Today is a classic example of why smart money buy bonds as a proxy for shorting stocks.  Bear market bounces, such as today’s, are much too violent and can, including for many today, be fatal.

Here is a post about Stan Druckenmiller’s strategy right around the 2018 Nightmare Before Christmas Bear Market,

If you listened to the Druckenmiller interview we posted on New Year’s Day,  he thrives in bear markets, not by shorting stocks but being long bonds.  Shorting stocks in a bear market, though more profitable,  he has learned is riskier due to the higher propensity for nutcracking short squeezes.  Druck also worries about the level he is buying at.  – GMM,  Jan 2, 2019

Our Twitter feed was full of stories about traders who shorted S&P futures at the Globex open last night blowing up just a few hours later.   If you shorted Spooz at the open last night, for example,  you lost 5.74 percent by the close.  A long T-Bond position would have lost you 0.64 percent.  Of course,  what matters is your relative position size and the extra leverage you take on with the bond trade versus the stock short.

Key Levels

The Dow had its biggest one day gain today (see tables below) with the S&P recapturing the 200-day moving average.   A very interesting low in this correction at 2855.84, right at the October low and launch point for the Fed’s No QE ramp.   That is the level the bears will now be gunning for.    Pay attention.

At the end of the day,  the central banks are fundamentally irrelevant in this crisis, in our opinion,  and we really won’t get a handle until the Feds start testing en masse for the coronavirus.  Note we said “fundamentally,” folks, not technically.  Spare the hate mail.

The low COVID-19 count in the U.S. is largely the result of not testing, i.e.,  “Don’t Test, Don’t Tell.”

In the United States, tests have taken place at a far slower pace. A genetic analysis suggested that the coronavirus, which causes a highly infectious respiratory disease called covid-19, has been spreading undetected for about six weeks in Washington state. The U.S. Food and Drug Administration on Saturday took steps to sharply expand testing.  – Wash Post

Wait, there’s more if you want to be outraged,

South Korea had tested a total of 66,652 people for the COVID-19 coronavirus virus as of 4 p.m. local time Thursday, whereas Japan had reported administering roughly 1,890 tests and the U.S. only 445. The huge discrepancy compared to other countries reflects how quickly South Korea’s numbers have been rising, experts say.  – ABC

Valuation As Our Gas Gauge

So, after the 15 percent crash from the February 19th high to February 28th low,  the S&P is still down 9 percent.

Are we buyers?   Check out the black line on the chart below, which shows valuations still at extreme historical valuations.    We saw one comparison of today’s price action to March 2009.   No, no, no.  Not much gas left in the tank.

Yours, baby.