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Covid – Lock Down 2.0
Our Covid-19 table scans the latest data of all 50 states looking for trends, not top-line numbers. The pipeline is infected => admitted => died. That is a terrifying pipeline and we don’t want any of those trending up. On the table, we take a seven-day average (bad data) and then we take a 5-day linear regression slope from the last five 7-day averages and we don’t want a positive slope, that means up.
Pipeline is filling up:
Feedback, help always welcomed: marlin@mrtopstep.com
Table: https://t2r4.com/cv19/views
Chart of the Day
Top Stories on MTS Overnight:
Our View
COVID-19 vs.Liquidity Surge
The ES sold off late Thursday and midday Friday but recovered after both declines and opened higher during Sunday night’s Globex session. The ES traded down to 3131.25 and rallied over 50 handles up to 3172.75 despite COVID-19 in the United States seeing its biggest daily surge of new cases. Both Florida and Texas reported their biggest daily rise in new confirmed cases over the past few days, with Florida reporting 11,443 new resident cases on Saturday and another 9,999 on Sunday. Texas reported a record 8,258 new cases on Saturday followed by 3,449 on Sunday. California reported 5,410 new cases on Sunday and Arizona reported 3,536 new cases. The question is why? Well, sometimes COVID-19 matters and sometimes it doesn’t and this morning it doesn’t.
According to JP Morgan ‘extremely loose monetary policy’ will be required for a long time to support growing debt levels worldwide, buoying liquidity along with global equity and bond prices. According to JPM strategies Nikolaos Panigirtzoglou, “More debt, more liquidity, more asset relation”. Panigirtzoglou forecast a $16 trillion increase in worldwide debt this year that would push the combination of private and public sector borrowing to a record-high $200 trillion by year-end. That will lead to higher savings rates, very accommodative central bank policies and more cash in the system, the bulk of which may find its way into the global stock market, they wrote in a note Friday. “Elevated cash holdings create strong background support for non-cash assets such as bonds and equities,” the strategists wrote. Given the current low level of bond yields, “most of this liquidity will eventually be deployed into equities as the need for precautionary savings subsides over time.”
This is what we call Global PPT. Central Banks around the world printing money to support their economies. The boost in Global liquidity during the COVID-19 virus crisis has been at a much faster pace than during the 2008 credit crisis and total money creation could be over $15 trillion by the middle of next year as ‘quantitative easing’ continues at a robust pace. I am not an economist but I think this will eventually end up like Japan where central banks are stuck in a very long drawn out process trying to supply liquidity while marking up huge debt that will be impossible to pay back. I also think the long drawn out process will eventually wreak havoc to global economies.
Our view, I had an opportunity to cover my short on Friday but the trade was a bet for ‘over the weekend’. I sold 3124 and bought 3136. I guess when you look at it the markets react to certain COVID-19 headlines and not others. While the short was a losing bet the trade does not change my longer-term call that the #ES is going to 3200 and higher. Our lean is to sell the open and look for the midmorning low to cover and go long and then come back at 2:00 and play the MIM.
Danny Riley is a 39-year veteran of the CME trading floor. He has helped run one of the largest S&P desks on the floor of the CME Group since 1985.
Market Vitals Technical Analysis
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