Triple Whammy Day For Markets

Evening all.

It was one of those rare days in the markets when we saw a triple whammy of asset liquidating which goes beyond the normal risk-off correlations we get used to seeing. Here’s a little snapshot of of watchlist to illustrate what I talking about here:

eToro Watchlist Snapshot (e.o.d 11/03/20)

I don’t have $SPX500 on this list, but it was down 4.66%. $IAU , the physical Gold ETF was slightly down, the Gold Miners took a huge hit in $GDX and also both $TLT and $ILTB which are US Bond ETF’s were down.

That gives us the triple whammy of Equities, Gold and US Bonds all selling off at the same time, on a day which saw the Coronavirus outbreak officially labelled a Global Pandemic by the WHO.

The fall in the 10yr & 20yr bonds is probably a good thing as those yields have been getting worrying low, but that will not sooth investors who might feel they have been doing the right thing by selling out of equities and buying them. I’m not sure where they go from here, quite surprising to see them fall quite so much into the end of the day.

I was also surprised by the daily fall in $GDX at 8.44%, when the physical Gold ETF was down less than half a percent today. An order did trigger for another position in GDX and my plan to slowly feed capital into this correction remains in place.

Etoro ProCharts – SP500 Weekly Chart With Correction Targets

As can been seen on this chart of the $SPX500 price has flirted with the 20% correction level this week, both yesterday and today. Price has not finished on the lows on either day though but it very close to getting the official title of entering a bear market. I’ve also plotted correction levels at 25% and 30% and there is some interesting thoughts in these following articles from CNBC.

I enjoy the commentary Mohamed El-Erian provides on the markets and whereas I had been working on the basis of a 20-25% correction as a best guess scenario for ‘peak fear’, this week I did review the size and range of my planned buying to allow for a full 25% correction without using all capital so that some over-run can be accommodated.

Between Cash, Bonds and Shorts, the portfolio currently has 24.20% of equity that could become accessible for purchasing more equities if the correction does develop further. Using the SP500 as a general benchmark for the stock markets, if it has roughly another 8% downside to play-out then I’m happy that I can continue as planned.

I’m going to be taking a look at a couple more ETF’s tomorrow which have just set new 52-week lows that I’ve been watching for a while now. One is $VMO, the Emerging Market ETF from Vanguard, and the other is $SKYY, the Cloud Computing ETF from First Trust. I’ll post about these before the weekend.

Thanks for your time.