Getting Out Of Dodge

If you think that the elected leaders of your local city council are hapless incompetent fools then console yourself by the fact that things could be a lot worse. You could be residing over here in Valencia where, despite the threat of a deadly global virus epidemic, the city council in their infinite wisdom decided to throw all caution in the wind and green-light the annual Las Fallas festivities. If you are unfamiliar, it’s a week of non-stop celebration which usually attracts hundreds of thousands of inebriated horny thrill seekers during the course of March. What could possibly go wrong?

Suffice it say that (like every year) we are getting out of Dodge and won’t return until March 20th, which not so coincidentally is the day after the big finale. The featured image shows one of the two places we are heading this year. One of our close friends just happens to own one of the famous Molinos of Javea where we’ll get to spend the first week.

Molino means ‘mill’ or ‘windmill’ in Spanish, and the ones in Java are all situated high up in what the Spaniards would call a mountain – however as an Austrian I’d call it a medium size hill. Either way back in medieval times their purpose was to take advantage of the strong breeze coming from the ocean to mill locally grown wheat. These days of course all the Molinos are either in disrepair or have been converted into little villas with a $1 Million view.

Although the ocean may be a wee bit chilly for swimming in early March I am very much looking forward to taking the boat to some of the amazing hidden beaches in the area. I’m not a fan of saltwater but my lovely wife insists on jumping in any open water she encounters (no, she’s not British).

After that we are heading to Chulilla which is situated an hour North of Valencia in the Comarca of Los Serranos. It’s an ancient village nestled in a giant limestone canyon that is a bit reminiscent of the Grand Canyon, just on a smaller scale.

Despite living in Valencia for almost eight years now I somehow never had heard of the place and only came across it by accident. Turns out Chulilla is actually considered one of the best rock climbing areas in Spain, but even if you’re not a climber it makes for quite some dramatic vistas and unique hikes.

FWIW I’m no wimp but there is no way anyone would ever get me to climb up a wall like this. Last year during our visit to Slovenia I mentioned that very sentiment to a rock climber who was instructing some very courageous lady. He seemed a bit taken aback and responded that there is no need to be afraid of heights, upon which I replied: “I’m not afraid of heights, I’m just afraid of falling to my death.”

Anyway, given all those amazing vistas ahead I decided to buy myself a little toy, which should allow me to produce some amazing footage without the risk of breaking my neck or ending my days in a wheelchair. Assuming of course I don’t crash the damn thing during its maiden flight 😉

Speaking of cliffhangers, there’s really not too much I can offer regarding the situation in equities. The Friday close left us with a nail-biter that could resolve in either direction – and violently so.

Technically speaking I consider ES 2850 the last line of defense, as mentioned several in previous posts. A drop through it will invariably lead to a stop run which in turn will trigger panic selling.

And even if we bounce higher from here, the sad truth is that the corona virus most likely is here to stay for the foreseeable future and thus has the potential to roil the emotions of market participants for weeks and probably months to come.

Gold has entered what looks like a high volatility bull market. Although the gold bugs are undoubtedly pleased about the bullish part it’s its HV characteristic that makes it very difficult to trade.

The trend here seems to remain bullish and thus buying large drops < 2.0 std. dev make sense if you want to accumulate positions. I would not want to be a seller in this market.

Bonds have gone exponential and there invariably will be a pullback. Again very tricky to capture and my recommendation is that you trade the hourly panel and small position sizing to take advantage of prospective reversal patterns.

Build up your winning positions and convert them into a daily campaign as things pick up speed to the downside. What I caution you against is to simply look at this chart and back up the truck with short positions – or Lord forbid – naked puts.

The Dollar is over and will invariably drop into the abyss. So I recommend you gather whatever cash you have in the house, put it in a box and mail it here to me in Valencia where I will dispose of it in an ecologically sustainable manner (most likely at the nudie bar).

J/K – however my humor ends with the current formation which looks like there may be more downside in store for us. A breach < DX 95.5 will most likely take us lower to 95 or perhaps even 94.

This really sucks as I was already looking for enjoying triple digits in the DX again. But whatcha gonna do – it was good while it lasted.

Last but not least: crude which is in a free-fall. The weekly panel on the left above shows the magnitude of the sell off while which has taken us to new multi-year lows.

How low can she go? Nobody knows… how long can Covid-19 keep global trade at a standstill? We are heading into market conditions the world has not faced since the onset of the Spanish flu over a century ago. And that was before cheaply available airline travel all across the globe.

However over the long term the coronavirus may just turn out to be a blessing in disguise that ends up reminding us all of the things that truly matter in life: family, friends, and a network of neighbors you can rely on when a serious crisis hits. Unfortunately it seems to be part of human nature that meaningful lessons usually have to be learned the hard way.

Now before I return to packing my bags here are this week’s stock victims for my intrepid subs:

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