Commercial free dan nathan tim seymour and. And the head of rbc capital markets. Let us recap how this incredible day played out the dow just had the biggest point drop in history. Falling 1190 points. A 4. 4 drop. The dow index has now lost 3,200 points in week alone its now down nearly 10 this year the s p meantime falling 4. 4 as well handing in the worst day since august of 2011 and this is the fastest correction, a 10 drop from highs in the entire history of the stock market lets focused on big names you know controlling the market, fangs tumbling as well and took the market with them you had apple down 6. 5 . Google 5. 5 and microsoft a 7 drop wow. As stocks sold off buyers they flooded into bonds the 10year yield at one point trading at 109. 24 ended at 1. 26. The lowest at any time in American History for the ten years. Bond traders expect a rate cut on march 18th. But there is chatter possibility of intrameeting cut between now and then all told, the fear on the street is very real so tim seymour, our audience is likely asking two questions. What do i do now and what comes next . Thanks, brian if you think about first of all when markets really start to panic, policy makers start to act. I think that the policy response which we have seen so many times is certainly part of the evolution of where we go from here the problem is weve had the conversation for 18 months about what policy makers can really do four the economy we know what they can do for for markets shortterm in terms of the news flo obviously we started to get bottom up forking things cut to the bone things from companies over the last two weeks and going into crescendo 37 you have a case where i think the news flo look on the virus lets be clear. The news flo on the virus that trend significantly lower. And when you without getting too deep in the dynamics of the virus itself you actually have an incubation period with the virus where my guess is we constitutional have a lag time where that news flo should probably get worse but maybe more importantly in terms of communication from officials. This is officials around the world, that type of responds tends to come in a delayed response so for equity players by any definition we are oversold brian outlined that on the way down if you think about where we were on december 24th for the Christmas Eve low and looked at the relatively strength indicators for the s p we were at a 129day rsi relative strength in in measure of moment up we are there now a and certainly as we pointed out put punctuation in terms what markets can do the problem right now for me, dan, that markets havent taken out where we were before the highs of the precoronvirus dynamics where we were concerned about other things. Its funny a lot oaf people talking about the maga cap stocks never having the concentration in the s p 500 by sew knew nims its microsoft, apple, googlism amazon about a week and a half they made up 5 trillion of the s p 500. 17, 18 or something if you thought they overshot on the upside the last few months and the sentiment got overly complacent relative to those, then you say to yourself, what is the level on thedownside where its too oversold . And none of us know exactly. Its also important to remember this virus is unacquaintable what it mendez to supply chains, demand and companies there are a lot of arguments when will microsoft is in china that toents matter when you think about the two companies that really rattled the u. S. Stock market this week was it was apple and microsoft by pulling that q1 guidance when you think about the expectations for s p earnings coming into 2020, a year after the s p rallied 30 with no Earnings Growth it was high single digits. And people felt comfortable about that now you can throw that out the window the question is do you have 2019 and 2020 with multiple expansion if the market goes back up with mo no meaningful Earnings Growth. What comes next. Dan is bringing up an important point. And i think we talked about it por months on the show most people said thats not the way it goes. But steve i got to ask you, coronvirus is the villain we know that. Right. This is the fastest 10 drop in the history of the market im talking to people all day longitude saying that theyre selling etfs, the qqq had triple daily average to raise collateral to raise crash and the etf market make eshs are not putting the bids in. How much does the crowding dan talked about accelerate what would be selling. Its about positioning and leverage but my problem is when you said what comes next. Tomorrow is friday ahead of the weekend news whats the news flow is it better or worse than it was today . Its going to be worse spot how do you bottom on a friday you dont. For me its 2855, 100 handles lower in the s p thats where i find support. Then you can substantiately bounce from there. But thats a next week story for me yeah, i say for us something important happened today we breached the 10 drawdown 10 while it feels terrible. Thats a garden variety pullback we put out a note say if we didnt hold at 3050 whats a growth score thats ha 14 to 20 drawdown and we had plenty sibs since the financial crisis 2015, 2016, back in 2010, 2011, so that scenario for me is now in play. What im watching next is 2,900. I know its kbok to quantify whats going on right now. Wove taken a stab at it. Our best guess at the moment tells us we can make the values argument after we get below 2,900. She brings up the level 3050, the 200Day Moving Average 3045 people looking at people are setting algorithms because they have no clue where the market is going. They set themfer moving averages you have to know the technical to be. They are selling down to the levels tim i texted you today said basically what the heck. Whats going on, tim. You said, there was a technical attempt to recover today. We were only down 200. I only athat tongue in cheek before it failed why did we fail in. Again, to me i think there is certainly some algo dahms that presses on things. 3045, something in there, 200day. We were in no persons land. But you had a case here i want to look at where was the market before the fed jumped in and supplied 400 billion of Balance Sheet . As a context this is what lori is doing too get back to 2855 which is what steve said. Which is the level on october 3 of 2019, that low that we hit before we essentially got the fed to respond in the tune of qe 4 which are they are not saying it was but you have to drop in where was the Market Sentiment at that time that was the sentiment with the World Without coronvirus, a world we dietinged the fact that the world was struggling with the trade war dynamic. But age willing pmi european pmis and the leading sbalkters in the United States thats the world we have to get back to and address in my view thats not a terrible place. Thats just a place that i think takes out a lot of that fed. Even though we are getting more fed but that really looks you in the eye of where we stair at lower growth and earnings. Its not a great place to be when you think about it. I heard about the v reversal thats happening in china once this moves on given the monetary and fiscal stimulus people expect but markets can turn on a dime economies dont. And when you think about it i think there is another theme i hear about is the deglobalization. One of the themes of the trade war we have been in the last year 1 2 let me tell you this if you see u. S. Multinationals moving out of china in a meaningful way and there are good reasons why they should i think you have to remember that chinas economy ma has been a driving force in global growth, especially over the last decade when we see europe and the u. S. Kind of weak, you know, and if you take all that business out there have whats happening to that emerging middle class that so many of our companies have been dying to get in for. I dont think you see the Global Economy turn on a dime once this thing dissipates im not trying to tell a too dire of a story. But risk asset valuations have been inflated no doubt and we saw it last q4 or last half of 4r569 year after the fed go. I agree with you i dont think you see economies turn on a dime but the s p and markets are always forward looking mechanism and always price out six to eight months sometimes a year ahead. You could see the market turn way before you see the economy turn and even when we still are in the death grasp of whatever we see going on in china. But do you think the risk of a couple percent slowdown this year, steve, for global economies lets call it china say they are flat the quarter. No growth, zero our gdp hit half a europe by 1 . Does. Mci started in this when you look at this we doubledigit in growth in china then down to 6 , 8 growth in china and now you noent dough. Know one believed the numbers at double digits. No one briefed midsingle. We do dont know where their growth is. Does one case one case in brazil justify a 12 drop or whatever in their markets in a matter of days no, but i mean. No one know are where the other shoe drops, where there is a vaccine. You need a vaccine when people are taking a stab at this on trade wars you could guesstimate. You have no way to guess right now. You need a vazquez a vaccine thats it. Brazil is affected by china when you think about commodities resources, who the ultimate buyer of what brazil produces, if you think about emerging markets when plenty of chance in this hour to get into the glikso implications so far youve had relative stability in terms of the currencies in em if you look at where we wereo they were year to date against the dollar weve been spend time on you see current account defs in south africa abbrazil, some of the off 8 , 10 wau but back to where the market has to at least find a place where we are weigh whats inevitability a policy response versus a market challenging the fed to really stay out of the market and if you look at the long end of the curve the last couple days i know it seems dramatic and i know we talked about the yield compression in the United States but relative basis considering the equity moves, the long end of the curve is has not done a whole lot. Weve been stuck around 125, 135 in the middle of the equity you know what storm. I think just think about the context of global yields, what thaelg thats telling but the world and what Central Banks can and cant do. I dont want to get to wonky and well talk about the fed and technicals in a minute but how much of the violent drop is the simply people raising cash and collateral to meet requirements on the street its a little technical. Its a little everybody i talk to says you got to raise cash you got to raise collateral. You sell what you can. And what are people selling, the big etfs, bill wig name. Lori said when you look at the qqq, the nasdaq 100, the top four names we know 50 of ha the weight and other 95 are whatever you sell what you can. Correlations go high there is a lot of sectors you could loot look at it consumerer staples got railed utilities nailed over the last week all the save havens. The only thing hald holding up, the save haven was the u. S. Treasurys. That was it. Just sell every rally in yields. And thats whats worked then obviously the dollar worked for a while thp. Thats come in you think about it remember back in the day, when were what were they doing in weaken the dollar. The whole notion of lowering rates and collar going up what was that was a double whamy. The fact its eased off a bit is not horrible but after ten years of unur. P appear zurp. You will okay, the old blocks out the window what do Central Banks globally what to they have in their in the data from where we came back to tims point we had an i mean incredible run in the marketplace sitting around the table i have to catch myself because last week you think about taking profits you go let me wait until they run out of momentum then it comes down with a crashing flo ro crashing blow appear say i dont want to sell now and other people dont want to buy i dont think there is enough of a discount everyone is stymied. I was getting data today. Saying the average trade size is now 138 shares these are mot mom and pop sellers who are callingtheir brokers and selling one stock. Thats not who is doing that. Sully, tesla is exhibit a, a robinhood stock. Mania going on, all screaming and silence there. Look through the prism through the prism of that december fed debacle we were at 2350 in the s p. And then we rallied to almost 3,400. When you have to when you look at retracement and technical i understand people mom and pop watch the show right now to your point trying to figure out what to do as long as you own Good Companies around in five years you stay the hours. Like who. Your apples, your microsoft, the googles, the amazon be, the problem that i have is that when you look for value and kelm snams appear energy those are done nothing but got got get demolished you cant be there i own some but i dont think thats where you see the growth. Ill give you quick levels on names like that. Microsoft literally consolidated last year between 140 and 150 for four and a half months broke out at 150 went to 190 become to 150. I know that sounds crazy it was at 190 a week 1 2 ago. Its at 150. Jp morgan broke out in october at 120 it went as high as 140 you get back to support levels disney trading as high as 150. We know where it broke out in april at 120 its below that. There are levels for the highquality numbers where you can highquality stocks where you can pick at. Apple is out the door. I mean that thing went up a hundred last year. Put your finger up in the arron you think about it thats a company around for a while. One thing that we noticed and talked about the big media, tech, internet names getting smoked after ferociously run up this year. We notice that the Hedge Fund Community got spooked last wednesday. On wednesday all the brokers around the street, myself included put out our reports on what the 13 fs had shown, the run ones released valentines day. And there was a chill through the community. What the lists tell su where the crowded position are and hedge funds are sensitive to the crowding risks we had seen them skew positioning defensively even while markets we want up auchld we whacked them over the head with the supercrowded stocks and started to see the passive systematic selling in the mechanic and now we are seeing real money going to 1 00 we saw the same thing in the second half of 2018 before the market peaked same last year july before the trade war debacle. People thought that was of oh the table. To me this smells like hedge fund reederisks right now thats one of the reasons its moving quickly even though it feels like some of the passive stuff may be employed played out. Well find more pints opportunities in the carnage a jim cramer says the bull market everywhere at some point we talked about it a wit but diving in deeper technical seem to be a big part of the day to day. Around midtai we were down 6 or 700 down near under 200 at one point. The buyer tried to fell oh off the lows only failing spectacularly again. Joining us now is todd gordon of assent well not only to talk about what happened but more importantly where is is if anywhere that support may that put that floor under this. Yeah, its a very interesting conversation i think we have to realize this is a market we are not in modern portfolio theory. This is Behavioral Finance there is a lot of psychology that witho can be interpreted based on the squiggles in the chart. Keep in mind we were sideways for two years. The Market Sentiment two years ago by largest head Fund Managers bearish underinvested and short. We just recently broke higher. I think there is a general disdain for the market and this is the first opportunity post twoyear consolidation that we have seen any selling. I think that sentiment carries over back to the charts bass as we clear it out this drop right now at the close was 12. 3 from the high in perspective calming down, looking at where we are and have been this is very much on pace to be eyakem to many of the declines oef the last two years when you start getting above a 16 decline, that becomes problematic. But again this is in the context of a major range from which we just broke out and were recapturing some of the breakout there is a lot of hope at the 20 li 200Day Moving Average. At the bounce we gave that up. Getting off the daily, this is the weekly chart i find moving averages only as relevant as the market wants to respect. Its very algo driven. This is the weekly, the moving average calculated offer the last 50 weeks and 200 weeks. What i like about this level is the 50 week is around the 3030 on top of the 200day. Thats why you stage the rally today which ultimately failed. Looking at the 200week you can see its amazing hoi well it held and unfortunately if we dont hold the cluster the next downside level is at 2620. Thats just the markets tracing this out and showing us where support is if we dont hold that would be the meks level of support. Now, i did see some promising signs with sort of that melt into the close here. A lot of the personal internal didnt dpifrm. But tick, trend, advance decline all didnt confirm with the new lo readings a they closed at the low. Further back to the end of 2018 and 2019 this is the vix in orange all we with he did was retest the 359 level. The more fear there is on the back of a 20 decline in the s p where we have only seen about a 12 . I think the market has gotten very fearful the internals we are following arent confirming just the last push down. Im not throwing in the towel yet. Im still hopeful. Todd gordon come and join us grasso what do you think i like the levels he is probably a bit more optimistic than i am ultimately where we actually bottom out in this when you look at i like following retracement levels when you look back to that 2350 left and the alltime high you come with the 618 retracement getting wonky where we close today. I dont think we bottomed today. We have another 100 handles lower in the s p and we have we have a possibility of rallying next he can week. Next week. Next week because you have to let the whole new attention cycle filter through with all the sunday morning shows if there is more cases, and what the cases are. There is not a lot of positive news news flo. Lori we had a president ial press conference, roj elong ranging during the special and trump said we are going to be fine, not much going on we have a response and what happened today 1,100 point drop for the dow. It seemed this morning when the market was fighting back trying to find the bottom put it in the news flo was more favorable.