Archive for February, 2020

The Coronavirus Is Killing More Stocks Than People: That Could Change

3 | By Shah Gilani

Thousands of stocks, globally, are getting killed as investors shed equities in the face of mounting coronavirus infection rates and deaths.

As bad as it’s been for global stock markets, it could get a lot worse if the number of deaths attributable to the virus, which two days ago was 1,075, increases dramatically along with infection rates and most frighteningly, mortality rates.

The World Health Organization (WHO) estimates the blended global mortality rate from the coronavirus is 2%.

That blended rate incorporates some countries’ mortality-to-infection rates at zero, some as low as .001%, China’s national rate of 2.1%, and the 4.9% rate in Wuhan (the epicenter of the virus).

With the death toll from the virus likely to rise significantly as the virus spreads and underreported deaths in China and Iran come to light, stocks are going to get killed even more.

Here’s what a rising death toll, increasing infection rates, and higher mortality rates will do to markets

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Coronavirus Is Turning Market Psychology Negative: Is Panic Selling Next?

2 | By Shah Gilani

The big selloff yesterday, as broad and deep as it was, coming on huge volume, wasn’t unexpected.

Historically, some of the markets’ biggest drops have come on Mondays.

Typically, the previous week’s selling, whatever triggers it, crescendos on Friday afternoon before markets close for the weekend.

As scared investors worry that more bad news over the weekend will tank stocks on Monday, they sell futures, which draws attention to Monday’s expected weak opening – making a Monday selloff almost self-fulfilling.

Coronavirus fears triggered all that last week with investors shedding stocks going into the weekend and selling futures right up to the open. That’s why Monday’s big selloff wasn’t unexpected.

But it wasn’t panic selling. For the most part, selling Monday was orderly.

The worst news of the day was benchmark indexes couldn’t bounce and ended near intraday lows.

What’s happening right before our eyes is investor psychology turning negative.

The question investors should be asking now is, will more negative news and fear trigger panic selling?

It could and probably will.

Here’s what’s changed, what could trigger panic selling, how to see it coming and what to do about it

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Capital Wave Forecast: We Need to Continue with a Hard Break from the Stance We’ve Been Enjoying

1 | By Shah Gilani

Last week’s Capital Wave Forecast was a hard break from the bullish stance we’ve been enjoying.

I said on Tuesday, “This Capital Wave Forecast is your first warning. Markets are overly optimistic, have risen too far too fast, and are prone to a correction in the coming weeks.”

That abrupt turnaround last week came on the heels of a long weekend of research into how high and how fast benchmarks had moved up in the face of the coronavirus spreading, as opposed to the fake news out of China that infection rates were slowing.

Equities were moving higher in anticipation of a quick resolution to the spreading virus, mostly fueled by new cash plowing into “passive” funds.

That worked…until it didn’t.

Today’s forecast is your second warning

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Covid-19 Is Still Center-Stage, But That Doesn’t Mean You Can’t Protect Your Market Gains and Profit from It

0 | By Shah Gilani

In this week’s Capital Wave Forecast – published Tuesday because Monday was President’s Day – right up top, out front, out loud, and against a very, very long string of very bullish Forecasts, I declared, “This Capital Wave Forecast is your first warning. Markets are overly optimistic, have risen too far too fast, and are prone to a correction in the coming weeks.”

Without hesitation (Wednesday’s dead cat bounce notwithstanding), it’s begun.

Right now, we’re seeing profit-taking.

If there isn’t positive news on the spreading coronavirus, named Covid-19, we’ll see net selling.

In the course of another couple of weeks, if we don’t see actual proof that infection rates are slowing and deaths don’t start declining, we’ll see bouts of panic selling which could, in short order, foster a correction – potentially taking markets down 20%.

From there, it all depends on the virus.

But you don’t need to sit idly by. This is what I would recommend doing to protect and profit in the face of the threat

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Capital Wave Forecast: Without the Coronavirus, Stocks Could Keep Rising – But It’s Here and This Is How to Prepare

4 | By Shah Gilani

Markets aren’t sick by any measure…right?

They’re stronger than they’ve ever been if you look at record highs being made last week and the money flows into stocks and bonds.

It’s all good…right?

NO, it’s not all good.

This Capital Wave Forecast is your first warning. Markets are overly optimistic, have risen too far too fast, and are prone to a correction in the coming weeks.

This is exactly what could happen. But more importantly, this is what you need to do to prepare

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What Happened to ETF Investors in the August 2015 Flash Crash Will Happen Again

0 | By Shah Gilani

In Part III of my It’s All Good Until It Isn’t series on ETFs, I remind ETF investors of the pain and losses the August 2015 Flash Crash caused, make clear what really happened, and explain why it will happen again.

And, I offer advice on how to avoid the same mistakes and losses next time.

Because it will happen again.

Reminiscences of a stock operation gone bad.

The morning of August 24, 2015 provided the industry, exchanges, ETF sponsors, their authorized participants, regulators, and investors with their first opportunity to observe how market protections implemented in recent years would behave during times of significant stress.

Making Sense of the Market’s New Highs (And Which Five Companies Could Grow Fastest Ahead)

0 | By Shah Gilani

Your Capital Wave Forecast for this week is “more of the same.”

That means the trend is still up and stocks want to keep going up.

And, they’re going to, unless the shadow of the coronavirus darkens the global outlook a lot more than it has.

But that still doesn’t account for the reason this rally’s been happening in the first place. Or what that means for five big tech companies (maybe more) that could see huge price action ahead

Kicking Off the “It’s All Good Until It Isn’t” Series with the Dark Side of a $5 Trillion Market

0 | By Shah Gilani

What’s not to like about ETFs?

Nothing, really.

At least until you dig a lot deeper into what everyone loves about them, how supposedly liquid they are, and what risks the “sponsors” and “authorized participants” who create, redeem, and trade them and all their underlying parts, really pose to the $5 trillion industry.

When it comes to ETFs, the truth is, it’s all good…until it isn’t

Boeing’s In Trouble – And Now’s the Perfect Time to Ask Whether You Should Buy, Sell, or Hold

0 | By Shah Gilani

The Boeing Co. (BA) is in trouble.

If it doesn’t get its troubled 737 Max planes certified by U.S. and international regulators and in the air by this summer, it’s dwindling cash and negative cash flow from operations will implode its stock.

But, unfortunately for them, the 787 Max isn’t Boeing’s only aircraft problem.

Regulators are investigating the company’s 787 Dreamliner over whistleblower claims that its oxygen systems don’t work, that managers let defective parts get through quality control checks, and that, when workers installed planes’ floorboards, they let three-inch-long razor-sharp shards of titanium fall the plane’s sensitive electronic equipment.

But, also, despite all its problems, Boeing isn’t going out of business. It’s too important to the American military and the U.S. economy.

But that doesn’t mean it’s not too big to fail (in terms of its stock price).

Investors should be asking themselves what to do with Boeing shares at a time like now: buy, sell, or hold?

Here’s what you need to do with the stock no matter what happens next