North American stock markets open trading lower, loonie down against US$

TORONTO — Canada’s main stock index capped its first winning week since mid-February despite snapping a three-day rally as cases of COVID-19 continue to soar.

The S&P/TSX composite index closed down 683.43 points or 5.1 per cent at 12,687.74.

In New York, the Dow Jones industrial average was down 915.39 points at 21,636.78. The S&P 500 index was down 88.60 points at 2,541.47, while the Nasdaq composite was down 295.16 points at 7,502.38.

The Canadian dollar gained to trade for 71.14 cents US compared with an average of 71.04 cents US on Thursday despite the Bank of Canada’s decision to cut its key rate by half a percentage point to 0.25 per cent

The May crude contract was down US$1.09 at US$21.51 per barrel and the May natural gas contract was down 1.8 cents at US$1.67 per mmBTU.

The June gold contract was down US$6.20 at US$1,654.10 an ounce and the May copper contract was down 0.6 of a cent at US$2.17 a pound.

This report by The Canadian Press was first published March 27, 2020.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD=X)

The Canadian Press

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When Would it Be Reasonable to Expect A Stock Market Bottom?

Yesterday’s highest print for jobless claims in the last 50 years (and probably the post WW II period, although I don’t know when the data series started) is evidence that the U.S. economy is in the middle of a major economic and employment shock.

It is fascinating watching the various Street firms forecasting Q2 GDP: JP Morgan just dropped their forecast from a -14% decline to -20%, while Goldman is at -20%, and a host of others are rapidly getting close to -20%. (CNBC had a great graphic showing all the sell-side GDP forecasts in one bar chart, which I unfortunately couldn’t locate on Twitter or the CNBC website.) Bank of America is at -12% (last I heard) and undoubtedly that will likely get worse with the jobless claims number.

St. Louis Fed President Bullard, in his comment this past weekend saying that Q2 ’20 GDP could contract 50% was – in my opinion – majorly irresponsible. Truly I have no idea how a comment like that could benefit the public or investors, particularly after Bullard downplayed the virus threat in February ’20.

Not helpful.

This current stock market rally that now includes the first two positives days of SP 500 return since early February ’20 could be a rally into quarter end, which is helped by passive and active rebalancing demands,

Gary Morrow (@GarySMorrow) an excellent technician followed for years, noted the importance of the December, 2018 lows for the SP 500 and it appears for now that these lows have held.

The trendline off the March, 2009 lows also appears to have held given this monthly chart of the SP 500 (Source: Worden Charts).

2.) The corporate bond market must cooperate and it has started to unlock already somewhat as the last 5-day issuance of $125 billion is close to a 1-month average issuance volume, per one observer.

3.) I think “the market” will need to have some idea what Q1 ’20 SP 500 earnings will look like, and more importantly the “linearity” of how managements saw January, February and March ’20 business progress. All the corporate earnings reports of late like an Oracle (NYSE:ORCL), FedEx (NYSE:FDX), Nike (NYSE:NKE) and Micron (NASDAQ:MU) were all February ’20 quarter end, although guidance for all but FedEx seemed more positive than you would otherwise think.

Here is an interesting note out of DataTrek blog published March 24th, 2020. DataTrek was started by Nick Colas and Jessica Rabe in the last year and I find the blog interesting reading on a nightly basis:

IN TODAY’S EDITION

Markets: March 2020 continues to run the 2008 Playbook. Today’s relief rally fits that narrative to within 1 trading day. Expect to see further outsized volatility over the next week but, if the Playbook holds, we may just tread water over that time. After that, the 2008 experience says we go lower and bottom on/before April 30th. We’ve got some thoughts about how we can avoid that fate below, but that’s where we stand today.

Data: Equity asset class performance review today. Even with today’s rip, the S&P is still down 24% YTD, the Russell is 34% lower on the year, and EAFE/Emerging Market equity returns sit in between those 2 bookends. ESG equity investing has neither insulated asset owners from the downdraft nor unduly hurt returns. Lastly, “value” and “dividend” styles have seriously underperformed “growth” and “momentum”, both YTD and since the 2/19 equity market top.

Disruption: Legalizing recreational cannabis would go a long way to plugging US state-level budget shortfalls created by the COVID-19 Crisis. For example, New York State’s Comptroller expects a shortfall of between $4 to $7 billion due to the coronavirus. Back in 2018, NYC’s Comptroller estimated that the legal, adult-use marijuana market could conservatively yield annual tax revenues of up to $1.3 billion at the state and city levels. Even at just $1 billion, that means legalizing sales of recreational cannabis could cover up to a quarter of NY’s revenue shortfall from COVID-19.

Plus our usual roundup of market action, curated links, and mind candy.

Summary / conclusion: Since rarely is much “market timing” done for clients, and thus it’s somewhat of a moot point for client portfolios, however clients are given some idea within a reasonable time frame as to what they might expect when something like this happens. My own educated guess is that – after this face-ripping rally we are seeing in the last 3 days, and probably when earnings start in the next two weeks (and probably a lot of negative pre-announcements after the first of April ) – the SP 500 will likely start to drift down towards the December ’18 lows near 2.280 and the lower lows near there that have occurred near that price level in the last two weeks, and then we might have a low for this crisis.

However, if all this happens by late April, early May ’20 the “bear market” would have happened in a relatively short period of time.

Readers may vigorously disagree, but I’ve always thought the assumption that a 20% correction should represent a “bear market” for clients was completely arbitrary . In fact i think it’s utterly ridiculous. What matters are “secular bear markets” like the March, 2000 peak at 1,550 and then not seeing that level succeeded or surpassed again until late April, early May, 2013 when the SP 500 traded firmly above the March, 2000, October 2007 peaks and then never looked back. If you’re a reader, don’t panic. I send an email to clients every morning – find an advisor that communicates with you frequently, and keeps you apprised of the what is happening within a market when “exogenous shocks” like a global pandemic occur. The mainstream financial media is littered with village idiots making “predictions”. No one can predict or know the future with any reasonable degree of probability and that is true under most what would be considered normal circumstances, let alone under a global pandemic that people are experiencing for the first time.

In February ’20, the US economic went from a “net new jobs created” of +300,000 and a 3.6% unemployment rate (lowest since Vietnam or the late 1960’s) to what will now be the sharpest contraction in GDP growth since the Great Depression (or even worse).

The worst GDP reading in the 2008 Financial Crisis was a -8.4% GDP print. The US economy could be looking at a contraction 3x that quarter in 2008.

The next 30 days economic data is going to be nothing short of horrid, and the virus data that will be reported could alternatively be both alarming and soothing as the public health departments get their arms around their own learning curve, and the progression of the virus, as well as the start of seeing a light at the end of the proverbial tunnel as many that contract the virus start to resume normal living.

Events are happening quickly. Stay invested, watch your asset allocation, try and find objective and measured sources of news and market information and look for a retest of the recent market lows – possibly – in the next 4 – 6 weeks.

Q1 ’20 SP 500 earnings starting in two weeks and Q2 ’20 guidance that accompanies those earnings will likely be HORRID by any historical measure, but therein lies opportunity.

Use the December ’18 lows and the recent lows of the last 10 days for the SP 500 as stop limit locations if you would be more comfortable raising cash. The SP 500 drawdown in 2008 was 55% in depth. I would be surprised if this drawdown got that bad given the strength of the US economy heading into this shock, but have your limits ready just in case.)

Thanks for reading.

Wall St. rallies for third day as job losses stir talk of more stimulus

(Reuters) – The Dow Jones Industrial Average .DJI wrapped up its strongest three days in nine decades on Thursday as record weekly U.S. jobless claims came in below investors’ worst fears and the focus stayed on an unprecedented $2 trillion stimulus awaiting approval by the U.S. House of Representatives.

The Dow finished up 21% from its Monday low, establishing it in a bull market, according to a widely used definition. It was the index’s strongest three-day percentage increase since 1931.

The number of Americans filing claims for unemployment benefits surged to 3.28 million last week as state-wide lockdowns brought the U.S. economy to a halt and unleashed a wave of layoffs.

The median expectation of analysts polled by Reuters was for 1 million claims, but the top end of the forecast was as high as 4 million.

Expectations are high that the House will pass the stimulus measure to support distressed industries, including airlines, after the Senate cleared the proposal. It would flood the country with cash in an effort to stem the crushing economic impact of an intensifying pandemic that has killed about 1,000 and infected nearly 70,000 people in the United States.

The S&P 500 .SPX benchmark index also logged a third straight day of gains for the first time since mid-February, before coronavirus fears stopped Wall Street’s 11-year bull market. Since Monday, the S&P 500 has surged about 17%, although it remains down 22% from its Feb. 19 record high.

“It’s encouraging to see people buying a day after a big up day because we hadn’t seen that in a month,” said Randy Frederick, vice president of trading & derivatives at Charles Schwab. “That doesn’t guarantee that the bottom is in, but it is indicative of a bottoming process.”

While the Dow’s surge may be viewed as birth of a new bull market after just six week in a bear market, many investors fear Wall Street could plunge again as coronavirus infections increase and more people die.

Juliette rings a “closing bell” as NYSE-AMEX floor traders work in an off-site trading office they built when the New York Stock Exchange (NYSE) closed, due to the outbreak of the coronavirus disease (COVID-19), in the Brooklyn borough of New York City, U.S., March 26, 2020. REUTERS/Brendan McDermid

“The price swings we have seen, both to the upside and to the downside, have been really exaggerated over the past month. So getting a big bounce now is more a function of the weakness we have seen than an indicator of what lies ahead,” warned Willie Delwiche, an investment strategist at Robert W. Baird.

Boeing Co (BA.N) rose 14%, boosted by a $58 billion provision for the aerospace industry in the latest aid bill. Boeing has surged over 90% in the past four sessions.

Adding to the upbeat sentiment, Federal Reserve Chair Jerome Powell said the central bank stood ready to act “aggressively” to shore up credit in the market on top of the unprecedented policy easing announced on Monday.

“He said the Fed is not going to run out of ammunition and that the committee still has policy room for more action,” said Charalambos Pissouros, senior market analyst at JFD Group in Cyprus.

The CBOE volatility index , known as Wall Street’s fear gauge, fell 2.9 points, but was still near levels far above those in 2018 and 2019.

The Dow Jones Industrial Average .DJI jumped 6.38% to end at 22,552.17, while the S&P 500 .SPX surged 6.24% to 2,630.07. The Nasdaq Composite .IXIC added 5.6% to 7,797.54.

The S&P utilities index .SPLRCU was the strongest among 11 sectors, jumping 8.4%.

Advancing issues outnumbered declining ones on the NYSE by a 5.15-to-1 ratio; on Nasdaq, a 3.71-to-1 ratio favored advancers.

Slideshow (3 Images)

The S&P 500 posted no new 52-week highs and no new lows; the Nasdaq Composite recorded four new highs and 13 new lows.

Volume on U.S. exchanges was 15.0 billion shares, compared with the 16.2 billion-share average for the full session over the last 20 trading days.

Reporting by Noel Randewich; additional reporting by Uday Sampath and Medha Singh in Bengaluru, and Ross Kerber in New York; Editing by Dan Grebler and Leslie Adler

Bill Gates on Trump call for quick end to lockdown: It’s tough to tell people ‘keep going to restaurants, go buy new houses, ignore that pile of bodies over in the corner’

‘There really is no middle ground, and it’s very tough to say to people, “Hey, keep going to restaurants, go buy new houses, [and] ignore that pile of bodies over in the corner. We want you to keep spending because there’s maybe a politician who thinks GDP growth is all that counts.” ’

— Bill Gates

That’s billionaire Bill Gates, the co-founder of Microsoft MSFT, +9.09% and noted philanthropist, sharing in a TED interview as described by the Vox Media site Recode his view on the drumbeat, notably from President Donald Trump, for an earlier end to public health policies aiming to mitigate the spread of a deadly pandemic that has brought much of the world’s business activity to a screeching halt.

Most of the U.S., including New York, New Jersey, Illinois and California, are under rules that limit movement and travel. Those efforts to dull the impact of the outbreak of COVID-19 are putting the U.S. economy into a recession and have tanked U.S. equity markets that were just a month ago at record highs.

See:Governors reject Trump’s timeline to reopen economy; ‘Job one has to be save lives,’ Cuomo says

The illness that carried by the novel strain of coronavirus first identified in China in December has been contracted by some 414,000 people and killed more than 18,000 across the globe, according to Tuesday data compiled by Johns Hopkins University, as of Tuesday afternoon.

In the U.S., where the epidemic is likely still in its nascence, some 51,542 have been infected.

Trump, however, said on Tuesday during a Fox News interview in the White House Rose Garden that he hopes to have the country reopened as early as Easter on April 12, though most countries have taken months to achieve some semblance of managing the infection.

Trump has argued that a longer U.S. shutdown would make it more difficult for the economy to rebound from a recession. “The longer it takes, the longer we stay out, the longer that is to do,” he explained.

An early end to the lockdown in the U.S. has been viewed as ill-advised by many experts and politicians who fear that lives would be sacrificed in the bid to resume business-as-usual, and achieve a stock-market rebound, before the virus subsides.

New York Gov. Andrew Cuomo, whose updates on the virus’s impact on the Empire State have been closely followed, expressed views similar to those of Gates on Tuesday. “No American is going to say, accelerate the economy at the cost of human life, because no American is going to say how much a life is worth. Job [No. 1] has to be save lives,” the governor said.

See:‘You pick the 26,000 people who are going to die’: New York’s Cuomo, in plea to Trump administration for ventilators

Gates told TED, according to Recode, that “it’s very irresponsible for somebody to suggest that we can have the best of both worlds,” referring to mitigating the impact of the deadly pathogen on human lives and keeping the economy whirring.

U.S., and global, stock markets have been in turmoil due to the viral outbreak, with some at least partly attributing Tuesday’s biggest percentage gain since 1933 by the Dow Jones Industrial Average DJIA, +11.36%, up 11.4%, to a belief that Trump’s administration may push forward with reopening the U.S. economy, despite public health experts indicating that such a move would likely be premature. Noted infectious-diseases specialist Anthony Fauci suggested at a late-afternoon news conference at the White House that it might be worth exploring an idea floated by Trump that some sections of the country could have restrictions eased ahead of others.

The Dow surged 2,112 points on Tuesday, while the S&P 500 index SPX, +9.38% soared 9.4%, and the technology-heavy Nasdaq Composite Index COMP, +8.12% finished Tuesday’s session up 8.1%.

Gates, who boasts a net worth of $94.6 billion, according to Forbes (making him the second wealthiest man in the world behind Amazon.com’s AMZN, +1.95% Jeff Bezos) is among a group of billionaire philanthropists who have said they would give away at least half their wealth to charities under terms of the Giving Pledge. The Bill and Melinda Gates Foundation has donated $100 million to pandemics science and testing.

Check out:Man who scored big wins during the 2008 financial crisis says the stock market could be ‘near a bottom’ if U.S. gets a coronavirus recovery plan

Equity markets slump as lockdowns spook investors

Panic selling in global equity markets continued on Monday, with most of the major bourses trading in the red as lockdowns spooked investors.

Lockdowns and closures intended to halt the spread of the new coronavirus expanded over the weekend to many cities around the world, as the number of people infected surged past 336,000.

Dubai Financial Market plunged 3.78 per cent to 1,714 points, led by the fall in Air Arabia, Emaar Properties, Emirates NBD, Emaar Malls, and Dubai Islamic Bank. Abu Dhabi index plummeted 3.11 per cent, pushed down by Abu Dhabi Commercial Bank, Methaq, Dana Gas and Sharjah Islamic Bank.

Among other regional bourses, Saudi Arabia’s Tadawul slumped nearly three per cent to 5,990; Qatar Stock Exchange lost 3.8 per cent; and the Bahrain Bourse dipped 0.4 per cent.

Oil prices also started the week on a negative note. WTI crude fell 1.2 per cent to $22.36 while Brent was down nearly three per cent to $28.14 per barrel by Monday evening.

The US markets opened mostly lower early Monday as Congress wrangled over a massive stimulus package while the Federal Reserve unveiled new emergency programs to boost the economy. The Dow Jones Industrial Average was down 0.8 per cent at 19,014.47. The broad-based S&P 500 also dropped 0.8 per cent to 2,285.83, while the tech-rich Nasdaq Composite Index added 0.1 per cent at 6,888.80 a few minutes after opening the trade on Monday.

Many investors are waiting for markets to fall further before plunging back in, said Naeem Aslam of Avatrade. Should the market drop by another 10 per cent to 20 per cent, the overall decline from recent peaks would be over 50 per cent, and “that would be a massive buy signal,” Aslam said.

In Asia, most stock markets ended in the red with Indian markets triggering a circuit breaker halt to trading. India’s Sensex plummeted 11.3 per cent after a sharp drop on the open triggered a circuit breaker halt to trading. Singapore’s benchmark plunged 7.8 per cent after the city-state announced a sharp increase in confirmed infections and its first two deaths. Shares also fell nearly eight per cent in Bangkok.

Japan’s Nikkei 225 index was the outlier, gaining 2.0 per cent after the International Olympic Committee and Japanese officials indicated they are considering postponing the Tokyo Games, due to begin in July.

South Korea’s Kospi lost 5.3 per cent to 1,482.46. Hong Kong’s Hang Seng index shed 4.9 per cent, to 21,696.13, while the Shanghai Composite index slipped 3.1 per cent to 2,660.17. The Nikkei closed at 16,887.78. Sydney’s S&P/ASX 200 fell 5.6 per cent to 4,546.00 after plunging more than 8 per cent sharply just after the open.

European markets cut their losses after the Fed action was announced. European markets pushed higher after starting the day sharply lower. Germany’s DAX rose 1.5 per cent to 9,059 and Britain’s FTSE 100 was flat at 5,190. In Paris, the CAC 40 rose 1 per cent to 4,087.

– waheedabbas@khaleejtimes.com

New Issue Bias: The Curse Of The Bond Market

The coronavirus-induced collapse of high yield bond markets focused attention on the role of bond ETFs in liquifying trading. An account may be found here.

ETFs’ greater liquidity relative to that of the underlying bonds allows them to trade at prices closer to values consistent with market sentiment. When sellers pressure high yield bond values, illiquid bond screen prices lag the markets’ valuation of the underlying bonds. But the more liquid high yield ETFs lose value more quickly, more closely reflecting market sentiment.

However, the high yield ETF is only an intermediate step in a process that benefits the entire bond market – the liquefication of bond trading. To reach the goal of bond market liquidity comparable to that of the stock market, market pressure may be put on issuers not to hamper liquidity. Liquidity is in the best interest of all, including issuers.

High yield ETFs gain liquidity by concentrating volume through simplification, eliminating the complexity created by issuers’ habit of multiplying the number of debt issues financing a single firm.

Why the difference between bond and stock market liquidity? New issue bias.

Issuers have an incentive to undermine the value of their seasoned debt issues to encourage investors to replace them with their new issues, driving new issue prices higher. Toward this goal, issuers add more attractive terms to new issues. Call this “new issue bias.” Terms that create new issue bias increase the only bond price that matters to a myopic issuer – the price of the new issue.

However, the resulting creation of many bonds pricing the same underlying risk undermines liquidity. Multiple securities pricing a single risk inevitably splinter the market, reducing market liquidity.

Putting pressure on bond issuers to reduce new issue bias.

The high yield ETF combats bond market illiquidity by combining many splintered individual bonds, reducing the number of issues an ETF trader needs to consider, thereby increasing volume and liquidity. But ETFs can be bettered.

ETF operators are more remote to issuers than exchanges listing bonds. How can they increase their influence? Combining the function of an exchange with that of a high yield ETF would increase the pressure placed on issuers to limit their new bond issues. For example, an issuer might be encouraged to match terms of new issues with those of seasoned issues.

Stocks have less issuer bias.

Since the stockholder is the decision-maker of the issuing firm, the stockholder will seek to preserve the value of seasoned issues, not focusing only on new issue values.

But issuer bias incentives are also present. Making new issues less attractive than seasoned ones reduces the amount of money the firm can raise.

The two opposing forces encourage the relative absence of competing versions of the corporate stock.

How can an exchange be built to substantially reduce issuer bias?

An exchange might originate, then list high yield debt of its own creation – call this instrument an exchange-originated issue (NYSE:EOI) and the exchange directly issuing the instrument an exchange direct issuer (NYSE:EDI). An EDI places itself in an even stronger position than corporate stockholders – the management of the exchange directly benefits from the liquidity of the EOI and receives no benefit from separating new and seasoned issues.

The be-all and end-all of an exchange is the liquidity of its traded instruments.

If the EDI trades only the EDIs that it issues, the exchange merges the role of the existing high yield ETFs with that of the exchange. The influence that the EDI gains by choosing its bonds from the entire market incentivize bond issuers to match the terms of their new bond issues to that of the acquiring EOI.

There are two reasons why the influence of an EDI would exceed that of an exchange that lists ordinary bonds or that of a high yield ETF.

  • First, an EDI that lists only its own fixed income securities would not need to solicit the business of the corporate issuer, since it does not list bonds directly and can back its EOIs with any corporate issue including high yield ETFs. Instead, the issuer would find it desirable to attract the interest of the EDI.
  • Second, an EDI is positioned closer to bond buyers than are ETFs. Bond buying institutions: investment managers like Vanguard and BlackRock (BLK); pension funds like CalPERS; insurance companies like Prudential (PRU); and retail electronic brokers like Fidelity (FNF); could be directly involved in the governance of an EDI. In this position, buy-side participants could influence the acquisition policies of the EDI. The buy-side would encourage the EDI to develop EOI properties consistent with the risk management needs of bondholders.

How would an EDI be structured?

The Figures below display the structure of an EDI. An EDI conducts two types of transactions: when-issued trading and seasoned issue trading.

Figure 1 shows how when-issued EOI trading works. During when-issued trading, the EDI pairs buyers with sellers at a market price, much like US Treasury when-issued trading. The difference from Treasury when-issued trading is that an exchange acts as the counterparty to both buyers and sellers, requiring traders to post margin in advance of trading, as do futures exchanges. Insertion of an exchange between buyers and sellers accomplishes two goals. First, it permits retail traders to use the market without added credit risk to other market participants. Second, it preserves the anonymity of traders.

Figure 2 shows how seasoned issue trading works. During seasoned issue trading, only the seller is margined, since the exchange already manages the assets possessed by the seller’s counterparty, the EOI originator.

EOI structure

A more detailed description may be found here.

Advantages of EOIs vs. ETFs

  • The democratization of the market. The placement of an Exchange between buyer and seller increases retail access to market participation. As with futures, margining opens the market.
  • The simplicity of shorting the EOI. Shorting an EOI is simpler by far than shorting an ETF. The coronavirus crisis has drawn attention to the potential for Lehman-like market interruption due to the difficulty associated with assuming a short position with a high yield ETF. Borrowing costs associated with shorting SPY, for example, have risen by 40 percent, according to data from S3 Partners, explained here.
  • More user-friendly instruments. Exchange governance that includes market users creates an EDI incentive to devise instruments more consistent with market participant needs. For example, an EDI can attract the business of risk managers by issuing instruments that require no margin payments and receipts of the buyer. This allows the buyer to account for EOIs on an accrual basis, consistent with the accounting for other assets and liabilities of many buy-side market participants.
  • Competition in the alignment of the value of the ETF with the value of the underlying bond. High yield ETFs are, to a degree, hostage to authorized broker-dealers that have a monopoly on the arbitrage gained by aligning the value of the ETF with the values of the ETF’s underlying bonds after the market closes. An EOI is aligned to the market value of its individual underlying bonds through margin pays and calls from the EDI to short at the close. This practice opens the arbitrage between bond values and EOI values to competition between broker-dealers.

Winners and Losers from EDI and EOI innovations

The winners would be the consumers of trading services, primarily individual investors and buy-side institutions. The losers would be any exchange management firms that don’t compete directly with or acquire the EDI. The big four EMFs, CME Group (CME), Intercontinental Exchange Inc. (ICE), NASDAQ Inc. (NDAQ), and CBOE Global Holdings (CBOE), may ultimately fight it out for EDI status.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Dow Jones Transports Ready For A Rebound?

The coronavirus pandemic is wreaking havoc on the global economy. Governments are closing malls, restaurants and literally all kinds of social gathering places, and even putting entire cities on lockdown. In the meantime, stock market indices are in free fall. The is down 28.7% YTD and the lost 35.2% since mid-February.

In this respect, the fact that the Average plunged as well is not surprising. What is interesting, though, is that this less followed index sent a warning as early as the summer of 2019. The world was yet to hear about COVID-19 and the economy was running at full throttle.

However, instead of letting complacency settle in, we were looking for early signs that the decade-old bull market was ending. On July 8th, 2019, we found one such sign on the weekly chart of the Dow Jones Transports shown below.

Dow-Jones Weekly Chart

Dow-Jones Weekly Chart

The chart revealed that the uptrend since the bottom of the Financial crisis in March 2009 formed a complete five-wave impulse. Labeled I-II-III-IV-V, this pattern meant a three-wave correction should follow. The drop to 8637 in December 2018 was too shallow to be all of it.

Instead, we thought a larger corrective pattern was in progress.
Corrections usually erase the entire fifth wave. A W-X-Y double zigzag made sense. “Wave Y down towards ~7000, possibly accompanied by a recession” was “the missing piece of the puzzle.

Dow Jones Transports to Start Recovering amid Coronavirus Recession

Eight months later now, a recession is practically guaranteed. Economists at Goldman Sachs (NYSE:) predict a brutal 24% GDP contraction in Q2. The Dow Jones Transports, in the meantime, fell below 6500 at one point last week. Take a look:

Dow-Transports Weekly Chart

Dow-Transports Weekly Chart

The selloff was much faster than expected. The correction looks more like a regular A-B-C flat correction now, but that doesn’t change much. It took wave C just three months to erase all of wave V’s gains. Nevertheless, amid all the doom and gloom, there is a silver lining.

Wave C just reached the support area of wave IV. The 5-3 Elliott Wave cycle seems complete. The theory suggests we should now expect the trend to resume in the direction of the impulse pattern. In other words, even if the bears manage to breach 6000, a bullish reversal should soon follow.

The coronavirus pandemic and the economic recession it is causing are far from over, but think about this: World War II lasted from 1939 to 1945. Yet, the stock market bottomed in 1942 and rose steadily during the last three years of the war. Also, the world was in a recession during the entire 2009, but the stock market started rising as early as March. The worst of a crisis rarely coincides with the worst in the markets. As Ralph Elliott once said, the habit of the market is to anticipate, not to follow.

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Addus HomeCare Announces Receipt Of Expected Notification Letter From Nasdaq Due To Timing Of Filing On Form 10-K

FRISCO, Texas, March 20, 2020 /PRNewswire/ — Addus HomeCare Corporation (Nasdaq: ADUS), a provider of home care services, when announcing this week its estimated preliminary unaudited financial results also announced a delay in filing its Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the “Form 10-K”). As disclosed then, because of an inability to obtain prior auditor consent for inclusion of financial statements for the years ending December 31, 2017 and 2018, in connection with making adjustments thereto, the Company’s current auditor, PricewaterhouseCoopers has agreed, subject to completing their customary engagement acceptance and independence procedures, to independently re-audit the Company’s financial statements for those years. In connection with the delayed Form 10-K, Addus yesterday received a letter from The Nasdaq Stock Market LLC (“Nasdaq”) notifying Addus that it is not in compliance with Nasdaq Listing Rule 5250(c)(1), which requires timely filing of periodic financial reports with the Securities and Exchange Commission. The Nasdaq notice has no immediate effect on the listing or trading of Addus common stock on the Nasdaq Global Select Market. Under Nasdaq’s listing rules, Addus has 60 calendar days from the date of the letter to submit a plan to regain compliance. Addus will continue to work to finalize the re-audits as soon as practicable and expects to submit a plan within the proscribed time frame.

Forward-Looking Statements
Certain matters discussed in this press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may be identified by words such as “continue,” “expect,” and similar expressions. These forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effect on us. Forward-looking statements involve a number of risks and uncertainties that may cause actual results to differ materially from those expressed or implied by such forward-looking statements, including discretionary determinations by government officials, the consummation and integration of acquisitions, anticipated transition to managed care providers, our ability to successfully execute our growth strategy, unexpected increases in SG&A and other expenses, expected benefits and unexpected costs of acquisitions and dispositions, management plans related to dispositions, the possibility that expected benefits may not materialize as expected, the failure of the business to perform as expected, changes in reimbursement, changes in government regulations, changes in Addus HomeCare’s relationships with referral sources, increased competition for Addus HomeCare’s services, changes in the interpretation of government regulations, the uncertainty regarding the outcome of discussions with managed care organizations, changes in tax rates, the impact of adverse weather, higher than anticipated costs, lower than anticipated cost savings, estimation inaccuracies in future revenues, margins, earnings and growth, whether any anticipated receipt of payments will materialize and other risks set forth in the Risk Factors section in Addus HomeCare’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 18, 2019 and Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 9, 2019, which are available at www.sec.gov. In addition, since December 2019, an outbreak of COVID-19, a new strain of coronavirus, has resulted in travel disruption and affected business operations across the world. At this point, the extent to which this coronavirus and the impact of social, government or Company responses to it may impact our results is uncertain. Accordingly, this outbreak could have a material adverse effect on our financial condition and results of operations. Addus HomeCare undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, these forward-looking statements necessarily depend upon assumptions, estimates and dates that may be incorrect or imprecise and involve known and unknown risks, uncertainties and other factors. Addus HomeCare undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, these forward-looking statements necessarily depend upon assumptions, estimates and dates that may be incorrect or imprecise and involve known and unknown risks, uncertainties and other factors. Accordingly, any forward-looking statements included in this press release do not purport to be predictions of future events or circumstances and may not be realized.

About Addus
Addus is a provider of home care services that primarily include personal care services that assist with activities of daily living, as well as hospice and home health services. Addus’ consumers are primarily persons who, without these services, are at risk of hospitalization or institutionalization, such as the elderly, chronically ill and disabled. Addus’ payor clients include federal, state and local governmental agencies, managed care organizations, commercial insurers and private individuals. Addus currently provides home care services to approximately 42,000 consumers through 184 locations across 26 states. For more information, please visit www.addus.com.

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SOURCE Addus HomeCare Corporation

Positive Bounce Tipped For Indonesia Stock Market

The Indonesia stock market has moved lower in four straight sessions, plummeting more than 800 points or 18.5 percent along the way. The Jakarta Composite Index now rests just above the 4,100-point plateau although it may finally stop the bleeding on Friday.

The global forecast for the Asian markets is positive following a rebound in crude oil prices and optimism over stimulus from banks and governments. The European and U.S. markets were broadly higher and the Asian bourses are tipped to open in similar fashion.

The JCI finished with massive losses again on Thursday with damage across the board – especially among the financial shares, cement companies and resource stocks.

For the day, the index plunged 225.25 points or 5.20 percent to finish at 4,105.42 after trading between 4,093.71 and 4,329.62.

Among the actives, Bank Danamon Indonesia skidded 6.95 percent, while Bank Mandiri shed 6.99 percent, Bank Central Asia and Indofood Suskes both lost 7.00 percent, Bank Negara Indonesia retreated 6.90 percent, Bank Rakyat Indonesia sank 6.69 percent, Indosat dropped 6.93 percent, Indocement declined 6.78 percent, Semen Indonesia fell 6.75 percent, Aneka Tambang plunged 6.70 percent, Vale Indonesia plummeted 6.80 percent, Timah cratered 6.88 percent and Bumi Resources was unchanged.

The lead from Wall Street suggests upside punctuated by continued volatility as stocks opened lower on Thursday before surging as the day progressed. Many of the gains evaporated, but the markets still ended in the green.

The Dow climbed 188.27 points or 0.95 percent to finish at 20.087.19, while the NASDAQ jumped 160.73 points or 2.30 percent to 7,150.58 and the S&P 500 added 11.29 points or 0.47 percent to 2,409.39.

The early weakness on Wall Street was chased away by bargain hunting following recent heavy losses.

Worries about outlook of energy demand subsided thanks to massive relief packages announced by global central banks and governments.

The Bank of England cut the bank rate again, to a record low on Thursday, and expanded its bond buying scheme and the targeted funding measure for small and medium businesses, extending further support to the UK economy amid the spread of the coronavirus, or Covid-19.

Crude oil prices skyrocketed Thursday, earning the front month futures contracts their biggest single-day gains in percentage terms. West Texas Intermediate Crude oil futures for April ended up $4.85 or 23.8 percent at $25.22 a barrel.

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Market Analysis

Wall Street ends higher to stem coronavirus selloff

NEW YORK (Reuters) – U.S. stocks managed to post gains on Thursday after recent steep losses as policymakers around the world took further emergency actions to try to help financial markets cope with deep coronavirus-driven economic damage.

Nasdaq outperformed other major indexes, ending 2.3% higher, fueled by gains in Amazon.com (AMZN.O), Microsoft (MSFT.O) and Facebook (FB.O).

The Federal Reserve opened swap lines with central banks in nine new countries to ensure the world’s dollar-dependent financial system continued to function.

It was the latest in a host of steps taken by the U.S. central bank over the last two weeks, including cutting borrowing costs to near zero and providing billions of dollars more for cheap credit.

The European Central Bank pledged late on Wednesday to buy 750 billion euros ($820 billion) in sovereign debt through 2020.

President Donald Trump called on U.S. health regulators to expedite potential therapies aimed at treating COVID-19, the respiratory disease caused by the virus, and the White House sounded upbeat on the chances of passage of hundreds of billions of dollars of aid in Congress.

Policymakers will need to keep providing support in order to provide liquidity to the financial system, said Quincy Krosby, chief market strategist at Prudential Financial in Newark, New Jersey.

“It is not just about the Fed,” Krosby said. “It is about the fiscal side of the equation. The question for the market is, how much do we actually need, and the severity of the crisis is suggesting we’re going to need amounts we never initially thought of.”

Even with the emergency moves, analysts in a Reuters poll gave a median 80% chance of a U.S. recession this year.

A trader wears a face mask on the floor of the New York Stock Exchange (NYSE) following traders testing positive for Coronavirus disease (COVID-19), in New York, U.S., March 19, 2020. REUTERS/Lucas Jackson TPX IMAGES OF THE DAY

The recent sharp market volatility continued, with the S&P 500 index falling as much as 3.3% during the session.

And Thursday’s gains did little to restore the markets after the pounding stocks have suffered in the past month. The S&P 500 remains down about 29% from its Feb. 19 record closing high after last week confirming its first bear market since the financial crisis, and the Dow erased virtually the last of its gains under Trump’s presidency on Wednesday.

The Dow Jones Industrial Average .DJI rose 188.27 points, or 0.95%, to 20,087.19, the S&P 500 .SPX gained 11.29 points, or 0.47%, to 2,409.39 and the Nasdaq Composite .IXIC added 160.73 points, or 2.3%, to 7,150.58.

Helping the day’s sentiment, U.S. crude oil prices spiked by 25% in their largest single-day gain on record, while the S&P 500 energy index .SPNY rose 6.8%, leading gains among S&P 500 sectors.

“Active investors are using this as an opportunity to maybe pick up what might be perceived as bargains because nobody’s really sure how to value stocks right now,” said Robert Pavlik, chief investment strategist and senior portfolio manager at SlateStone Wealth LLC in New York.

Ford Motor Co (F.N) was the latest major U.S. corporation to bolster its cash reserves to ride out the virus impact, drawing down more than $15 billion from existing credit lines. Ford shares ended down 0.7%.

The virus’ impact on jobs was also in focus as official data showed the number of Americans filing for unemployment benefits surged to a 2-1/2-year high last week as companies in the services sector laid off workers because of the pandemic.

Late on Wednesday, New York Stock Exchange owner Intercontinental Exchange Inc (ICE.N) said the market would temporarily close its trading floors and move fully to electronic trading starting next week.

Advancing issues outnumbered declining ones on the NYSE by a 2.64-to-1 ratio; on Nasdaq, a 3.21-to-1 ratio favored advancers.

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The S&P 500 posted three new 52-week highs and 94 new lows; the Nasdaq Composite recorded 13 new highs and 569 new lows.

Volume on U.S. exchanges was 17.08 billion shares, compared to the 15 billion average for the full session over the last 20 trading days.

Reporting by Caroline Valetkevitch in New York; Additional reporting by Medha Singh and Sanjana Shivdas in Bengaluru; Editing by Leslie Adler and Will Dunham