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Prepared by StratagemTRADE.com and Scott
Writing under the nom de plume of J.L. LORD

Monday | January 27, 2020

Hello Mayumi.

YESTERDAY'S CLOSING PRICES

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YESTERDAY: January 24

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One of my predictions for the year was that the news and events would be much more nutty than 2019. It is only the 3rd week of the year and we have impeachment hearings, Michael Avenetti in El Chappo's old cell, the Coronavirus, and Kobe Bryant's tragic helicopter crash.

I suspect this will seem calm compared to coming attractions.

Pre-Market

The market opened slightly higher on reports (true story) that the Coronavirus was being well contained. The markets opened higher with the SPX and Nasdaq at all-time highs as the SPX hit 3333.18 (+7.64).

MARKET

Within 90 minutes of the market opening, the media outlets reversed itself. It had been a long 2 hours since selling hysteria, and they felt out of their element. At 10:00am Chicago time, reports started to coming in of isolated cases of Coronavirus popping up in the US. Of course this was going to happen, as anyone can travel to anywhere in the world now.

“You are fine – Get on Plane”

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The media showing us images of Chinese authorities scanning people's heads to take their temperature is proof there is a “stupid contest” going on between the media and Chinese authorities—and this time, the Chinese authorities are winning that contest.

One of the things about many viruses, especially the Coronavirus, is that incubation periods are asymptomatic. Taking someone's temperature to prove they are not infected is no better than kicking a car's tires to check its mechanics when buying it. It is only to make the majority of ignorant individuals too lazy to research the disease feel a false sense of safety that things are being done.

Thus, it will continue to spread. When you do stupid things, expect stupid results.

TRADING DAY

The market slowly sold off all day as “one more” case in the US and Australia kept being reported throughout the day.

The only bounce came with Boeing (BA) got a surprise announcement from the FAA that the 737 MAX may be certified for flight by mid-summer. This took the stock from $312 to $326, lifting the Dow up +100 points from its -300 bottom.

It took the SPX back up to the 3300 line exactly, which now acted as resistance, and the market fell again.

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TODAY: January 27

WHAT IS THE CORONAVIRUS?

For the next couple of weeks, the market is going to be focused on this. Good news will run the market higher, and anything negative will instill mini panic. The media is not giving us the honest information about it.

I am NOT a doctor. Despite being a pre-med major, it does not qualify me as an infectious disease expert, but... if it is moving the markets, we have to understand it better than the information coming out. We are getting reports from some saying that it will last 3 months and will infect 100 million. We are getting from some outlets in the media that this will be larger than the Spanish Flu outbreak during WW1 that infected 500 million people.

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History

We will never know the truth of how it started, BUT right now it appears that some Chinese scientists working in Canada stole it from a lab and brought it back to China. There is speculation that China then started to play with it for a chemical weapon research project, and it got out accidentally. Who knows? If true, poetic justice is a bitch.

Some scientists are saying it could have originated from a snake infestation, but that doesn't seem likely.

SARS

People have been saying it might be worse than SARS.

SARs and MERs are from the same family. The Coronavirus is usually a mild to moderate upper-respiratory illness, much like the common cold. MOST PEOPLE will get a Coronavirus in their lifetime without knowing it is a Coronavirus.

Technical name: 2019-nCoV

SYMPTOMS

Like most colds and flu, it usually is accompanied by a runny nose, cough, fever, and aches with a headache. As of Sunday night, there have been 2082 cases reported and 56 deaths. That comes to be 2.7% of those with it have died. The mortality rate may be higher as some of those infected may end up dying, taking the total up to 5% mortality.

Remember that illness is hardest on the elderly, so likely that most people don't have a lot to fear. Remember that 61,200 people died of the flu last year.

Treatment

There is no known treatment though doctors in China have started to treat some patients with anti-HIV drugs Lopinavir and Ritonavi.

Coincidence?

It is interesting that a simulation of the Coronavirus pandemic was studied “theoretically” months ago, and one of the featured videos on Netlfix is PANDEMICS. Too many coincidences for the “tin foil hat” crowd that has been listening to some of the world's billionaires claim we need to thin the population to avoid famine and global warming. Amazing that this also happens at a time of the Chinese New Year when 5,000,000 Chinese may have left Wuhan to celebrate, making containing this disease tough. This differs from reports that noone is being allowed to leave Wuhan.

The best way to predict the future is to look at the past for an analogy. Though history doesn't copy, it does resemble. Back in 2003, SARs was the big fear. It was going to be as big as the Spanish Flu of 1918 – 1920 that infected 500 million worldwide. Close encounters with troops in WW1 caused rapid infestation, and today's modern ease of travel is not much different.

SARs failed to live up to the hype with 774 deaths and 8,100 infected. We will likely see more than 8,000 infected but less than this 10% mortality rate.

MARKETS

For the first few days of the news, the markets usually fall. Unknown outcomes hurt the markets. “I don't want to be long stocks if I am going to die, I need cash” is stupid, but how the markets work. I guess it is easier to be buried with cash than Ebay stock.

After the initial panic, stocks seem to actually do well as seen in the chart below. As with the boogey man and the Hale-Bop comet, things are never as bad as people fear. That doesn't mean this move can't be different, especially considering we are starting the year at overdone record levels, but... I am not too worried about the markets despite today being lower.

One month after the SARS outbreak started, the global stock market was up 8.6%. The Ebola and Zika saw the markes down 6 – 7%, but most of the time, the markets performed better than people thought.

Airline and travel stocks (Priceline, Expedia) will likely be the hardest hit.

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2020 ONE-YEAR PREDICTION:
Average year with lots of intermittent volatility
(+2.00% so far)

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