History is being made today and this week. Thanks for reading and enjoy the evening.

The market has more moves than a shortstop batting .150. 

I have not sold a share of anything purchased today or yesterday.

The S&P futures are +50 from the day's lows.
Breadth is now 8-1 negative.
Ho hum in the new regime of heightened volatility!

In dollar terms, I purchased more equities in the last 24 hours than in any week during the last six months.

When the market advanced relentlessly in 2020 I quoted my pal Wally Deemer (Putnam's technical analyst in the 1970s) that :

"When the time comes to sell, you won't want to."

He also said:

"When the time comes to buy, you'll be too sick to."

Perhaps that is appropriate for today.

At around noon I will be travelling to a research meeting about an hour away and I will be out of the office until about 3 pm.
A heads up.

Market breadth is negative 13-1.

Initial jobless claims rose to 219k from 211k last week and that was 7k more than expected. As a print of 217k dropped out, the four week average was little changed at 210k vs. 209k. Continuing claims, delayed by a week, fell by 9k.
The pace of firing's remains low and we can only hope it stays that way as the U.S. potentially now enters the eye of the virus hysteria storm. I say hysteria because the emotions and fears will FAR outpace the reality but the economic result is still real and painful.
Here is a chart of four week average in claims:

Core durable goods orders for January, dated data of course in light of everything going on, surprised to the upside with a +1.1% month over month gain vs. the estimate of up +0.1% and December was revised up by three tenths. I wonder whether some was pent up spending upon the signing of the trade deal. Capital spending (not included here is spending on software and some other R&D) though remains modest as it was up just +1.4% year over year. Versus last year orders for electrical equipment and computers/electronics rose, offsetting weakness in the industrial world of machinery and metals. Core shipments, plugged into GDP, also exceeded expectations which would lead to a slight upward revision to Q1 GDP which is right now a complete mystery. 

Bottom Line

This number at least tells us where things stood before the virus outbreak but assume that many spending decisions are now frozen thus making it irrelevant.

Here is chart on core durable goods orders year over year: 

I added to the following longs (on the opening): (C) , (BAC) , (GS) , (SPY) , (QQQ)  , and (FDX) .

While the S&P 500 is approaching its 200 day moving average of 3045 and the Euro STOXX 600 is basically sitting on its, interestingly the China H share index and the Hang Seng index both closed higher overnight. Maybe reflecting the belief that the rest of the world has to deal with this virus while the worst has passed in the region it first came from. Both are still down 5% year to date and lower on the week but I just wanted to point that out.

There was an obvious response in the AAII individual investor sentiment index where Bulls fell 10.1 pts w/o/w to 30.4 to the lowest level since October 10th, 2019 while the Bear jumped by 10.5 pts to 39.1, the most since that same day last October. Also of note, the CNN fear/greed index closed yesterday at 21 in the 'Extreme Fear' category, https://money.cnn.com/data/fear-and-greed/ . Bottom line, so the uber complacency and teflon feel to this market is now being wrung out but keep in mind this only matters for the very short term.

I have to applaud the Bank of Korea today where going into today's meeting the consensus was that they were going to cut interest rates by 25 bps to 1%. That of course is the default reaction by everyone that whenever a rough patch comes, central bankers will print and cut. Well, the Bank of Korea stood its ground and did nothing because they understand that a rate cut isn't a vaccine to what ails the global economy. Governor Lee said "A health security crisis is the cause of the current economic difficulties. In a situation like that, micro support for self-employed businesses and companies in trouble is more effective than an interest rate cut." The Kospi did close down 1% and is lower by 6.5% year to date but it was the right show of patience on the part of the BoK. The Korean won is little changed.

In the eurozone, the February economic confidence index for the region actually rose .9 pts m/o/m to 103.5 and that was above the estimate of 102.8 mostly led by a rise in confidence in manufacturing and with the consumer. While still depressed, this index is now up for 4 straight months. Of course with the virus worry now reaching Europe, we'll have to see where it goes from here. This beat is helping the euro today get back above $1.09 vs the dollar.

EUROZONE ECONOMIC CONFIDENCE

Also out in Europe was the ECB loan data where total Eurozone loans to non financial businesses rose 2.6% y/o/y, the same pace as seen in the prior two months. It's pretty lackluster considering how cheap credit it. Households responded more as loans to them grew by 3.7% y/o/y vs 3.5% in December and this is being mostly driven by mortgages which rose by 4.1% y/o/y. In response to the easy money, the ECB has now created housing bubbles in certain markets. It has gotten to the point where they are looking at recalculating their CPI figure because it currently understates the cost of housing. So we've had scorched earth monetary policy over the past 6 years from the ECB on a faulty and understated read of inflation. You can't make this stuff up.

Facebook FB and JP Morgan (JPM) are approaching my buy zones - at $185 and $122.50.

* Tragedy creates opportunity and we shouldn't be silent to the potential of an upside market trade developing in the current sea of concern and fear
* If high stock prices are the enemy of the rational buyer, low stock prices are the friend of the rational buyer
* The "everything bubble" has been pierced - as speculative stocks (for example SPCE) have swiftly fallen back to earth
* At the 1:30 am lows, S&P futures were lower by -50 handles last night (was it a successful test of the 200-day moving average?)
* According to my calculus - at the above early morning lows - the market's upside reward exceeded the market's downside risks for the first time since late 2018/early 2019
* The tragedy about history is that while we may learn it we rarely learn from it - remember the words of my pal Byron Wien that"disasters have a way of not happening" as well as the wisdom of Warren Buffett (see quote below)

"The Chinese use two brush strokes to write the word 'crisis.' One brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger--but recognize the opportunity."
- President John F. Kennedy 

Over the last month (and with markets appreciably higher) I had strenuously argued that speculation was running amok ( (SPCE) , etc.), market structure posed heightened risk (as ETFs and risk parity thrust everyone on the same side of the long/bullish boat), the underlying foundation of profit and economic growth was unsound, there was growing political and policy risks, and that the possible supply chain and demand implications of the coronavirus were being ignored.

Over the last 1 1/2 weeks, flowers and balloons have been replaced by pins and needles.

Prices (the S&P has fallen from 3393 to about 3080) and valuations (price earnings ratios are -9%) have been reset much lower in the face of concerns regarding the spread of coronavirus.

Though often viewed as a Perma Bear - I am not, as there is more contrarian and less perma bear in my investing DNA (which is governed by a calculator and a non consensus orientation).
There is a saying in Tibet that "tragedy should be utilized as a source of strength - no matter what sort of difficulties, how painful experience is, if we lose our hope, that's our real disaster."
So, let's examine the non consensus view - some reasons why I have started to do some buying:
* China has moved on. Coronavirus cases are down and its stock market is well off the lows. (Interestingly, today the China H share Index and the Hang Seng closed up on the day.) Will this be the blueprint for the rest of the world as well?
* When China sneezes... The last two major selloffs in U.S. equities were China-induced (devaluation fears and a trade war with the U.S.) - these proved to be great buying opportunities.
* A point of maximum fear? There are many examples of this - Dr Roubini in the Financial Times, Mohamed El-Erian on CNBC, etc. "This time is different." But will it be?
* Market structure systematics created a perfect storm. We entered into this selloff with CTAs near record long with a need to sell substantial sums of stocks if the market inflected. This has more or less been absorbed now.
* Corporate buyback bids could trump systematic supply at this point.
* Volatility has spiked and the market may be pricing "guaranteed" panic.
* Speculation is no longer running amok and the "everything bubble" has been pierced. Stocks like SPCE, downgraded by Credit Suisse this morning (and many others) are in free fall now - erasing much of the recent gains as speculators run to the hills.
* As discussed in yesterday's "After The Fall" and "Brokedown Palace", stocks are swiftly moving towards oversold as market and economic expectations have quickly soured.
* If the old narrative comes back - it looks more sold than ever with yield gap support (and a 10 year U.S. note yield of 1.31%) coupled with a President Trump re-election (despite Sanders' ascent) at the highest probability this year.
* If financial TV and "talking heads" are viewed as a contrary indicator - the confident Bulls of only 1-2 weeks ago have confidently reversed their bullish views and now see little opportunity to buy. (Reminding us of Divine Ms M's wonderful phrase, "Price has a way of changing sentiment.")
* At the lows last night, S&P futures were within one percent of the 200-day moving average. Could that 1:30 am print have been a successful test?
* As my friend Byron Wien likes to say, "Disasters have a way of not happening." It is also a good idea, for long term investors to consider another quote - this one from Berkshire Hathaway's Warren Buffett: "In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression, a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497."
* Finally, and most importantly, lower prices are the friend of the rational buyer. My calculus suggests that, for the first time since late 2018/early 2019, (statistically), the upside reward exceeds the downside risk - using a "fair market value" of 2850 and based on my projected (and most probable) 2020 S&P range of about 2900-3300. (Last night the (SPY) /S&P Index equivalents were about $306/3060). In S&P Index terms that produces upside of about 240 S&P points and downside of approximately 160 S&P points.

Danielle DiMartino Booth says planes ain't flying, freight and passengers ain't moving:

• World Trade Monitor's annual trade volume contracted for only the third time in the last three decades making the current episode distinct given the prior two annual declines coincided with U.S. recessions; WTM trade flows do not, however, include services
• The travel & tourism sector accounted for a tenth of total global GDP and employment in 2018 with leisure travel's spend four times that of business; travel & tourism accounted for 27.2% of total global service exports raising issues for consumer discretionary
• Jet fuel is a daily proxy to gauge marginal global travel demand as leisure travelers cancel plans with greater ease; the recent significant declines in jet fuel prices presage more serious declines in global consumption

People have bartered since the dawn of civilization. The system involves an exchange between two parties using goods and/or services for payment instead of currency based on a mutually perceived value. A plumber of yore could just as easily have repaired a baker's well in exchange for baked goods in lieu of the (many) 'Benjamins' he or she would receive today. But cows? Around 1000 B.C., the earliest form of coins originated in China with bronze and copper cowrie shells. Cows, however, pre-date this form of exchange by multiple millennia. So now you can answer today's title query.

Fast forward to 2019 AD, where fewer cows traded hands for only the third time on record. Translation: Tuesday's CPB December World Trade Monitor (WTM) revealed that world trade volume registered its the third annual contraction in the three-decade history of the series. Tallied by the Netherlands Bureau of Economic Policy Analysis, the other two annual declines posted were in 2001 and 2009 and coincided with U.S. recession. (This development was presaged in the Weekly Quill two Wednesdays ago.)

As popular as the WTM is to gauge the pulse of global growth, it has its shortcomings, especially in the context of Coronavirus. A quick perusal of FAQs on the CPB website yielded this: "Do trade flows include services? No. WTM trade flows are based on monthly Customs data and include goods trade only."

Last Friday's Feather highlighted the emerging downside risks to travel being larger than those to the industrial sector. That commentary focused on U.S. exposure from diminished travel risks. We take this discussion global via a new source.

• The World Travel & Tourism Council's (WTTC) research indicated that "the sector accounted for 4% of global GDP and 319 million jobs, or 10% of total employment in 2018." Travel spending is "firmly weighted towards the leisure market," by a ratio of four-to-one versus business spending. The sector also accounted for 6.5% of total global exports and 2% of total global service exports."

For perspective, WTTC's analysis is broad - spanning 185 countries and 25 world regions - and comprehensive, taking account of direct (e.g., hotels, transportation), indirect (e.g., travel & tourism investment and purchases from suppliers) and induced (e.g., spending of direct and indirect employees) spending.

Nearly half of travel & tourism GDP occurs in the top five markets of the U.S., China, Japan, Germany and the U.K. China (78,064) and Japan (178) are taking bigger hits given the concentration of Coronavirus cases there relative to the U.S. (57), Germany (18) and the U.K. (13).

But we know that the virus is spreading like a bionic grasshopper from one continent to the next. As QI landed in Mexico City yesterday, it was impossible to miss that all official personnel were masked. The world is on Coronavirus alert. Any and all trips are subject to cancellation, even to countries free of the scourge...for now.

The implications for global employment cannot be dismissed. WTTC notes that travel & tourism support one in every ten jobs on the planet and have accounted for one in five of all jobs created worldwide in the past five years. Wealth has been created on a grand scale and with it, the jobs that cater to world travelers. The risk is that this dynamic engine will stall out...indefinitely...until the Coronavirus scare is contained.

Leisure making up about four-fifths of the global travel market squarely puts the consumer discretionary sector in the crosshairs. How to gauge this in real time? That would be jet fuel prices.

The advantage of using jet fuel as a Coronavirus indicator is that it's a daily indicator. Jet fuel inflation is a proxy for global travel demand, while also having a good track record in mirroring world trade volume, as shown above.

Leisure travelers, or 'transient' customers as the hotel industry knows them, should have a higher impact on the jet fuel price trend because there are more of them who can cancel their plans with ease. This helps explain the precipitous slide in the year-over-year trend in jet fuel prices in January (-18.6%) and so far in February (-25.2%) versus December's strong 21.8% gain.

The Venn diagram inset courtesy of Moody's in today's graphic demonstrates other angles of China's footprint over the three major global sectors of commodities, trade and tourism. This simple yet clever illustration shows how countries like Russia, Chile, Australia, Korea, Thailand and the Philippines overlap two major sectors, while Malaysia and Canada are exposed to all three.

Moreover, jet fuel is the common denominator. If planes ain't flying, freight and passengers ain't moving. Jet fuel is high on our watch list; it should be on yours too. You can bet your bottom cow - uh...dollar - that when it turns around in a durable manner, the scare will have passed.

In pre-market trading I moved to large (SPY) and (QQQ) trading rentals at $306.95 and $212.64, respectively.