Double-edges swords - tend to describe bounces from S&P (SPX) supports. I anticipated an early Wednesday rebound, but not any sustainable rally. It rallied early, but that's not the point. Sobriety returns when one dismisses the 'structured' morale-building optimism (such as the White House surely attempted), versus the candid perspectives 'history' of pandemics brings. 

In the midst of all this, we come-off a 'priced-for-perfection' S&P, thus a 'mispricing of risk' clearly preceded the WuFlu Pandemic. That requires a wallop of decline to bring equities into more realistic valuation levels. Of course it's too early (especially in the US) to have a perspective on how it will unfold, and how severe the physical and economic impact will be. At least one hint of how markets view 'risk' after the preceding sharp decline look to see how Microsoft behaves. After the Close they are the latest to warn about missing earnings guidance due to the WuFlu epidemic. Now, that shouldn't be surprising, but if MSFT breaks say 165, that's a hint that previous shakeouts don't fully-discount the essential 'stock re-rating'.   

Sure, I for one believed the status is 'blended', and the President wasn't entirely wrong, with regard to the 'relative containment' in the USA. But at the same time the continued 'openness' of our airspace (and unsure they are willing to truly address this without reflecting on the 1918 pandemic), to a degree, forewarns (as does the CDC, HHS and so on) this is brewing on a broader basis. Even just talking about it causes consumers to think a bit about their travels, and maybe even contract local outings, when for the most part (note, the most part) American cities are safe for interaction (and yes I realize there are variations in this across the Country).  

It's all a tragic situation that omits noting the high 'recovery percentage' I mentioned last night, and others should focus on. However that's not the all-clear kind of reassurance people need, and what they want really isn't available yet, no matter what anyone says. Even the White House tends to soft-pedal the 'containment claim' and realizes more money eventually will have to be allocated to fight it, which admits we're unprepared to the extent 'real' knowledgeable people would like to see.

So, trying not to be too somber, after sharing Dean Koontz, excerpts last night.... and by the way thanks to a couple members who offered thought provoking views on that... one of which caught my attention. That was the idea that the 1980's book was 'less some sort of predictive vision' (Wuhan was a small city back then, not the 11 million metropolis it became..while certainly not that anymore), and maybe instead reflected some diabolical individual (or a group?) reading the book, and trying to emulate it.  

Sick thought, but we do know that a Harvard Professor recently arrested, by the FBI, at Boston Logan Airport, was involved as a consultant to that bio-lab in Wuhan, and we don't know exactly when or to what end. Could he be the diabolical perpetrator; who knows? The media is obsessed for now with politics (and that has a market impact of course), while one may wish that 'real' investigative journalism would explore 'why' the FBI arrest and what the allegation was (perhaps espionage or illegal transfer of his knowledge), but we just don't know. I would think this sort of matters.  

 Coronavirus is a very serious issue, particularly as we have no immunity to it. Now, the US is not doing badly 'yet', but that was also true in 1918. I didn't want to delve into parallels, and hope this gets contained. But what happens if inadequate (and smarter) measures are taken, then the genie is out of the bottle. We understand 'containing fear', but China finally got a grip on things, and became aggressively pro-active (even draconian as to how they treated people) in trying to separate individuals.  

They have a very hard time .. even in Beijing today, they mandate grocery shopping with 4 meter (about 12 feet) separation between customers, to avoid unnecessary proximity (I can't imagine subways or trains). That is all necessary because they weren't proactive enough early-on. Is that our status now? Hard to say. But in 1918 they thought they were prepared, as documentation of the era reveals. It stands they were not. 

I'm going to share a long but fascinating Smithsonian story about all this, funded it seems by the Bill & Malinda Gates Foundation in cooperation with John Hopkins and the Smithsonian Museum of Natural History.

Despite not a type who would read much, I wish the President would read this report with realization that a reelection is irrelevant if we don't squash this flu-bug in ample time ahead of the voting, and that handling medical security now, is a lot more pertinent than worrying about morale-building, even though of course, he's correct in urging calm (but also behind-the-scenes ideally a crash program to enhance our preparedness should this move to what is called 'mitigation', and that's what the CDC is telling us).  

Remember this was about the so-called 'Spanish Flu' of 1918. It too was a slow start that mushroomed. And there were doctors urging no worries as the bodies started piling-up. And by the way it began in Kansas, but it was censored; so when it got to Europe, the free press in Spain wrote of it a lot, so it became called the Spanish Flu, even though it wasn't.  

Plus a big revelation to me was the previously-unheard prospect that U.S. President Woodrow Wilson was really suffering 'influenza' fever during signing of the Treaty of Versailles, which proved to overly hobble all the Germans for years to come (the financial reparations and denials), thus arguably contributing to despair and hence rise of Nazism a decade later. I knew about the 'Treaty' provisions, never thought of a 'flu' aspect, nor did I know President Wilson was 'sick', rather than suffering from a light stroke. So here's the link to a long but fairly interesting chronology:  

Smithsonian / John Hopkins 1918 Flu 

Technicals meanwhile... took the S&P swings dramatically up and down but like I've been seeing; this isn't about support & resistance levels as so many expect (and which do offer temporary respites and breakdowns for sure), but as I often point-out, technicals don't operate in a vacuum.

To be very bullish here, one has to be in denial that the world changed. If the President is or isn't in-denial isn't germane for the S&P here, though of course it can temporarily mask the real economic and societal damage that's existing and pending; and behind-the-scenes they know that (once again because The White House realizes the 2.5 billion will be just down payments on addressing this if a full-blown outbreak hits in the U.S.). 

I've already been skeptical about how they ignore the poorly handled flu victims (or try to quarantine them in questionable facilities, such as one of the efforts that prompted Costa Mesa California to file suit to block not a compassionate assist to patients, but putting them in a shabby facility not at all capable of functioning in the intended way). Mistakes are a risk and we have already seen a couple. Now there are more brewing, probably a result of early 'carriers' of WuFlu not even having signs of fever, hence no triggering of infrared devices at airports and so on. And many passengers just back from Italy probably 'hope' they only have a slight cold (and most may have just that, but nobody knows and the incubation time goes on).

Bottom-line: this market needs to explore realistic levels for the S&P, as a lot of smaller stocks are already there, or did not spurt ridiculously as of course the FANG-type stocks did. And the travel-related stocks are not at low levels sufficient to make them attractive yet, and might not prosper in any realistic time-frame 'if' we don't get a vaccine in-time for next winter's cruises (forget about this year). Similarly for unessential air-travel.  

So the market 'vacuum' to get stocks down to attractive levels will vary of course, especially depending on a company's profile, the extent on sales or revenue globally as opposed to domestically, and their involvement or absence resulting from an epidemic or even pandemic. Safe havens may do better for some time to come. 

Bits & Bytes: today LightPath (LPTH) received the expected notification letter of no risk of delisting (by virtue of being above 1 for the requisite sequential number of days), and they announced their new CEO selection. He is the former head of Thor Labs division that built-up the China business from a zero base to around $100 million I've heard (can't confirm details as yet). His education was Electronic Engineering from Ben Gurion University, an MBA from NYU Stern School of Business, and Exec. Ed. at Harvard. He seems to have chutzpah, and that might be just the ticket for LightPath.

No favorable reaction after a solid report from Amarin (AMRN). It washed-out but as I've said, the short-term downtrend isn't reversed until it breaks 19, so I'd lower that to 18 now, given its lower price. After the close, Amarin did file a 'Shelf Registration' but it's just an automatic replacement of one that already existed, so nothing really new. Here's the Q4 report summary:  

Conclusion: markets don't function in a vacuum, as only temporarily get totally disconnected with fundamental reality. The backdrop was never as strong as super-bulls or some politicians claimed, as a narrow universe of stocks led the move, as I emphasized for many months, of optimism for a S&P rise that extended with noted seasonal and flight-safety fund flows. I expected a correction this past month, with a 'wild card' thrown in of WuFlu, that changes the dynamics and the time-frame for an earnings revival.  

That basically means the disruptions go beyond supply-chain concerns, is not just an Asia-Pacific concern, and requires more price revisions.

The S&P needed to 're-price risk', and that's the bottom-line.