In a recent blog we discussed the importance of having a hedging strategy.  It’s a way to protect your portfolio, and protection is often just as important as appreciation.

Since February 21^st, we have seen a significant stock market crash, with the S&P 500  dropping 35% from the high, blindsiding most investors.

Fortunately for subscribers to our Trend Technical Trader (TTT) service, they were presented with several effective hedging strategies that were simple to follow and easy to implement.  The results allowed subscribers to not only protect their capital in this bear market, but to actually make some significant gains.

Some examples:

An Exchange Traded Fund (ETF) that trades on volatility: +29.5% in 3 days

A 2^nd position in that same ETF: +48.5% in 1 month

A leveraged Bear Small Cap ETF: +47.2% in 1 month

A leveraged Short DJIA ETF: + 61.5% in 2.5 weeks

A leveraged Bear Jr Miner Gold ETF:  +86.5% in less than a week

The question now is, ‘what next?’ As we can see from this chart, after the significant decline, the S&P 500 is in a near-term uptrend channel. Is this the start of a new bull market, or a dead-cat bounce?

The headlines are full of talking heads predicting everything from ‘back up the truck’, to ‘it’s a bear trap.’  If we look at other major bear markets one thing is clear, they all end eventually. But typically they only end after it is no longer the lead story in the mainstream media.

Typically markets only bottom out once people have moved on, not when investors are buying every dip.  If you followed a hedging strategy during the big crash, and are now in a strong cash position, you need to have a strategy for when to get back in, just like you needed to have a strategy for the decline.

After the big crash we saw a lot of ‘bottom picking,’ buying, which suggests that there is still too much optimism in the markets.  There is a real FOMO (Fear of Missing Out) sentiment in the markets, which suggests that a re-test of the low, or even lower lows, could be in the cards.

These are crazy times.  We have a global pandemic, with fear and panic running rampant.  We have central banks and governments turning on the fire hoses, pumping out $trillions into monetary and fiscal stimulus programs.

While we can’t know exactly how things will play out, we will follow our models to get a better idea of when to get back in.  Our TTT service has been actively making very short-term, and even a few long-term trades already, positioning for when we get the full green light to buy back in.

Here is Monday’s commentary from TTT:

DJIA started the week with a gain of 690 points.

While earlier this year that would’ve made for a truly remarkable day, instead it was the calmest trading day in many weeks.

It’s likely this current rally is very near its end, and we expect many more stellar entry levels during the next major leg downward.

When stocks drop significantly again, we’ll suggest lowball bids for additional positions, focusing on the resource sector and specifically oil.

The overwhelming bearish sentiment and predictions on oil at present has us ready and eager to buy.  We made absolute killings in oil-related stocks the last time prices crashed and the world turned ultra-bearish.  We expect this time won’t be different, and once again we’ll be focusing on a variety of companies and related funds, some paying considerable yields.

In contrast beware of the extreme hype currently with respect to gold and silver.  Such extreme sentiment along with stories of shortage and conspiracies about price suppression tend to attend a top.  We’ll load up on quality mining stocks and speculations related to precious metals if there’s another major liquidation soon.

If interested in subscribing to TTT at a special rate of $399.95, click here.

Stay tuned!

Our BUY Stop was triggered today for a new trade in the bond market. We suggested this trade because our models have been detecting some abnormalities in the markets. For a few years we have warned of a coming global credit and liquidity crisis. We are now moving deeper into this crisis.

Europe and Japan have destroyed their bond markets by introducing negative rates.  For quite a while we have said that capital from Europe would escape the Euro and European bonds and move into the $US and US bonds. To play that trend we used an Exchange Traded Fund (ETF) to short the Euro, and another leverage ETF to be long the US bonds. Both trades have done extremely well.

What we are seeing now is a huge capital flow into the $US, here is the chart.

But as we can see during today’s’ drop in the equity markets, the bond market was also down, pushing yields higher. This is a nightmare for the central banks.

We have stated all along that there was going to come a point where the curtain is pulled back and the masses start to realize that those in government have lost control of the economy and have no idea how to solve this current financial crisis.

This is a problem that has been growing for the last decade when central banks started to interfere in the markets with their enormous stimulus programs, all the way to where we are now, with zero, and even negative rates. They have used up all their ammunition and the recession is not even here yet. Yes, the coronavirus certainly accelerated the problem, but this liquidity crisis has been looming for some time.

In Europe they have banned shorting of government bonds. When they make those kind of moves it tells the markets there is something very seriously wrong with Euro bonds, so investors move out of them. But today, they did not move into US bonds during this sell-off. This could be the start of serious trouble in the bond markets.

We are hearing of plans to force a ‘banking holiday’ in Europe as they are now worried there will be runs on the banks. This is getting ugly.

Our new trade is a long-term play on our theme that central banks have been artificially keeping interest rates down with all of their stimulus programs and bond purchases. It is like they have been trying to push a beach ball further and further under water. At some point they will lose control of the beach ball and it will shoot up. It looks like this is now starting to happen in the bond market.

It really is starting to look like the markets are losing confidence in government and if they abandon government bonds, watch out!  We believe this new trade will eventually be a monster gain.

If you wish to see the details of this trade and other strategies from the Trend Letter, you can subscribe at a $200 discount.  Click here to subscribe for only $399.95

Stay tuned!

By Thomas Perls, Professor of Medicine, Boston University

As the coronavirus spreads into more and more communities, public health officials are placing responsibility on individuals to help slow the pandemic. Social distancing is the way to do it. 

What is social distancing?

Social distancing is a tool public health officials recommend to slow the spread of a disease that is being passed from person to person. Simply put, it means that people stay far enough away from each other so that the coronavirus – or any pathogen – cannot spread from one person to another.

The Centers for Disease Control and Prevention describes social distancing as staying away from mass gatherings and keeping a distance of 6 feet or 2 meters – about one body length – away from other people. In New York City, for example, theaters have closed temporarily, many conventions around the world are being canceled and schools are closing all across the U.S. I’ve stopped taking the train during rush hour. Now I either work from home or drive in with my wife, or I take the train during off-hours so I can maintain the 6-foot distance.

Social distancing also means not touching other people, and that includes handshakes. Physical touch is the most likely way a person will catch the coronavirus and the easiest way to spread it. Remember, keep that 6-foot distance and don’t touch.

Social distancing can never prevent 100% of transmissions, but by following these simple rules, individuals can play a critical role in slowing the spread of the coronavirus. If the number of cases isn’t kept below what the health care system can handle at any one time – called flattening the curve – hospitals could become overwhelmed, leading to unnecessary deaths and suffering.

There are a few other terms besides social distancing that you are likely to hear. One is “self-quarantine.” This means staying put, isolating yourself from others because there is a reasonable possibility you have been exposed to someone with the virus.

Another is “mandatory quarantine.” A mandatory quarantine occurs when government authorities indicate that a person must stay in one place, for instance their home or a facility, for 14 days. Mandatory quarantines can be ordered for people who test negative for the virus, but have likely been exposed. Officials have imposed mandatory quarantines in the U.S. for people on cruise ships and those traveling from Hubei province, China.

Why does social distancing work?

If done correctly and on a large scale, social distancing breaks or slows the chain of transmission from person to person. People can spread the coronavirus for at least five days before they show symptoms. Social distancing limits the number of people an infected person comes into contact with – and potentially spreads the virus to – before they even realize they have the coronavirus.

It’s very important to take a possibility of exposure seriously and quarantine yourself. According to recently published research, self-quarantine should last 14 days to cover the period of time during which a person could reasonably present with symptoms of COVID-19, the disease caused by the coronavirus. If after two weeks they still don’t have symptoms, then it’s reasonable to end the quarantine. Shorter quarantine periods could happen for asymptomatic people as tests to rule out the virus become widely available.

Why is social distancing so crucial?

At the moment, it’s the only tool available to fight the spread of the coronavirus.

Experts estimate that a vaccine is 12 to 18 months away. For now, there are no drugs available that can slow down a coronavirus infection.

Without a way to make people better once they fall sick or make them less contiguous, the only effective tactic is making sure hospital-level care is available to those who need it. The way to do that is to slow or stop the spread of the virus and decrease the number of cases at any one time.

Who should do it?

Everyone must practice social distancing in order to prevent a tidal wave of cases. I am a geriatrician who cares for the most vulnerable people: frail older adults. Certainly, such individuals should be doing all they can to protect themselves, diligently practicing social distancing and significantly changing their public ways until this pandemic blows over. People who are not frail need to do all they can to protect those who are, by helping to minimize their exposure to COVID-19.

If the public as a whole takes social distancing seriously, overwhelming the medical system could be avoided. Much of how the coronavirus pandemic unfolds in the U.S. will come down to individuals’ choices.