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

Monday | March 9, 2020

Hello Friend.

YESTERDAY'S CLOSING PRICES

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YESTERDAY: March 6

MARKET LAST WEEK

It was a day of chaos and confusion (again).

There has been so much volatility that people might not realize that the markets were actually up for the week as measured by the Dow and the SPX. For the week, the Dow was up 456 points and the SPX up +18.15, albeit the previous week was pretty hectic.

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FRIDAY

Friday, the markets were chaotic like we have been for 2 weeks now. With every drop of news about the coronavirus, the media turned it into a flaming ball of TNT—weaponizing the news and stoking fear.

OPEN

After the open, the SPX was down -110 points within the first half hour of trading, mostly from over reacting.

TRADING DAY Until 12:30pm Central

After the opening fall, the market bounced a dramatic 63 points from the lows over the next hour. It gyrated around until 12:30pm Chicago time.

12:30pm to 2pm

As traders came back from lunch, it is rumored that a larger trading firm on the CBOE was being liquidated and for the next 90 minutes, the SPX fell from 2965 to 2901. At the same time, as the rumor goes, the liquidation of the account caused the VIX to run to 54% as a large position in this was being closed.

2pm – Close

With 90 minutes left in the day, the alleged account was totally closed when the SPX was at 2901 and the VIX at 54%. Once this was complete, the market bounced 71 SPX points higher and the VIX fell from 54% to 41%. This is a HUGE swing.

If you were watching the markets at this time, you could not help but notice the volatility and force of the bounce, making the “rumor” of a large account being liquidated seem plausible. On the close, the SPX settled down a mere 51.57 points, the Dow down only 256.50 and stocks like AMD actually closing higher on the day.

In short, it was a nutty day, but nothing we have not seen for the last 2 weeks.

SURPRISES

SPX closed down -1.71%

Dow closed down 0.98%

AAPL closed down 3.89 at 289.03 (-1.33%)

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TODAY: March 9

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LIMIT DOWN

In the night session the market is limit down in the MINIS. Below is the LIMITS from the CME during the actual trading session.

S&P 500 Price Limits

From 8:30 a.m. to 2:25 p.m. CST, there are successive price limits corresponding to 7%, 13%, and 20% declines below the previous trading day’s reference price.

From 2:25 p.m. until the 3:00 p.m. CST, close of the cash equity market, only the 20% price limit will be applicable.

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TODAY

The media is pumping out news story after news story about the virus. This is translating into massive fear as the TLT is up 10, the VIX futures are up 9, SPX Minis are down -145 (5% limit). crude oil is down 12.92 at 28.32 (31%). Think about crude alone that was at $54 just 3 weeks ago, and is almost 50% lower.

The open is going to be a mess. Here is what I expect (who knows, though?):

  • I expect the open to be a very big mess. The limit in the night session is 145 points lower (5%), but we can open down as much as 7% in normal trading hours (-205 points) in the Minis.

  • We will probably see forced liquidation and/or panic selling for the first 30 minutes. After that we will see large moves higher and lower—especially if the Fed or White House intervene.

  • Being a year of elections, I do not see both parties coming out to calm fears, rather some people more interested in politics (than Americans) may actually be relishing this move lower. We may see blame tossed around which will add to the mess.
  • We will see large moves with little trading in a 500-point gap higher or lower.
  • The media will have almost nothing positive to say, and you will see a look of frustration on many of the reporters' faces, though many will not even have money in the markets.

  • Skew and volatility is going to blow up BIGGER than most people have seen unless they traded the 1987 crash. I'm looking at Mini put options 3 days from expiration that are 24% OTM trading for $2.30. Think about that!

You’re braver than you believe, stronger than you seem and smarter than you think”.
—Christopher Robin, Winnie the Pooh

2020 ONE-YEAR PREDICTION:
Average year with lots of intermittent volatility
(-8.0% so far)

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I was hoping to have an online class this morning that people got to see my screens, but it will be too chaotic for that today. It will prevent me from doing my job and seeing all the data I usually look at. Once this market bounces (wherever that is from), I will have the class. After the first big bounce people with finally exhale and be 1/3 as nervous, and things will be easier to accommodate such a platform.

Since we are locked down limit, I will be watching the market all night, and if opportunity comes, I will let you know. Those in NIGHT PAGING will be alerted if something comes out. Since MOST of the time, things will be even nastier on the open and there is not a lot one can do from here unless we bounce.

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DISCUSSION BOARD

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Really quickly...

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LAUGH OF THE DAY

Trading is a tough job on a stomach void of coffee and humor.
You provide the coffee and we will take care of the rest.

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