‘So, It Was Right Not To Buy The Dip’: Traders Warily Eye New Week As US Reports First COVID-19 Death

‘So, It Was Right Not To Buy The Dip’: Traders Warily Eye New Week As US Reports First COVID-19 Death

At the risk of stating the obvious, the news flow around COVID-19 on Saturday was not what one might call "positive". Barring some breakthrough, policy intervention or material improvement in the general trajectory of the situation, risk assets are likely to remain displeased in the new week, especially on the heels of China's official PMIs for February which painted a dire picture (although I would again caution that a plunge in indicators of Chinese economic activity should not be greeted wit
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16 thoughts on “‘So, It Was Right Not To Buy The Dip’: Traders Warily Eye New Week As US Reports First COVID-19 Death

  1. Is it just me, or does anyone else think that Super Tuesday potentially turn into a “super spreader” event? There are an unknown (largely because the CDC had been constraining who could be tested until yesterday) number of people with coronavirus in the United States. We know this because of the handful of cases of “community spread” that have been identified on the west coast. Now, millions of people are about to go out and vote, which means people in close quarters at the polling stations, handling the same objects and surfaces. If we’re lucky, there are very few cases within the public at large right now (again, because of the lack of testing we just don’t know), and so the potential to spread will be low. But if there are a meaningful number of people infected that show up at polling stations on Tuesday, it seems like this could lead to an explosive growth in the number of cases.

      1. To be clear, I’m not suggesting that the primaries should be delayed. That would be a serious over reaction based on the information that’s currently available. I’m merely trying to point out (again, due to the lack of testing over the past couple of weeks) that the information we do have – that there are still only a few cases within the US – might be inaccurate. If this is the case, and there are dozens or hundreds of cases “in the wild” in CA for example, then the primary elections (which entail large groups of people gathering in relatively close proximity) could serve to spread the infection in a dramatic fashion (“Super Spreader Tuesday” if you will).

        However, you’re right. For a more paranoid long-term take, if this does turn into a nationwide outbreak with 40%+ of the country being infected (as some experts are anticipating) then you could certainly imagine this being used as a pretext for delaying the elections. Furthermore, even if an election did take place as scheduled, you could expect that in such an environment voter turnout would be dramatically suppressed (perhaps so much as to call into question the legitimacy of the election? – I don’t know).

  2. “So it was right not to ‘buy the dip””, Rabobank’s Michael Every said, in the Friday edition of his global daily macro note,”

    It really depends on the global central bank response. If, when and how much.

    1. @ Bob. Not sure about that. If the Fed cuts by 50 or more points we get a violent relief rally, but if that is followed by a steady drip of bad COVID19 news, then I suspect risk assets head south once again. But that is probably the obvious trade so something else will happen ….

      1. “But that is probably the obvious trade so something else will happen ….”

        People have been conditioned by ten years of central bank responses to buy the dip, Fed funds futures indicate a 95% probability that the fed will cut to 1.00-1.25 by march 18th. The Fed always, as our host has already posted, ‘bends the knee’ to the market. Whether any gains will stick is an open question, but I wouldn’t be surprised at the rapid onset of more QE.

        If you’ve only got a hammer, every problem is a nail.

        1. “Buy the dip,” in the sense you’re referring to, already failed. It would have brought back to even or close to even after a couple of down days this week. There may be one heck of a bounce on Monday, but you’ll do well to sell into it, even with Central Bank intervention. As I said on a previous post, throwing cash at a virus just gives you a pile of virus-infected cash.

  3. H-Man, there is a lot of spilt milk under the bridge. Rather than cutting rates, the Fed would be better off by creating a credit facility to be used to counteract the virus. I am not talking about a couple of billion which is a drop in the bucket. We are ill prepared if this forest fire breaks on the ridge since we have no idea of the direction. We will need $$$ not only for medical support but to restore supply chains in the economy. Currently there are 62,000 ventilators in the US, most of which are being utilized in ICU’s with existing patients. Throw in a shortage of surgical masks, R95 ventilators, haz mat suits. We are talking about a bigly credit facility. If you think I am simply wailing and hand wringing, try and buy some hand sanitizer or disinfectants. Meanwhile the flow of information to the market is simply negative, negative, negative and that mantra does not appear to be ending anytime soon. Trying to price this market is like nailing jello to the wall. And every time you try and nail it, you’re lower on the wall.

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