Wednesday, March 11, 2020

Elliott Wave Stock Market Update - March 11

Prices fell to a lower low as expected after a rally yesterday and today's low went below the 2728 multi-month support I mentioned on Monday so there is a good chance 2603 will be tested. We might see strong counter-rallies like the one on Tuesday but they will probably be sold into. Putting waves aside, the problem we now have is just barely getting started. The problem is that we are more like Italy than China or South Korea. The reason the corona virus spread so fast in Italy is because they had some cases that were undetected for over a month, this means the virus had more than a month to spread all over the place and now the entire country is in quarantine and a recession there is virtually assured. In the US, we have a similar situation. There are people who have not been tested who carry the virus and are spreading it without knowing. Is not only until we have plenty of test kits available that we will know the true number and then figure out what to do but by then we probably will have cases in the 10's of thousands. The Trump administration needs to take this very seriously before it becomes a national disaster. Trump and his followers have been going around comparing this virus to the flu which has killed 20 thousand in the last year. Sounds like a few dozen dead is negligible at this point? yes if you are a simpleton. What this type of thinking doesn't take into account is A) We have a flu shot, which saves approximately 60 thousand lives per year and there is nothing against this corona virus at this point. B) The fatality rate is 2 to 3 times as deadly as the flu so a simple calculation yields 160-240K additional deaths in a year if the corona virus is left to propagate like the flu. So the government MUST start restricting travel not just from foreign countries and across state lines right now, set up zones and declare a national emergency. The more Trump goes around trying to minimize the problem, the bigger he will make it as his loyal followers seem to believe everything he says and will go around like nothing is happening. This time, Trump can't divert attention, blame Obama or BS his out of this one. We need someone who listens to experts and follows their advice not someone who is just worried about the economy and his own election prospects.

Anyway, now that I've said what has been on my mind, I predict a recession this year. The market might find a bottom at 2600 but there is a high probability we will see lower prices given the backdrop. Major long term support is 2346 if 2600 breaks and then 1860 which would reverse all gains made since Trump took office. In the event of massive panic, we could see severe selling to as low as 1450 which would be a gift!! I am sitting on a pile of cash and maybe I'll get to spend it all during one of these panic attacks.

Short Term Trend = Bearish
Medium Term Trend = Bullish trend being challenged
Long Term Trend = Bullish trend being challenged

* Trends are not trade signals. Trends are posted for situational awareness only and does not take into account wave counts, technical or fundamental conditions of the market. While mechanically trading the posted trends is feasible, keep in mind that these are lagging indicators and as such are prone to whipsaws and I personally do not use nor recommend them to initiate or close positions in the market without taking

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