From Really Bad to Worse

bears love put options trading

The carnage continues.  At lunch time yesterday the market was kind enough to give us a 15 minute break as the S&P500 fell 7% and triggered a circuit breaker.

The SPY fell further after trading resumed, breaking the December 2018 lows before a furious late day rally say the $SPY close at $240.  Still down 5%.  But in the current state of the markets -5% is somewhat less worse than 7%+ to the downside...  if that makes any sense.

We have spent the entire month of March gyrating so wildly that we have yet to close inside 1% for a day.  How crazy is that?  We went months without having a + or - 1% day in years past... now we can't even get a day that isnt less than a 1% move.

It speaks to a market that remains unsure.  Unsure how long this Virus will last and unsure about its long lasting effects on the economy.

The unprecedented Central Bank actions of 2008/2009 are looking far less unprecedented as Central Banks are doing all they can in 2020 to stave off an asset depreciation the likes we have never seen before.

Stepping to the plate are the Governments as well, doing all they can to put a bandaid on an injury that requires extensive surgery.

This is the perfect storm.   Those uber bears who were calling for a market crash every month since 2009, got far more than their greatest expectations with this Virus.

Global economic activity grinding to a near 100% halt.  The World stuck in their homes.

You could not have crafted a more dire economic landscape.  The strongest, healthiest economy in the world would not be able to survive months of world under quarantine.

And YET!  And YET!  Despite the carnage and record breaking declines... as I write this the S&P500 still trades above the lows of DECEMBER 2018!

Yes  One year and 4 months ago the S&P500 was trading lower than it is today... and we did not have a virus keeping everyone under house arrest.

Really?  Oh yes many stocks have been absolutely mauled.  Small caps thrown in the paper shredder.  The weak have been crushed.  High debt stocks.... destroyed.

The S&P500?  Still above the DEC 2018 lows.  Wow.

I'm going out on a limb here.  An event like this.  Unprecedented.  Surreal.  Out of no where.

I'l use this analogy again.  Its the massive forest fire.  It wipes out a lot of the forest.  But the next spring, what a sight to behold.  The soil is fertile again.  The forest comes back, bigger, better, and stronger than ever before.  And that's where we are.

The question is... are we just at the start of this fire?  Or is it under control.

The bad news is all the Central Bank and government intervention has done little to ease fears.

We will need to see some data pointing to the Virus spread slowing.  We aren't there yet.  But the minute the market sniffs the beginning of the end to this epidemic, prices will reverse higher  almost as swiftly as they fell.  And if this virus is just the start... well...  we will all have a lot more to worry about than the stock market.

I think the VIX will lend a hand.  It's been steady in its ascent higher.  Even yesterday amid a frenzied late day market pop, the VIX held its ground.  Until we see the VIX make a swift descent, this downside will persist.


Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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