For most investors last week was a disaster! Global stock markets got absolutely hammered last week, with the S&P 500 down almost 13% since its recent record high.

But subscribers to the Trend Letter & Trend Technical Trader greatly reduced any losses and in fact could have made significant gains by simply following the recommended defensive strategies.

Most investors ignore the bond and currency markets, which is a huge mistake. The bond and currency markets dwarf the global stock markets and for those who know what to look for, these markets tell us where the global capital is flowing. Clearly last week, global capital sold off global equity markets and flooded into the bond market, especially the US bond market. Here is a chart of the US 10-year bond.

On January 3/20, the Trend Letter recommended that as insurance for what it forecast as a potential major correction, subscribers buy a leveraged Exchange Traded Fund (ETF) that would profit 2% for every 1% rise in bond prices.  The logic for this investment was that while some capital might go to gold and some other safe-haven trades, the US bonds would be the first place large institutional investors would go, and that is exactly what happened. On the close Friday, that trade is up over 27% in 2 months.

While the Trend Letter’s bond trade was an excellent strategy for subscribers, Trend Technical Trader (TTT) did even better. TTT is a hedging service designed to make money in down markets. The deeper the correction or bear market, the bigger the returns TTT is likely to make. Here is a sample of what TTT subscribers would have made

On January 23/20, TTT recommended subscribers buy a leveraged Short Small Cap ETF. Understand these ETFs are as simple to trade as any stock, as simple as a click of the mouse. You do not need to actually short anything, you simply use this ETF.  In a little over 1 month, that trade is up 40.97%.

On  the next day TTT triggered another trade, this one trading the volatility in the markets, again using an ETF. That trade is up 65.89% in just over 1 month.

On then, just 8 days ago, on February 20/20, TTT triggered another trade, this one a leveraged play to short the Dow Jones Industrial Average. Again, this was an ETF, simple for any investor to enter.  In just 8 days that trade is up 45.12%.

Gold and gold stocks on the other hand, had a severe sell-off, as investors took profits and in many cases had margin calls forcing them to dump their winners to cover their losses in equities.

The equity crash is now oversold, so depending on the conoravirus news this weekend, we could see the markets bounce next week, especially if the Fed promises a big rate cut. But typically, even if this is not the start of a deep bear market, we are likely to re-test these lows, if not set new ones before the correction is over. That means having a good hedging strategy is paramount to preserving your capital.

We are opening our recent offer that we gave attendees of the World Outlook Conference earlier this month.  Click the button below for those special offers.

China has pledged to support small businesses and this was responsible for triggering today’s rally. This perceived positive news has overshadowed the global disruption to supply chains from the coronavirus which the mass media has pushed to the back burner,  at least until we see the next level of concern.    

Here is a look at some key markets.

US dollar: The $US has gone vertical, blasting through near-term resistance levels. We have been bullish the $US since February ’14 and remain so for the next 1-2 years. Everyone asks why the $US is so strong and we keep pointing to the looming disaster coming to Europe and Japan, where those regions have destroyed their bond markets with negative rates.  We are seeing European investors moving their capital out of Europe and therefore the Euro, into the US bonds and therefore the $US.

Note on the bottom of the chart the Relative Strength Index (RSI) shows the $US is now overbought, so a pullback is due soon.

Euro: The Euro has been in a free-fall, plunging through a number of support levels recently. Capital has been flowing out of Europe and coming to North America.  Two years ago we recommended a simple ETF trade to short the Euro, and that trade is up over 45% today.  Most investors ignore currencies, which is a huge mistake. If you understand the flow of capital, everything else starts to make sense.

Note that RSI is indicating the Euro is oversold, meaning a bounce is due soon. 

Canadian dollar: The loonie is trying to gain momentum after its big decline since the start of the year.

US S&P 500:  Concerns over the apparent spread of the coronavirus was put on the back burner Wednesday and investors pushed the S&P 500 to a new all-time high. We do not believe that the market has fully priced in the potential global disruption to supply chains from the coronavirus. 

Canada TSX: The Canadian market chart looks very much like the S&P 500, trading in its near-term uptrend channel, and making another all-time high. Note a bottom of chart, the RSI is now technically overbought, so a pull back soon would not be a surprise.

Shanghai Market: After major sell-off once coconavirus was confirmed, the SSEC had a solid rebound after being quite oversold.

Gold:  Gold has been acting very strong here, in spite of the strength in the $US. This suggests that while the equity markets continue to rally to new highs, investors are also using gold as a hedge against potential coronavirus fears. We remain bullish on gold

Oil: Oil has bounced nicely after being oversold and expectations that China will initiate a massive stimulus program has given oil a real boost.

Stay tuned!