Once In A Lifetime
|Mar 14|| 1|
This week, when the coronavirus panic hit its peak, I was inundated with tweets by mainstream news organization with headlines like;
SUPER IMPORTANT CORONAVIRUS INFORMATION THAT COULD SAVE YOUR LIFE!
Not wanting to die, I’d click the links to this critical information, only to get a fucking paywall.
Imagine my despair upon realizing that the media doesn’t really care about me.
Well, I care about you.
That’s why, even though the Lund Loop newsletter is usually only free on the last Saturday of the month, given this week’s unprecedented market action, I’m opening this issue up to everyone so you can get a sense of what is going on and where we’re at.
Independent content creators like myself rely on readers like you for support. So if you find value in what you read today, please consider becoming a paid subscriber.
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On February 24th, I tweeted out the following;
Some people commented that it was silly to even think in terms of a bear market at that point.
It’s not so silly now.
The term “black swan” gets thrown around a lot these days, and it seems as if we have “once in a lifetime” events every other month.
But what we experienced this week is something you only see once in a lifetime.
If you had told me coming into last week that we’d see two limit-down and one limit- up days, I’d have bet everything I had that it wouldn’t happen.
And if you told me that we’d get limit-down and limit-up days back to back, I would have thrown my kids in on the bet as well.
But that’s exactly what happened.
Here’s a little more color on what an outlier this week was.
Fastest Bear Market Ever!
In addition, the S&P 500 traded in a 404-point range, and the smallest daily change was 4.89% drop on Wednesday.
When the week closed out, the Nasdaq finished off 8.17%, the SPX 8.79%, the DJIA 10.36%, and the IWM ended down an almost unimaginable 16.57%
*insert deep breath emoji*
People often say, “We’re in uncharted waters now,” even though we’re not.
But now we are.
One of the things that stood out for me as I was putting together the charts last night is how much I had to zoom out in order to add new support levels.
On the fundamental side, everything is shutting down, and it’s going to have a domino effect in ways we can’t even imagine yet.
Nobody knows what will happen for sure, except on Epistemology Twitter - where everybody is suddenly an infectious disease expert - but here’s where we are as of now.
Personally, there’s been some Larry David-like upside to COVID-2019 for me.
And my kids are over the moon because they are off from school for weeks now.
A consequence of this panic there’s a lot of bad information going around, particularly about the markets. But it’s important to ignore most of it and pay attention to the technicals.
Let me give you an example of why this is important from the last time there was this much uncertainty in the markets.
Which one should you listen to?
If you’re a subscriber of the Lund Loop, you know that a few weeks ago the technicals told us it was time to step aside and watch.
If you’re not, what are you waiting for?
Despite all the doom and gloom predictions out there, take some advice that my grandmother once told me.
It was 1977, and a young punk rock wannabe named Brian was despairing, because, despite all the new, aggressive, and vital music that was coming from the garages in his neighborhood and import singles at the local independent record shop, all that the radio played was disco.
“What’s wrong sweetie,” she said as she was sitting at her antique vanity, combing her purple mohawk.
“Aw, it’s just that I can’t stand the music they play these days. Every time I get into the car with mom it’s all disco. I hate disco.”
“Yes, my dear. Disco sucks,” she said as she bent over to lace up her Doc Martens.
“But just remember,” she continued. “This too shall pass.”
And so will this market. Someday it will look like a blip. Don’t believe me? Check out this chart.
There are some pretty nasty events along this timeline, including wars, assassinations, and a little thing call the Spanish Flu - which killed 50 million people worldwide.
By the way, why is calling it the “Wuhan virus” racist, but calling it the Spanish Flu isn’t?🤔
Anyway, don’t despair. We’ll get through this and come out stronger for it.
Now, let’s get to this week’s fugly charts…
*Click any chart to enlarge. Please read disclosures at the bottom of this page.
Due to the extended moves this week, I’m doing something a little different on the charts.
I’m going to show a normal chart and then a zoomed out version. And on each I’ve drawn support levels - the thicker the line the more substantial the support.
The red lines indicate where bear market levels begin, uh, began, and are not support.
There’s not much to say on the charts this week unless you just want me to keep repeating “Ugh!”
But I’ll try to add some color.
On a completely theoretical - take this with a grain of salt basis - I feel like we’re now in that phase where the government is going to be proactively intervening in the markets - think Financial Crisis.
That could lead to some substantial rallies, but ultimately, manipulation can only work for so long. We probably will need a successful retest of these levels before we can be reasonably sure the bottom is in.
I also suspect we’ll see central banks and governments co-operate on a fiscal stimulus package, probably announced early in the week, maybe even Sunday night.
But nobody really knows what will happen.
S&P 500 Index (SPX)
The SPX bounced on Friday, not off of any support level, but just because it was so oversold.
Around 8:00 pm PST Thursday night, there was a tell that this might happen.
The Australian stock market had been down as much as 8% but closed out the day - and week - up 4%. Right about then, the overnight U.S. futures started to go crazy.
By the open, they were locked limit up - something I’ve never seen before.
The day’s action was interesting.
At one point, after being up as much as 150 points, the SPX gave up most of it and got within 12 points of going red before rallying a bit.
Being terribly oversold from the previous day was the first piece of the puzzle that we might rally hard into the close. This intraday double-bottom was the second.
Then, when it was announced that President Trump would be declaring a national emergency and the market didn’t tank - that was the third.
And we did, putting in a big reversal day, that in normal times would indicate we move higher - at least for a few more days.
But these ain’t normal times.
NASDAQ-100 Index (NDX)
The NDX bounced hard on Friday, putting in a nice reversal candle. We could move up to the 200-day MA, or if we’re really lucky, the 100-day, before stalling.
Dow Jones Industrial Average (DJIA)
The DJIA is a stupid index with only 30 stocks and I don’t know why I even track it.
But I’m not bitter.
Russell 2000 ETF (IWM)
In last week’s Lund Loop I wrote;
This is the bad news. IWM was down 1.32% this week, closed below that big range we’ve been watching forever, and is way below its 200-day MA.
If the overall market doesn’t tank, this is due for a big bounce, but longer-term, this really worries me.
That worry proved valid this week as IWM hit levels not seen since July of 2018.
S&P 500 Volatility Index (VIX)
The bad news: The VIX blasted through various resistance levels on its way to a +37.89% week.
The semi-good news: Friday it reversed hard, closing down 23.27% for the day. Hopefully indicating that we get a pause in the carnage.
For some perspective, the VIX hit levels not seen since November 2008.
And how about this? I had to use a different platform to get data this old, but here you can see where we are now in relation to the peak of the Financial Crisis and to the all-time volatility peak during the Crash of 1987.
AAPL bounced off its 200-day MA, forming a green hammer. As always, this stock is showing better relative strength than the rest of the market.
A strong bounce off support and a green hammer means AMZN could go higher for a day or two more.
Similar setup with GOOGL as it could get up to the bottom of that previous support, now resistance, level before stalling.
FB has been much weaker than its tech counterparts, down -17.04% YTD. I don’t know what’s going on but the price action is telling us there might be some company-specific bad news we’re going to hear about at some point
The idea that everybody would be social distancing themselves and watching Netflix had kept this stock afloat, but this week it gave it up. Still, up 3.93% YTD, it’s hanging in there better than most.
If this good relative strength continues, NFLX will be a stock to watch when this market turmoil is over.
iShares MSCI Emerging Markets ETF (EEM)
EEM fell off the planet this week, down 9.94%.
iShares Trust China Large-Cap ETF (FXI)
The 6.11% drop in FXI looks mild by comparison.
Financial Sector SPDR (XLF)
This hurts, as financials usually lead the market, and XLF is off 25.11% YTD.
Green shoots: We could get a couple of days of follow-through from Friday’s bounce.
SPDR S&P Homebuilders ETF (XHB)
XHB had been the champ, hanging in there even after the market started to crack. Now it’s down 22.68% YTD and even the bounce on Friday looked weak.
VanEck Vectors Semiconductor ETF (SMH)
SMH bounced off a decent support level and might get back up to the 200-day MA before stalling.
iShares Trust Biotech (IBB)
I had such high hopes for this index, but they were all dashed in this week’s 12.16% drop. 😢
US Dollar Currency Index (DXY)
CBOE Interest Rate 10-Year T-Note (TNX)
DXY had a massive bounce and TNX fell into levels I can’t find on a chart going back to 1964.
SPDR Gold Trust (GLD)
GLD dropped 9.07% and broke its trendline this week.
iShares Silver Trust (SLV)
SLV got hammered, down 15.39% on the week.
West Texas Oil (WTIC)
Speaking of getting hammered, oil was down over 20% on the week, hitting levels not seen since March of 2016.
ETFMG Alternative Harvest ETF (MJ)
The ugliest sector in history continues to get uglier.
Bitcoin showed this week that its reputation as a non-correlated store of value is suspect at best.
TRADING & INVESTING
*Click any chart to enlarge. Please read disclosures at the bottom of this page.
There are obviously no setups right now, but I did get a number of inquires recently about the story of my trader friend who banked $437K off the initial break in the markets.
The questions were basically around how he did it?
Well, I’ll tell you.
My friend, let’s call him “Mr. Person Guy,” takes a very different approach to trading that we do here in the Lund Loop.
Not sitting next to him as he trades, I don’t know for sure, but I’d say his style is about 20% technical, 40% conviction, and 40% guts/instinct.
For example, he and I both had the same feeling on February 21st - after the market started to crack - that there was going to be a potential big drop.
However, I couldn’t match a technical entry up with that feeling, so I passed on taking any trades.
He went with his guts and took some large positions. And it paid off big time.
Someone asked me if there was a way to “safely” trade like Mr. Person Guy, to which I would have to say, no fucking way.
Mr. Guy’s method is risky, but that’s also why there are potential outsized rewards.
A couple of years ago he took $400K and turned it into $1.6M in a relatively short time, which is amazing.
But then he spent about a year giving a good chunk of that away. And I can tell you that it was very nervewracking on him. Hell, it was nervewracking for me just to watch it.
You see, Mr. Person Guy has to deal with the same issues all us traders do. When do we stop?
For the day. The week. The month. The year.
When do we bank our wins and pause to reset?
After MPG got back on his winning ways recently, I told him - in all seriousness - to turn off his computer and go down to Mexico for a week.
“Sit by the pool,” I said. “Drink Coronas [no pun intended] and just chill knowing that you crushed it while most of America is watching their 401k hemorrhage.”
Honestly, I was afraid the Guyster would overtrade and give back a good chunk of his hard-earned money.
But he didn’t take that break. Instead, he traded all last week. And you can guess what happened, right?
He banked another $150K.
So, there’s nothing about the way Mr. Person Guy trades that I can impart to you, other than to say that his style is the style of the young.
It’s the way I used to do it, but it involves a lot of risks, and it takes a lot out of you emotionally.
And I’m too old to do it that way now.
Markets, Trading & Finance Links:
The relationship between recessions and market crashes. A Wealth of Common Sense
The 30 minutes that make or break the trading day. The Wall Street Journal
There are different types of declines and it’s good to know which is which. Collaborative Fund
It might be a good time for a refresher course on bear market rallies. The Irrelevant Investor
The epic post of the week about what to do right now. The Reformed Broker
Don’t just sit there. Use this crisis as a way to learn. Ramp Capital LLC
Comparing the corona crash to 1987, 9/11 and 2008. That’s a lot of numbers. Sentiment Trader
By its nature, the current oil shock can only last so long. Klement on Investing
The SXSW cancellation is going to reverberate through the economy.The Wall Street Journal
There’s a bigger threat to Sweden’s $43 billion sovereign fund than the coronavirus. Financial Post
Lessons from the Dotcom bust.WSJ
Lost in this week’s news, Twitter CEO Jack Dorsey kept his job – barely. CNBC
How to spot fake financial news. Advance Capital Management
Coping with market meltdowns. The Rational Walk
Nobody is going to cancel Netflix. The Lefsetz Letter
The winners in an oil war? Consumers. The New York Times
Even though the tax filing deadline is going to be extended, don’t do your own. The New York Times
Feeling stressed? Turn off your screens. Bason Asset Management
This is a post from the archives that I think hits a good note on perspective - something we all need this week.
One week after my mother died, my sister and I arrived at her house with a U-Haul and a mandate to wind down the remnants of her life.
It penciled out as an easy job, as my mom had moved twice in the last five years, each time prompting a garage sale or phone call to one of us inquiring, “Do you want this?”
Anything of significance or sentiment should have been long gone, so we adopted a well-known strategy to expedite the process – save, trash, or donate.
It was a simple algorithm.
“Save” meant my sister or I wanted it. Failing that, if someone else could use it, it went to “Donate.” Anything that didn’t fall into the previous categories went into “Trash” – literally.
But even with our ruthless efficiency, we ran into speed bumps - the first of which was a hoard of ephemera my mother had obsessively collected.
Old travel brochures and printed recipes mixed with bank statements, handwritten check ledgers, and triplicate copies of utility bills - each annotated by highlighter and post-it note.
And file cabinets full of folders, stuffed with everything from 60-page prospectuses for mutual funds she never bought to instruction manuals for exercise equipment she never used.
Not to mention receipts for every repair, upgrade, and renovation ever done on her houses - going back to the first one my parents bought in 1972.
Not wanting to accidentally throw out a cherished photo or a stock certificate for 10,000 shares of IBM, we sifted through each piece one at a time.
But quantity wasn’t the only stumbling block. Emotional drag played its part as well, particularly when we got to her bedroom.
My mom lived alone in a three-bedroom house, but the sicker she got, the smaller the orbit of things around her became.
Hats to cover her bald head. Mints and candies to take the bitter taste of chemo from her mouth. A phone and flashlight for emergencies. Nightshades, an ice pack, and a hot water bottle so she could sleep better.
These things - and more - piled up next to her bed, initially on a small nightstand, then eventually across the length of a massage table, all pulled close within a late-night arms reach.
I’ll admit I felt a tinge of guilt as I cleared away the miscellany of her life, but I had to do it.
Every time I entered the house it felt like she was still there. Around the corner, in the kitchen making a sandwich, or upstairs folding clothes - always just out of view.
I had to start creating space between the memory of her alive and the fact that she was dead.
In these situations, you do odd things. Things that don't make sense.
Like when I bumped into her desk clock and the battery fell out. I quickly scrambled to replace it. To make sure it kept accurate time for someone who wasn't there - and never would be again.
But what really slowed us down was deciding what to do with things that carried a tacit obligation - the antique pair of glasses, inkwell, and church hymnal, for example, found in a small chest of drawers, nestled in the corner of a closet.
Inside the book’s cover was written “John Kelly.” I had a vague recollection of the name and even less interest.
A snippet of retained family folklore told me he was a great-great-grandfather, or uncle, or cousin twice removed – someone from my father’s side who died 150 or more years ago.
I knew nothing else about him, but reflexively put his things in the “Save” category.
Then wondered why.
My father was 30 years gone and had never mentioned him while alive.
My mother certainly had no connection, nor had she indicated any significance for his things.
In fact, the last time I saw them was 40 years ago, in a dirty old box under my father’s workbench.
Why was I saving them?
[A Russian nesting doll with hand-painted scenes from Prokofiev’s “Peter and the Wolf.”]
I was in love.
I thought she might be my wife someday. And I wanted to get her something special.
She was hard to shop for, but I had paid particular attention when she cooed over a friend’s Russian nesting doll.
That’s what I would get your mom.
I went to every place I could think of to find one - tchotchke shops, doll museums, even the local Russian cultural center - but to no avail. And her birthday was tomorrow.
Disappointed and depressed, I went to the mall - a mall I’d been to a hundred times before, one which had no Russian nesting dolls – resigned to buy her a shirt, or something.
Walking through the concourse I passed kiosks selling random crap like handmade jewelry, customized cell phone covers, peanut brittle, off-brand plushies, steak knives, new age crystals, windchimes, bath salts, and Russian nesting dolls.
Yes, right there before me sat Vaclav’s Doll Hut, brimming over with nesting dolls of every size and shape. I picked one I thought she’d like.
It’s the one you’re looking at now.
And the stroke of serendipity that led me to it convinced me that your mother and I were destined for each other.
P.S. One week later I was in the same mall and I thought I’d stop by Vaclav’s to tell him how happy the doll had made my girlfriend. But his kiosk was gone – never to return.
[A Ragged, bearded doll, dressed in Bavarian clothes of green felt]
I was only six and it was the first time I’d flown by myself. I wasn’t scared, but the stewardess who sat next to me gave me ginger ale and a toy airplane just to make sure I was okay.
The flight was short, and Geneva and Roy were waiting for me at the bottom of the stairs when I deplaned.
I called them my aunt and uncle but technically they were “greats” – Geneva my grandmother’s sister and Roy her husband.
I was spending the weekend with them at their house in Kentfield, and knowing how they’d dote on me, I’d been excited about the trip ever since they called my parents to suggest it.
Now in their 60’s, they never had children, and I was their surrogate, just as my father had been before me.
They were wonderful people. Not particularly educated, but cultured, moving in all the right circles in the Bay Area. Roy even played violin in the San Francisco Symphony.
They took me to Fisherman’s Wharf where I tried a shrimp cocktail for the first time.
We ate chocolate sundaes in Ghirardelli Square, then rode the ferry to Alcatraz.
And on Sunday we had a picnic in Sausalito.
But what made the biggest impression on my six-year-old brain were the tall tales Roy told while we sat around the dining table eating prime rib and Yorkshire pudding.
When he was still a young man, Roy had lived in a faraway land called Germany. It was there that he’d seen incredible things, like people paying for a loaf of bread with a wheelbarrow full of money – or so the story went.
He told me about men in boots who marched in the streets, shouting slogans to their leader – an evil man they called “The Father” – who eventually attacked his neighbors and tried to wipe out the people called the “Juice.”
Roy left Germany but returned after a great war had passed and The Father was gone.
He looked far and wide for his friends, many of whom were juice, but they were no longer there.
I remember thinking that The Father had probably taken them away.
Before I went home, Geneva and Roy gave me a present – a Sandman – the one you’re looking at now.
In German, he’s called Sandmännchen, based upon Ole Lukøje, a character by Hans Christian Anderson.
Sandmännchen is the gatekeeper of children’s dreams, and according to legend.
Under each arm he carries an umbrella; one of them, with pictures on the inside, he spreads over the good children, and then they dream the most beautiful stories the whole night.
But the other umbrella has no pictures, and this he holds over the naughty children so that they sleep heavily, and wake in the morning without having dreamed at all.
At the back of my Sandmännchen, there’s a string, attached to an ivory ring. When pulled, it plays a Bavarian lullaby.
On nights when my sleep was disturbed by nightmares, I pulled that ring, and pulled the Sandman close, for protection from the unknown.
And I thought fondly of aunt Geneva and Uncle Roy.
[A Black and white photo of a small grainy image]
I sat in the darkened room and watched the movement on the screen. I’d done this twice before, but still, I was nervous.
“Good,” said the technician. “Just fine.”
She moved swiftly through the process, but the gaps between her words seemed to last a lifetime.
“Good over here,” she continued.
Then she paused, “Hmm?”
Hmm? I thought. What does “Hmm” mean? Don’t say hmm. Never say hmm during an ultrasound.
I held my breath for what seemed an eternity. Finally, she spoke…
“Okay, everything looks great.”
My relief was audible as I let out a loud “Whew!”
Three months down, six to go.
I was fine with just you two. To be honest, I was fine with none. But after you came into my life, I couldn’t imagine it any other way. And if number three brought even half the joy you did, I’d welcome her with open arms.
Her. It was a girl.
I wondered what she’d look like. Specifically, would she be a mini version of her sister, or have a look all her own?
I pictured her with curly hair.
My mind drifted as I calculated how old I’d be when she graduated high school, got married, had kids.
The humming from the ultrasound machine brought me back to reality, as a series of small photos – with even smaller images on them - emerged from a hidden slot.
One of which you’re holding right now.
We raced home to show them to your grandparents and to post on Facebook. We got cheers of excitement and likes all-around. The next step was a name.
Then the phone rang.
It was Doctor Tucker, your mom’s obstetrician.
“We have the results from the amniocentesis and there seems to be an anomaly,” he began. “I’m sorry to inform you that your baby has markers for Trisomy 18.”
It’s a genetic disorder that causes most babies to die in utero, and if they do live to birth, they’re usually dead within a matter of hours.
She died not long after we found out.
I was sad, and as men often do, I pushed my emotions down deep and thought no more of it.
But your mom was devastated and never got over it.
It was my job to inform family and friends, as well as delete social media posts.
Your mother never mentioned the ultrasound photos, but I assumed she’d want me to get rid of them, so I ripped them up.
I never told her I kept this one.
I don’t know why I did.
One of the prime directives for parents is to leave their children with as little burden as possible.
Financial burden. Emotional burden. The burden of things.
What you just read were the letters I want to write to my children, explaining the significance of the things I left behind.
But these narratives are uniquely mine, and I can’t expect my emotional attachments to translate to anybody else. It’s the height of arrogance to think they could.
To me, these things represent the touchstones of my life, but to my children, they are a cheap trinket, a raggedy old doll, and a low-quality image of, at best, an abstract concept.
I understand the importance of history, of family history, and a sense of lineage. But I also understand the value in relieving your offspring from the burden of carrying sentimental straw men from generation to generation.
And if I accomplish nothing else as a parent, I at least want to free them from my baggage.
So, this is the letter I will write instead.
As you wind down the remnants of my life, feel no obligation to take my things with you. I’ve lived a full life and the things I’ve left behind are hollow vessels compared to the memories you carry of me in your heart.
If they please you through aesthetics or emotion, gladly take them with you. If they’ll help someone else, forward them so, but, and this is so important, don’t be afraid to discard them with abandon as you wish.
Above all else, that will put my soul most at ease.
That’s how I hope to break the cycle.
John Kelly’s widow kept his things because they were the only tangible remnants of the man she loved.
150 years down the line, my mother kept them to honor a well-meaning but defective tontine.
If I kept them, I foresaw my children, 150 years hence – if modern medicine is to be believed – wrestling with the same questions that vexed me.
And so I gladly relegated them to “Trash.”
It’s Good, It’s Good
Not this week folks, but “It’s Good, It’s Good” will return next week.
Thanks for reading this week’s edition of The Lund Loop.
I want to hear your opinion on these or any other topics you see fit to pontificate on.
So drop me a line.
If you arrived here by accident, happenstance, or magic, make sure that you become a paid subscriber to The Lund Loop to have it automatically delivered to your inbox once a week - isn’t technology great?
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Talk to you soon,
P.S. It should go without saying - but I’ll say it anyway - all opinions expressed in The Lund Loop are my own personal opinions and don’t reflect the views of my employer, any associated entities, or other organizations I’m associated with.
Nothing written, expressed, or implied here should be looked at as investment advice or an admonition to buy, sell, or trade any security or financial instrument. As always, do your own diligence.