14 March 2020 #MAGAAnalysis Coronavirus #KeepCalmBuyStocks Today is a day, pun intended, of taking stock. What a rollercoaster ride yesterday was. We have many more to come, before we're done and won. But what a show yesterday was. Wow.
2) Let's begin with what can now be called the Trump Effect. He speaks, stocks go up. We have to admit, he kind of missed the target Wednesday evening. @KateScopelliti and I were yelling at whoever allowed that to happen, not knowing who but we were pissed.
3) And, sure enough, the market plunged on Thursday. That would be the Anti-Trump Effect. Not so good. So, phenomenal team that they are, they put together a show the likes of which I've never seen. You could see the press gaggle rock in shock and awe.
4) And watching the Dow soar with every word Trump spoke, it would have to be a speech analysts dream come true to correlate, moment by moment, the words spoken to the stock market's ticking. A data man just drools over such a precious gem of analysis. Swooning.
5) Now let's turn back to the market itself, for, yes, another technical lesson. You've been hearing everyone say, we're technically in bear territory, or we've broken the 11-year bull market, or other such tomfoolery. We have to slice and dice this malarkey.
6) First, some person, somewhere, decided that the definition of a bear market is when you've dropped 20% from the most recent high. Don't get me wrong. This is not a stupid definition. It could be incorporated, possibly - if robustly tested - into a good definition.
7) It's important to understand that there is no Pope of Technical Analysis, pontificating on which definitions are right and which wrong. As analysts we are all empowered to create our own individual definitions. We do, however, have a founding father, Charles Dow.
8) I haven't taken the time to look up his definition of a bear market, but I've read him countless times over the decades, and here's what I'm very confident pretty much everyone on TV continues to miss. It's the word: confirmation.
9) Something can jolt a market, breaking its current trend. That's a given. A real reading of the market, though, requires more than calculating the distance from the most recent high. It requires that the trend - the new downward trend be confirmed. And we know how to do that.
10) You have to wait to see how the market rises once it hits a bottom. The truth is that a bear market is confirmed by successively lower highs. Try to picture it. You draw lines from one high to the next, and the slope is downward. This is called testing resistance.
11) Again, a high is when the number of sellers surpasses the number of buyers and the price has to start dropping in order to find someone to sell to. If you haven't tested resistance, you do NOT have a confirmed bear trend, yet. Again, do try to see that dropping line of highs.
12) Ah, but that's not all. We also have to have a dropping line of lows. Once a trading range can be analyzed, the low prices will, for some time, stay in the somewhat parallel lines of its falling resistance line, and its also falling support line.
13) Support, you recall, is when the price has become a bargain to more buyers than sellers, and the buyers have to start bidding for the shares at a higher price to find a willing seller. The bear market itself has to have all these elements.
14) There is, by the way, another possibility. Your highs can be falling while your lows are rising. Can you see how the two lines begin a triangular dance. This is called a flag or a pennant formation. In it, one line or the other will be broken sooner or later. I love these!
15) Let's sum up. A bear market may employ the general rule (or another one if you prefer it) of the 20% fall from the peak guideline. But, if you want to have confidence in your trend, ou want to test a falling resistance line, and you want to test a falling support line.
16) The more tests to each line you have, the more strongly you're able to believe in the trend you've called. Do linger with that word: called. You call a trend. It is YOU who makes the call. You read the numbers. You draw the lines, even if only with your mind's eye.
17) I have to opine against the professionals, here, the experts. They may make their living doing what they do, but that still gives them no authority over you. Remember that, and learn to think your own thoughts, make your own calls. A mind is a terrible thing to waste.
18) Last point on the stocks for now. You do not get the biggest single day gain in history in a bear market. I'm not saying we won't fall into one. I am saying we do NOT have a confirmed bear and we need to be a bit more thoughtful about such terms!
19) Returning to Coronavirus and the phenomenal presentation yesterday, it's impossible for me to express my awe at the demonstration of how you get big things done. I don't know about you, but I never realized just how significant regulatory power is.
20) Again and again during the presentation, we learned how regulations have been removed, allowing instantaneous action. A thought I had is we run our economy almost like putting speed limits on races like the Indy 500.
21) That's of course an over-simplification. Many of those regulations are, I'm sure, very good things for normal circumstances. But it still made me being to wonder how long and under what circumstances a regulation is even a good thing at all.
22) What was good once can become bad later. I remember reading of a mogul during the 1920's who's will established the rule that all his stocks had to be in rail roads into perpetuity. I can tell you this, if I'd been that man's son, I'd have broken the will's stipulation.
23) I can only imagine the regulatory obstacles that had to be obliterated in order to create drive through testing in Walmart parking lots. Can you imagine? Extraordinary. I am so proud of our team! And on that note, I have to say, for a change, something nice about VP Pence.
24) I fear I'll always have questions about Pence, but man, he was outstanding in his podium work yesterday. He was the right man for that job, and it was genius of Trump to entrust task force leadership to Pence. I honestly couldn't have been more impressed.
25) Last for today, we have to walk through the ongoing question: did China weaponize this and deploy it like an bio-economic suicide vest? Or, was it simply a disaster and NOT the work of purposeful minds for their dark and evil reasons?
26) The disaster theory benefits if, as this roles and on the other side of it China only suffers and fails to gain. Of course that could just mean that Trump kicked them all around the global block and defeated their evil strategy. We do have to look more at the disaster theory.
27) For the weapon theory to work, China would have to have more steps to come. And of course they may. At its worst, this could never have been a solitary kill strike against America. It might have been solely targeted to remove Trump, I guess. But that seems a bit off to me.
28) So, if we flip sides, the first word that supports a disaster theory is: bumbling. Communist nations do not tend toward finesse. They stomp around with their clubs raised, as opposed to the swordsman's dance of death with a fine rapier.
29) What's more, their entire system, built upon the foundation of slave labor, encourages disasters. And when I say slaves, I do not just mean factory workers. I also include all the executives, scientists, and government workers in every process in the society.
30) Of course, we have disasters too. Three mile island was no walk in the park. Everyone can slip up. A vile can get dropped and broken and proper procedure to clean it up may not be followed. There are infinite chances for things to go wrong.
31) Funny enough, China's recent half-hearted attempt to blame America for this disaster does NOT tip my mind toward purposeful planning. Rather, their PR stock upon the planet has collapsed and they look like idiots. They really can't afford that.
32) A halfway decent plan would have required a much more sophisticated attempt to engineer America's blame for this. Just whining as they are looks more like the never-ending consequences destroying people's lives and officials have no idea how to handle any of this.
33) So, you see, the word 'bumbling' is a pretty good word to work out a disaster and NOT a planned attack theory. I have one more historical dynamic to mention. We have to look at the command to never underestimate your enemy, and how that's worked out.
34) Looking back after the collapse of the USSR, I think it's almost impossible to argue that we overestimated our enemy, in fact, vastly overestimated them. Most don't realized that it is equally bad to overestimate as to underestimate. We'll discuss this again, soon.
35) In closing for today, I don't have any decisions on my theory/counter-theory question. I am happy, though, at least to have built up my counter-theory more robustly. And, I'd like to fine tune our estimation of our enemy, and certainly do NOT want to overestimate them!
CORRECTION This sentence from 34 is now edited for accuracy: Looking back after the collapse of the USSR, we must argue that we overestimated our enemy, in fact, vastly overestimated them.
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