieve, was being pushed to the back burner as many investors decided that the 2000 pt drop in two days may have been a bit overdone and it was time to go shopping. Futures which had been all over the place during the night, did an early morning reversal, going from negative to positive as the bell rang at 9:30 am. Talking heads suggesting that maybe the worst (in terms of stock prices) was over. By 10 am – it was clear that the markets were headed higher, with all of the indexes up more than 1% as the algos went to work. Well, how’d that work for you?

As the day got underway, small bits of new news began to circulate. More cases were spreading across the European continent (think new countries) and now more cases spreading across the Mid-East and now Brazil. So the markets appeared to grind to a halt. The buyers suddenly backed off as they awaited more news. Trump then chiming in that there is nothing to worry about. Members of the administration continu- ing to tell us not to worry – “We have contained the virus.” This only served to ignite frustration and fear. Then we heard how “upset” Trump was at Dr. Messonnier, recall that she was the Dr. that gave us the “not IF, but WHEN” scenario on Tuesday afternoon about what Americans should do to prepare for the virus as it was sure to hit the shores of the US.

Upset? Why would he be upset with a Dr. that was doing the right thing and advising Americans on what to be careful of and how we may help attempt to slow this down? Well, recall that in her statement on Tuesday she said that we need to:

“prepare for the expectation that this is going to be bad. Ultimately we expect we will see community spread in the United States.”

And it was this commentary that sent the market reeling on Tuesday afternoon, specifically because she now used the term “community spread” to describe what could happen here. Stocks ended Tuesday beat- en and bloodied (again). And THAT makes him very upset. (Just FYI – there has been a $3 trillion loss of value in global equities this week alone)

**Community spread is when the virus begins to “circulate freely among people outside of quarantine or known contact with other patients.”

And then yesterday, just as she suggested, the US apparently got its first case of someone with the virus that had no contact with anyone else with the virus or had travelled to any country that is under attack from the virus. (think community spread).

Word that Donny was to address the nation, as he tried to calm the building frustration did little to slow the sell off. Speculation began to run wild as now every continent on the globe (except Antarctica) has report- ed cases of the virus. The WHO (World Health Org) continues to refuse to call this a pandemic. (They are watching…) By the end of the day, The Dow had lost another 123 pts, the S&P down 11 pts, the Russell down 19 pts. The Nasdaq on the other hand did manage to eliminate the negatives and close higher on the day, adding 15 pts as the bell rang. Do the techs know something we don’t?

That leaves the Dow down 8.6% off the highs of early February, the S&P is now down 8% from the highs, the Nasdaq has lost 9% and the Russell is by far the worst performer, losing 9.2% from its February high. So we are approaching CORRECTION TERRRITORY, defined as a 10% move from the high, and that might happen today.

Overnight investors remain confused. Stocks in Japan falling another 2+% as the virus continues to infect more people. Japan’s Prime Minister Shinzo Abe urged all schools to close nationwide until the end of their spring vacations in April. On the economic front, South Korea’s central bank (BoK – Bank of Korea) kept rates unchanged, when everyone expected them to cut and that didn’t help anything, sending the Kospi falling another 1.4% as 334 new cases are announced. China markets bucking the trend, rising by 0.29% as the WHO suggests that the spread of the disease is slowing within China. Australian markets closed lower by 0.75% leaving Simon Fentham-Fletcher – Chief Investment Officer at Freedom Asset Management to suggest that COVID19 was just the excuse the markets needed to sell off.

As the markets opened in Europe, the selling has not abated. All those major market centers under as- sault, falling better than 1% as the day gets going. News that infections in Italy went from three people in Northern Italy last Friday to 424 people as far south as Sicily in just six days, causing 12 deaths seems to have gripped the markets (think the speed at which these new infections are happening). And as ex- pected, Estonia and Denmark can now claim their first cases of the disease as of today. There is some economic data due this morning for the Eurozone and flash inflation data for Spain later this morning. But no matter what, that is not going to stop the bleed and in fact if it is worse than expected it will only serve to cause the markets to go lower.

At 5:30 am – this is what it looks like: FTSE – 1.67%, CAC 40 -1.74%, DAX -1.96%, EUROSTOXX – 1.92%, SPAIN -1.72% and ITALY -1.93%.

US futures are DOWN, but have also been all over the place. In the wee hours of Thursday morning, Dow futures suggested another 300 pt rout. But as of 5:30 futures had rallied back a bit (not positive – just less negative) only to come under pressure again as the sun prepares to rise over the Atlantic. Right now – the Dow is lower by 334 pts (1.32%), the S&P losing 36 pts (1.3.9%), the Nasdaq lower by 155 pts (1.76%) and the Russell down by 18 pts (1.41%).

The CDC now confirming that the newest case in Northern California (Sacramento County) is of “unknown origin,” meaning they can’t know exactly how he got it. That doesn’t sound comforting to me… Yesterday afternoon, Trump did address the nation, saying that we have done amazing things to slow/stop the virus and that the risks remain “very low” and that Mikey (Pence) is now in charge of the effort. The US will spend whatever is necessary to deal with the virus (that’s great, but I don’t’ think it responds to money – but it is great that we can spend it). He did though concede the fact it could get worse before it gets better, which was very different than his off the cuff comments on Tuesday. (Just FYI – he was told of the case in California before the press conference – so he apparently toned down his rhetoric about how safe we are).

Economic data today includes the second revision to fourth quarter GDP – exp of 2.1% (bullish), Pers Consumption of +1.7%, Durable goods orders exp of -1.5% – (not so good), Init Jobless Claims of 212k, Cont Claims of 1.76 mil, and Pending Home Sales of +3% m/m.

During the press conference CNBC’s Eamon Javers asked about the recent market selloff and his re- sponse was that the market doesn’t like ANY of the Democratic candidates on the stage and as a result was showing its complete displeasure with the choices! Now that may be true – but I can’t connect those dots just yet. It’s still too fractured. Although he and Jeffrey Gundlach would like to classify it as a Bernie Selloff (and I would like to as well) – that’s a bit too early. So get ready, because if this is NOT the Bernie Selloff – I hate to think what’s next!

The Dow is now down 8.6% off the highs of early February. The S&P is now down 8% from the highs, the Nasdaq has lost 9% and the Russell is by far the worst performer, losing 9.2% from its February high. So we are approaching CORRECTION TERRRITORY, defined as a 10% move from the high. And that might happen today. With futures weakening again as the clock strikes 6:10 am (EST), investors/traders and al- go’s are preparing for another volatile day.

Look for more negative news coming from companies as they attempt to guide lower without causing fur- ther damage.

Remember, stocks closed on their lows again yesterday. And as I noted, THAT does not bode well for today’s early action. The market is expecting more bad news and investors/traders are bracing. The S&P closed at 3116 – solidly below its intermediate term support. 3045 represents long term support (200 day trend line) and it is not out of the question that we test that and we might even do that today. Remember – the Dow and Russell have broken all three, and the Dow Transports have collapsed. So the trend is not so positive. The Nasdaq is the only index that is still above its intermediate term support – but that is about to be tested today. If that breaks, expect the technically driven algos to kick into high gear once again. (Think sell pressure).

Oil – continues to get hammered falling another $1 breaking below $48/barrel as the demand destruction conversation heats up as the virus takes a grip on the global economy. Oil is back at levels not seen since Dec 2018 and until this virus gets under control – we could see oil (like stocks) get slammed even more.

Take good care.