Market Correction 2020: An Excuse For The Fed To Attack
Long before this pandemic hit, we stated that central bankers, especially the Fed, was on a mission to take rates towards zero. Imagine if the Fed had lowered interest rates by 150 bases two weeks ago, how people would have reacted. When the Fed cut rates before the coronavirus attack, experts were quick to label them as being reckless, but now after a 150 basis point cut, they say more has to be done. Notice the ploy here; to do that which the masses abhor, one has to create a situation that distracts their attention. Then offer a solution that is three times as damaging as the previous one and in their desperation to seek safety, they will agree to whatever course of action is laid out.
The system is going to be flooded with so much liquidity that the markets will melt upwards when the media starts to report the data more accurately. Right now, they talk about the mortality rate without breaking the data down and informing the masses that older individuals are the ones that fall into the high-risk category. Even then, most of them appear to have some other complications already.
Market Correction 2020 Equates To Incredible Opportunity
We are 99% sure that a “mother of all buys” will be generated shortly; the anxiety index is still stuck deep in the zone of madness, and the next pullback could push it right to the very edge. The secondary indicators posted below are trading in the extreme ranges and bullish sentiment while surprisingly high given the chaos is still below its historical average. Neutral sentiment rose, but it’s well below its historical average. To trigger this buy, all we need is for neutral sentiment to test its recent lows or for our weekly indicators to move a tiny bit more
The 1987 crash and 2008 crash fell into the category of the “mother of all buying opportunities“, but we could get a setup that could blow these setups and create the “father of all opportunities“. Such an event is so rare that it might occur only once during an individuals lifetime. In the short term, there is no denying the landscape looks like a massacre, but if one is going to focus solely on the short timelines, then the odds of banking huge profits are quite slim.
Sharp Pullbacks equate to Opportunity
Just three weeks ago, everyone would have begged for such prices, but 15 days later everyone is ready to throw the towel in. The volatility is likely to continue until the end of the month, especially since V readings soared by a whopping 650 points to an all-time high. Again, think about it, when was the last time the Fed dropped rates by 150 basis points in two weeks. This is a massive development but its overshadowed by the current hysteria. As we stated before, companies are going to go ballistic with their share buyback programs.
When the panic subsides, it will create a feeding frenzy of the likes we have never seen before. When you combine zero rates, two trillion dollar injection by the Feds and several more billion-dollar packages designed to stimulate the economy, the result is going to be a market melting upwards. The markets will be driven to heights that are unimaginable by today’s standards. Zero rates are also going to force a large portion of individuals on a fixed income to speculate, and these guys have a lot of cash sitting on the sidelines.
Stock Market Correction 2020; Just another Buying Opportunity in Disguise
The Trump administration has doled out roughly $881 billion from the major components of the pandemic relief package signed into law one month ago and soon will have a half-trillion dollars more to shovel into the economy.
The Treasury Department was put in charge of distributing, through multiple channels, nearly half of the $2.2 trillion Coronavirus Aid, Relief and Economic Security Act. While one key piece ran empty within two weeks — aid to small businesses — there’s still has a lot of money left to work with.
“We’ve had an unprecedented fiscal and monetary response,” Treasury Secretary Steven Mnuchin said Thursday in a Bloomberg News interview.
On Friday, President Donald Trump plans to sign into law another $484 billion in rescue money, including replenishment of small business assistance, aid to hospitals and funding for virus testing. Here is a tally of what’s been spent or committed so far from the law’s key programs: Yahoo
This kind of liquidity is like throwing gasoline on a raging fire, while the short term pullback has been vicious, the counter-rally is going to be even stronger. The first stages of the counter-rally already indicate what lies in store for this market in the years ago. Now is the time to back the truck up and buy quality stocks.
Other Stories of Interest
Stock Trends & The Corona Virus Factor (March 14)
Trading The Markets & Investor Sentiment (March 3)