If you ever wanted to know what an outlier looks like, this is it. The futures market is limit down right now. The stock market is locked down. Indexes are gapping down almost 7% @CL is -24%, TLT is +7%. The only bright spot is $vix.x +5.86%
If you are in the markets, the open is not the time to sell. Matter of fact, historically the open would be a reasonable time to buy once the markets open up, as typically the 4-day return under these circumstances is about +5%.
The sample size is very small, however, and we are in uncharted territory right now. There will be hedge funds going broke on this one, and I expect much more carnage to follow.
I went through this during the housing meltdown, and I assure you this will pass. The idea is you do not panic. If you have been position sizing you will still take a hit, but when the smoke clears you will have funds to take advantage of this carnage.
There is no reason to speculate whether this is overblown. The best way to trade is with price action. And right now price is telling us the path of least resistance today is down, way down.
I sold the mean reversion trades I had on over a week ago and took a loss on them. As it turns out it was the correct approach. Typically on mean reversion, there are no stops. But as in the financial crisis, I sold everything on a Monday open.
The political odds are consolidating a bit, with Biden being the likely winner of the Democrat primary. I still have my doubts he will be the nominee. Trump has moved down to a tossup to win the election from about 57/43. Control of the Senate has moved down to 60/40 in favor of the Republicans from 5/2 and the House has moved up to 69/31 from 6/4. So the media reporting on the virus is taking its toll on the betting odds.
This is the issue that the Dems have been trying to find ever since Trump won in 2016. Nothing has worked until now. I have my doubts that this will work in the end for them, but it will make things tighter. There is no doubt in my mind, that the goal is to send the U.S. into a recession. And the media may get the job done this time. Myself for political wagering I am going to wait and see how thing develop. I have sold out most of my positions for a nice gain.
I still have very small positions on Hillary to get the Dem nomination. But I am getting something like 20 to 1. My wager against Sanders getting the nomination returned me about 75% on my original wager.
Be aware also in the markets that a lot of the selling today will be because of margin calls. People will have to get out, as some are dusted. Amazingly I am seeing 4 holdings in the green right now 30 min before the open:)
In college hoops, the 3rd season of hoops has so far been good to us as we are 5-3 on our conference tournament picks. Now we are getting close to season 4 which is the NCAA tournament.
RickJ’s Handicapping Picks