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

Monday | February 24, 2020

Hello Mayumi.



YESTERDAY: February 21

Friday Summary:

Fears of coronavirus caused a lower open, and a dripping of more negative news through the day kept the selling going.

Friday saw a slow drip of negative virus news all day. We thought that the virus was pretty much isolated to China, and to a lesser extend a cruise ship. There was a few patients sprinkled around the globe as well, but 18 people in the US is not a reason to panic.

The US had 2,167 people die from constipation last year, what is 18 coronavirus cases to worry about? Now, however, it is starting to spread in other countries, and the markets are taking it seriously – or too seriously?


The SPX opened -12.47 at about 3,360, but within 15 minutes hit 3,336 (another 24 points lower). Within the first hour of trading, it had bounced back $14 points (to 3,348). It chopped around most of the day in a $15 point range as news leaked out all day of negative news.

The markets started to climb, and then were slapped back to the lows with news. Then the markets crawled higher, and then fell again. This repeated again and again the whole day. At the end of the day, the SPX closed down -35.48.


AAPL closed down -7.25.

AMD closed -3.99 (6.97%)


TODAY: February 24


Friday was the foreshadowing of today. We didn't see it at the time because the coronavirus is a news driven event, and one headline will change the direction of the current move in a moment.

Whether this virus is a way overblown joke of a FLU, or a rogue laboratory-created pandemic with no cure, it doesn't matter. The markets are going to react as if it is a pandemic until the unknowns become better known.

Original Opinion in January

You will recall that in the end of January when the coronavirus started, I stated the virus was nothing worse than the Flu. When SARs and Zika started, the markets fell about 7%, and then bounced much higher than the starting point the moment it appeared that things would not be as bad as feared. We fell 3% for all-time highs at the start of coronavirus, and bounced back to new highs immediately. The selling was NOT as severe as I would have liked (at least 6%). Then we started to find out China was lying about the numbers and origin of the virus (go figure). I stated that this gave me cause for concern that we were not out of the woods yet.


Now things have changed. As long as the virus was predominantly in China, we could be lied to. Now it is spreading fast in S. Korea, and to some extent in Northern Italy. Both countries will not hide the numbers as blatantly as China, so people are now starting to get very concerned.

Despite the Fed printing money by the billions, easy cash does not stop a virus. It also doesn't create enough growth to compensate for entire economies not going to work. The Fed definitely can not print vaccines.

To make matters worse, this doesn't appear to be some chicken or bat soup virus. This appears to be accidentally (or not) released bio-engineers biological weapon. Dr. Frankenstein seems to have lost control of his monster.

With a lack of candor (should I say truth), Chinese people have lost faith in the government being honest with them. Thank God American media is much more honest (I pause a moment to stop laughing).


China is now forcing people back to work telling workers it is safe, and surprisingly workers are refusing to go back to work because they don't trust version #83 of the truth. Maybe this is all Putin's doing (humor for those who didn't get it)?

If “President for life” Xi can't get the machines back on, and working spitting out fake medicines, pirated electronics and rubber dog poop, they are destined to go through a major recession (at best). In China, “President for Life” has a different meaning than it sounds here.

Right now it is being reported that car sales are down 92% there, and demand for commodities is down 66% (y/y).

This will scare people for at least today. Ladies and Gentlemen....this is a fear based drop that will continue until the media runs out of fear to sell. When it ends, who knows? It could end today, tomorrow, or in two weeks. When it does end, however, the markets will bounce so hard you will be shocked. Remember, the first thing traders will be thinking is:

1- Get long – we saw the bottom

2 – The money machines are printing on “SUPER HIGH”

3 – Crap, I am short and need to be long.

Average year with lots of intermittent volatility
(+3.3% so far)

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This is when the FUN starts. Chaos!

A separate update is coming. Remember, there are things to do when everyone is panicking.



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