First, let me address the comments in the news this morning that Italy has turned the corner on COVID-19. The number of new cases and deaths has fallen the last two days, which is to be expected with the tightening of quarantining standards.

While this is encouraging, it’s important to note that we’ve seen daily dips before – both in total cases and deaths.  From our COVID-19 post, pinned at the front page of this website.

It’s also important to note that Italy is far ahead of the US in terms of outcomes – with closed cases representing 21% of the totals and deaths 44% of closed cases.

In the US, closed cases are only 2% of the total, and 3/4 of those resulted in death.

And, Italy’s mortality rate continues to tick higher. It recently topped 9% of total cases and should reach 10% by the end of today.Even if Italy has turned the corner, it remains at least 10-14 days ahead of the US – possibly much more. It it way too early to talk about the US doing the same, especially since still have no ability to test those who should be tested. It is therefore much to early to talk about ending social isolation. Things are going to continue to get much worse.

The daily rate of growth in deaths fell from 39% on Sunday to 32% on Monday. But, this is one single data point — not a trend. The 10-day moving average is nearly 28% and rising – up from 18% a week ago.

At 39%, we’d reach 1,000 deaths tomorrow, 10,000 on April 1, and 100,000 on April 8.  At 32%, we’d reach 1,000 deaths on Thursday, 10,000 on April 3, and 100,000 on April 11. Neither is exactly good news and neither argues for removing the quarantining which is our best chance for flattening the curve.

Meanwhile, we’ve had another algo-driven overnight ramp to the same trend line which has marked previous bounce tops for the past several weeks.This one was aided by the Italy comments as well as a well-timed hammering of VIX as futures backed off their limit.

The primary goal remains to get DJIA back above 18,974 – the 1.618 Fib the Dow broke through post the 2016 election. As we discussed last week, this remains the score card that matters the most.

continued for members…

With the overnight ramp, ES has clawed its way back to the bottom of the yellow channel which broke down last week.

For SPX, the yellow channel bottom is around 2410.

Note that VIX has reached its SMA20. A drop through it would be very helpful to ES and SPX pushing up through those TLs of overhead resistance.

On the bond front, the 2s10s is bouncing off the white TL, but just barely.The 2Y has settled in just above the latest support. And, the 10Y continues to remain in the safe zone between the 1.000 and 1.272 Fibs.  Note how much it has quieted down over the past 48 hours.

Oil is bouncing, but not making a whole lot of headway.

RB’s bounce is more impressive, but it’s fighting for its life – having been below all chart support.

Currencies remain on hold, with EURUSD still backtesting its white channel bottom and .786 and USDJPY still hanging back. This leaves DXY just below its .886 – fairly neutral.The most impressive move over the past day or two has been GC, which as expected is back to its channel top and testing its previous breakout high.

Today’s goal is to hold ES/SPX close enough to the falling trend lines and channel bottoms so that if/when Congress reaches a deal stocks will be able to break out. If the deal fails to materialize, ES 2155 and SPX 2138 are still the downside targets.

UPDATE:  12:28 PM

SPX and ES have gained over 8% on the day, thanks primarily to VIX’s beatdown. But, VIX is edging higher and coming up on overhead resistance. If it breaks above the TL and/or SMA5 200, we might see ES reverse at its SMA10, now at 2437.57 intraday.Note that SPX is coming up on its SMA15 200, often a reversal point. It is also nudging up against its yellow channel bottom. Last I heard, there’s still no deal in Congress.

 

UPDATE:  3:40 PM

Another Tuesday, another runaway spike in stocks. 2s10s is back below 48 bps, USDJPY is seesawing higher, and CL is technically rallying.

Both SPX and ES have pushed above their yellow channel bottoms and ES is almost to its SMA10.

Ironically, the one drummer who’s marching to a different beat: VIX.Keep in mind that the Fed’s recent announcements were sometimes cause to sell the news. With the Congressional deal so hyped, there’s no guarantee that the market will spike higher if/when it’s announced. Today’s rally isn’t any more legit than any of the others. As always, this is about whether the manipulation can win out over the fundamentals.