March 22, 2020
Weekly Market Outlook
By Keith Schneider
The massive drop of almost over 40% in IWM (Small Caps) this year highlights the extreme liquidity issues facing smaller companies with lower cash reserves and higher debt levels.
The Dow, S&P 500, and IWM are all trading beneath their 200-week moving averages.
Both the Dow and the Russell 2000 moved into death crosses on their daily charts and broke through key levels on their weekly charts that we highlighted last week.
Despite the huge spread in yields between high yield corporate debt to US Long bonds, it was hard to find bids on corporates.
This key ratio (TLT/HYG) continues to implode and deepen the risk-off sentiment. Even general obligation mini debt could be trouble and the Fed is looking into shoveling money there as well.
This week’s highlights are:
One thing we are very proud of is our quant-based trading model, Alpha Rotation which uses our risk gauges highlighted above. The model has not only kept us safe but profited from the last gasp up in equities. It also exited bonds on what could have been a blow-off top and end of the 30-year bull market in fixed income.
Stay Safe and Best Wishes for your trading