20200327 Still need patience

27 mar 2020

Although the number of U.S. initial jobless claims on Thursday soared from 282,000 of last week to 3.28 million, the stock market still rebounded, over 20% in three days. The media reported that the market is returning to bulls. Obviously, the market ignores the severe bearishness data, and focus more on the Fed’s unlimited money-printing policy and the US government's upcoming 2 trillion US dollar fiscal stimulus. In addition, in addition to the Fed, Europe will also cancel the fiscal deficit ceiling and the ECB ’s debt purchase ceiling, which is actually emulating the US money flooding policy. I’m more conservative about whether the stock market's lows have passed or not. The basic assumption is that the key to the impact of the epidemic on the economic downturn is not how many people become sick or how many people die, but the continuity, that is, "how long will the government lock people down?" As long as the number of infected people remains at a certain level, there will be a certain threat to force the government to continue to implement strict lockdown measures. In addition, even if the government does not implement it, people will naturally reduce consumption and impact the economy. As to whether the epidemic can be controlled quickly, it is difficult to judge. The market may expect that the epidemic situation in the EU and the US will be quickly controlled according to the Chinese experience that controlled the spread two weeks after the lockdown cities. However, due to the initial negligence, the flow control in the EU and the US is chaotic. The current case growth rate is still increasing. Due to the lockdown were launched after widespread, it takes more time to obtain control. In addition, the virus is gradually spreading in tropical countries at the southern hemisphere which is current during summer, and the hopes that the virus will disappear by summer are disappearing. In short, it is difficult for the government to lift economic lockdown in a short period of time. As long as the government does not release, the economy will not improve. In summary, this week's sharp rebound in the market is more likely to be the story of the government's efforts to stimulus, plus the technical retaliatory rebound of the mean reversion after sharp fall, but the more the rebound, the pressure on the 20 MA and 60MA resist. Sooner or later it will be examined by the recession. Important data will be released in early April, and the market may retrace again.
Compared to the enthusiasm of the stock market, the bond market and commodity responses are relatively calm. The US bond yield did not fall again even under the policy of the Fed’s unlimited money-printing policy, it has entered a triangle-converge pattern and is still no directions; while the oil price reflects the low fundamental demand and excess supply, hovering at a low level. In terms of trading ideas, there is currently no tendency to place a large bet on the direction of the stock market. However, if the stock market declines again causing volatility to rise, based on the assumption that there were a 30% drop in the first wave, the most rapid decline has over, and the next trend is to assume a slow decline. If the stock market falls again and the VIX rises, will increase short VIX position.