Angst and cocooning - related (both literally and psychologically) to the expansion of precautionary 'battening-down of hatches' we called for over the past couple weeks. As the continuation pattern resumed S&P decline as called for, relates to believing no recent rebound were sustainable, it's the A-B-C decline outlined with noted factors not mitigated yet. 

While WuFlu (my term for the Wuhan coronavirus) frenetic liquidations of course are at the heart of current actions (relegating Impeachment almost to the sidelines of importance as to what matters to humanity), this was a decline we forecast to begin by mid-late January, extend into early-to-mid February (at a minimum), and ironically ahead of my talk about the stock market and reducing cardiovascular event risk too (that's a hybrid topic of my forthcoming February 8 talk at 3:30 pm at the Florida Money Show). I'll probably not wear a mask while talking, providing nobody coughs (!).  

Avoiding market exposure with a buyer's strike Friday (I'd rather not say panic) amplifies the already ongoing setback we had projected, and I am glad we were able to forewarn that WuFlu greatly exceeded estimates in the early days, although of course I wish reports we had were wrong. It turns out they were not, so I thank both a friend in California that returned only 3 weeks ago (it was less than 2 weeks when I shared the warning), a respected doctor he knew in Shanghai had conveyed the information, as well as a military intelligence source noting certain stories were plausible.

I also was and remain critical (but understand) the news censorship that's both not answering the question of why we now quarantine evacuees, but really do nothing with regard to the thousands flying here in recent weeks who could be traced with reasonable efforts beyond 'asking' them to just come forth. The greater risk is perhaps from those already arrived here.

We also saw and reported on the 'whistle-blower nurse', who after being a bit concerned for her well-being are relieved that she's being regarded as a 'hero' now, but normal people in Wuhan who appreciated the alerts; well before more-proactive moves by their own Central Government.  

Speaking of 'central governments', I'm unsure how to respond to the CDC ordering (for the first time in 50 years) the full quarantine of consular staff that was flown back to March AFB California, since nothing is said about the thousands of 'other' travelers that arrived in the United States or were simply aboard transpacific or connecting flights who were cleared simply because they had no fever, and released into the general population.  

This matters because the pattern continues. 5 million 'escaped' Wuhan; I am glad for them. But they went somewhere and some were carriers. To this day flights from China continue to deliver passengers 'only' with IR (infrared) fever checks and that's insufficient. I understand that there's no way to keep (or recover and place) thousands who traveled recently into quarantine; but that's why believing the risk to the USA is minimal is very unrealistic. Of course its better prepared than China; but we'll get some.  

I have called for 'flight suspension' for 2 weeks and we finally have it; but in a progressive fashion, so now you get several days of panic. Days ago we reported pressure from American Airlines (AAL) flight attendants and also a Pilots boycott, so fortunately everyone came around, but not as quickly as we'd have preferred. The end-April scheduling halt may not be realistic an I'd be a bit concerned about financials for 'domestic' flights as well.

United Airlines (UAL) will miss revenues by 3% or so, Delta (DAL) maybe as much (it has bee emphasizing long-haul flights and especially with their new A350 service to Asia) and American has less gross from Asia. They cannot I'm thinking mitigate the loss of these flights, there will be a general reduction in domestic travel (and cruise ships too) based on what is already known, and it may only worsen if we start to have bigger outbreaks in the U.S.  

I'd shared this morning (on a morning comment) that two personal friends I'd mentioned flew to Chicago yesterday (to my surprise) wore surgical face-masks on the flight, and noted a number of passengers doing so, on the flight and at O'Hare once they landed. My comment about cancelling plans for a trip again to one of my favorite escapes (Puerto Vallarta) can't be the only such change in travels. In my case I didn't want to deal with a 'who knows where they arrived from' crowd on the return thru Customs, more so than any other concern. Yesterday I mentioned N-95 respirators and I'll add to that N-100 if really concerned (beware of price gouging as already exists on Amazon and eBay). (A respirator provides a seal while a surgical mask does not; both 'may' be adequate for this, I don't know.)

Technically ... these two weeks have pointed to the rising bottoms S&P pattern and projected S&P would break with the market's move below a rising trend and the standard deviation envelope on a daily chart.

Extent of decline is not based on indicators but on expansion of outcome from this phase of a 'Black Swan' event that as I've outlined these weeks as compounding an already expected decline during this time-frame. 

We tempered our preceding (and correct) optimism based on our internal projections, which were partially related to seasonal flows or institutional re-balancing, with a view that events could take this lower.  

Fundamentally... there's been a belief that this gets out of the way and it is all fine again, and that's not the case. We needed the immediate trade dividend, and as I've written all through these two weeks, that is deferred or at least delayed by the unknown aspects of the epidemic.  

Most important would be preventing it from becoming a pandemic, but I'm already concerned that's the case. You might get a massive fiscal stimulus from China, which is a reason not to get to negative into this weakness I'd looked for. However, although China is about money and their economy, it will have a global shock (both can result in rallies and purges alternating for that matter) even if they try to stick their finger in the leaking dikes. 

In-sum: this is more than seasonal rebalancing and contradicts WHO's recommendation that travel restrictions 'not' be imposed (interesting as it sidestepped the core issue by suggesting it only meant countries far less prepared, and I thought that was a cop-out to minimize what essentially was a pandemic warning, as I mentioned the other day). Finally, airlines are responding, and that's after Beijing said the U.S. reaction is incorrect (really?, I don't think so... if anything it's a couple of days later than logical).

Eventually, we will go on 'offense' to this market decline, but some money managers talking about that now are premature, although yes I suspect a financial stimulus can lead to an intraweek rebound next week, that is going to be 'within context' of the overall corrective action I called for.  

Bottom-line: a further purge is likely regardless of intervening efforts to stem the tide. Ultimately we get to a trading low for S&P, but we tend to be suspicious of the first effort to achieve that. 

We knew this WuFlu virus was transmissible while people remained in an 'asymptomatic' state for two weeks, although I grant that Washington for sure was urged not to declare this a 'public health emergency' quickly enough, though now they have. 

And on cause: to be clear, I'm absolutely not saying it's bio-engineering, nor am I supporting any conspiracy theories with no evidence. I'm simply saying scientists need to do more research to get more data. And finding the origin of the virus is an important research priority. 

Ultimately: what's more, once the epidemic (hopefully not pandemic) is resolved, there will be a lot of work to be done on rebuilding trust and of course, restoring travel and so on. It's likely that the return to normality will be slow but not inconceivable, and that the stock markets (from whatever levels they are at here and abroad) will begin to recover upon 'signs' that a cure or abatement of the contagion is at least on the horizon.  

I quite eagerly look forward to that time, primarily for humanity of course, but as an analyst, I'll look for 'messages from the market' telegraphing not just viral spread (as it does now), but the inevitable containment. How do I know containment is inevitable? We have to be optimistic, in time.