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Market Update: A Bottom Could Be Near

Mar. 01, 2020 8:20 AM ET299 Comments


  • The market correction last week was one of the most brutal we have ever seen.
  • We explain why the bottom could be near.
  • Don't stress too much. We will put this genie back in the box and come out smarter and stronger for it.
  • This idea was discussed in more depth with members of my private investing community, High Dividend Opportunities. Get started today »

Co-produced with Trapping Value

Usually our market updates are reserved to our investors, members of High Dividend Opportunities. But given the severity of the market correction, we decided to share it with our readers and followers. Our service does not only cover high dividends, but we also monitor macro economic conditions and propose hedging strategies. We have warned about a market correction back in January and advised to raise a 20% cash position to redeploy as when the correction occurs. This is where we are now.

Market Update: A Bottom Could Be Near

The S&P 500 index pulled back sharply on Friday, but bounced back and was able to close well above the 2900 level which is a key support level. The index closed at the 2954 level which is the high of the session. This is very positive from a technical perspective, and suggests that a bottom is probably very near. We would expect the markets to see a sharp bounce next week. We also expect crude oil prices to bounce back from here. The $45 level held well today on bullish inventory data and is likely to bounce back too. Note that we are likely to see extreme volatility in the near term. Just remember we may bounce half way the correction, and then retest the lows. It will appear that some "news" caused this, but it has everything to do with asset flows and positioning.

Support from the Federal Reserve

Federal Reserve Chairman Jerome Powell signaled Friday that it's prepared to cut interest rates if needed.

The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity, Mr. Powell said in a statement released Friday afternoon.

"The Federal Reserve is closely monitoring developments and their implications for the economic outlook. We will

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This article was written by

Rida Morwa profile picture

Rida Morwa is a former investment and commercial Banker, with over 35 years of experience. He has been advising individual and institutional clients on high-yield investment strategies since 1991.

Rida Morwa leads the investing group High Dividend Opportunities where he teams up with some of Seeking Alpha's top income investing analysts. The service focuses on sustainable income through a variety of high yield investments with a targeted safe +9% yield. Features include: model portfolio with buy/sell alerts, preferred and baby bond portfolios for more conservative investors, vibrant and active chat with access to the service’s leaders, dividend and portfolio trackers, and regular market updates. The service philosophy focuses on community, education, and the belief that nobody should invest alone. Lean More.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (299)

georgefelix75 profile picture
Going to break 2420 again Monday but this time its possibly going to test 2150. That will be a reasonable bottom but not until tech gets slaughtered. Tech has had it pretty easy so far......AAPL at $200 or less then we can talk about a bottom is in....
Dan Victor, CFA profile picture
was this article revised from the original publication?
Aged well.
Thinking about this more, no matter what you were in the last 10 years, conservatively, your easily 4X ahead, if not multiples more from investing earnings, should you have them. This includes the high risk plays SA contributors have, it was a no lose scenario. We've built wealth and it's been incredible going with this once in a lifetime bull market for 10 years!

Speculatively speaking, I think the parties over short term (1-2 years), I'm bearish, and I'm thinking a 40%-60% drop from all times highs isn't so bad, it's probably normal. Should this happen, it's an opportunity to invest for the next 10 years, stay strong, think long term.
Agree. With you and I working together, this will surely happen.
Michael1944 profile picture
Futures point to very strong opening,but much advice is to Sell when this happens and wait for inevitable pullbacks???
PendragonY profile picture
Now is not the time to sell. Now is the time to buy if there is a good deal on offer on a security you want.
The author misses the only point that matters - the coronavirus "scare" is just an excuse for traders to sell. The author demonstrates just how flimsy this excuse is but does nor realize that by doing so he actually undermines his case.
Just as the stock market was going up for no good reason in the second half of last year, it is now going down and giving the speculative momentum gains back.
Michael1944 profile picture
J.P.Morgan, a Bear Market returns stocks to its' rightful owners.
Tide has gone out,who is swimming naked??
georgefelix75 profile picture
Looks to breach 2960 this morning on the open.....it could get ugly from here to 2780
You are playing with fire. Right now calling a bottom is pure speculation! You are not great at calling bottoms, remember WPG! Maybe you should look at what happened after prior 50 bp emergency rate interest cuts. Hopefully your subscribers will not get too hurt and are hedged. I truly hope this goes away soon. But things do not look good. Western governments do not take precautions as they should. This will get worse every day. Being long this market with a huge bubble in cooperate debt is pure gambling especially the HY stuff.
Donggle profile picture
@Santxi its good for clicks! thats how people are paid, good or bad comments.
PendragonY profile picture
No one is paid for comments. SA pays the author for PAGE VIEWS.
Just speculating, I think there is risk of the DJIA going to 20,000 in the next 2 months, that's assuming we do a reasonable job staying ahead of overwhelming our healthcare system. If services are really impacted, layoffs, 2008 stuff, and people stop spending, I think there's risk of 15,000. I hedged pretty close to even a month ago (actually tilted bearish, so some gains), so I'll collect some income. I'm risking not participating if the market sky rockets. I have no idea when to buy back in, whatever happens. There's so much uncertainty, this is the first pandemic in my lifetime, so who knows who this shakes out.

I was in in 1987 (MLPs in the 80s, terrible), 2000, and 2008, pretty heavy, didn't sell, but these were painful times, but these high risk/high div stocks sometimes don't fare so well. Good luck to all.
Jhalgren profile picture
This article is pure fantasy: the bottom is far from here. One must consider the corruption apparent in accounting practices where few companies adhere to GAAP standards and instead do their nonGAAP adjustments. So many are in deep trouble and hope we don't figure it out!

Please don't fool yourselves into believing we are home free--far from it. Your best to sell, hold cash or buy gold, long term US treasuries, short term credit, and, maybe, CAN banks!

Good luck to you all....
disagree, please provide your evidence that's been proven accurate; if they are providing bad information how do you select that which is accurate; are you going to AUDIT whatever company you plan to invest in and first determine IF they are honest? or trust a governmental agency?
another point of view: if all data is less than accurate [honest, whatever] then errors are CONSISTENT and evaluation can be accomplished because all your data has similar errors... GAAP standards has flexibility and is not perfect, never will be....you have to work with the in-perfect world, people, etc.
be safe, all the very best, thanks for your thoughts
A lot of illegals work under falsified working papers which means that they have taxes deducted from their pay and sent to withholding just like everybody else. Except they never get SS nor Medicare nor a tax refund etc. However, the crime then is forgery which is a problem. I haven't been working out on any farms for about 8 years now but at that time all an employer had to have was the proper documents from the worker. In remote rural locations it was pretty difficult to do a background check as the internet is still a bit primitive in many places. I mean dialup. It's estimated that some $25 billion is in the SS trust that came from these people maybe more by now as that was 8 years ago. Another interesting fact. NAFTA allowed US farmers to dump surplus corn in Mexico at below market prices which destroyed a lot of small farmers who subsequently came north looking for work. An army of people with skills working cheap. It hasn't really been so good for them either as they come on the promise of a better wage than Mexico but find out once here that it is a very low wage here. $8/hr sounds good if you've been making $8/day but it's not enough to live on. So in truth the workers on both sides of the border got screwed by NAFTA.
Jhalgren profile picture
This is why people should consider Sanders over Biden who supported NAFTA, the Iraq war--it goes on and on. He's an elitist while Bernie is truly for the people. And unless your Buffet or Bezos, well, get real! Do you really want to everything due to fantasy-market momentum? Nah. Do what's right for your own security and sell out of this volatile nightmare and secure what you can to survive the months ahead.
ijeff profile picture
Bernie is truly for the people? You could also say Trump is for the people. Its a meaningless statement. Let's just assume every candidate is for SOME people. None are for all.

Rather than focus on some meaningless platitude let's focus on policy and core beliefs. Its there where Bernie is truly dangerous. He's nearly 80 years and just as clueless as he was as a young man. It pains me to see good people actually buying what he's selling.
Donggle profile picture
@hughesbayou Illegals pay more then their far share and take nothing, so we kick the out! stupid!
I'm less worried about the coronavirus than Trump wrecking the economy with more trade wars.
strongly disagree; the evidence is just the opposite: the trade protections has generated better balanced trade agreements with many countries, China, EU, Mexico, Canada; more needs to be accomplished IF Trump prevails; all the very best
do your homework. disagree.
Jhalgren profile picture
Exactly alphism!
Michael1944 profile picture
What Market?
I had a few Greens today, a lot of reds, and a few No Change.
Lower Rates should help R.E.I.T.S, Dividend Stocks,P.M's, others may not be impacted at all, except Financials,they will face pressure.
My FAS took Hammering, Covered Calls smoother out things.
My SLV Calls did fine, HMY also.
Donggle profile picture
@Michael1944 Lower Rates should help?" just which of these are green today? Your principal can drop faster then you can sell covered calls.
Michael1944 profile picture
DHT,TLT,Calls against FAS,worst performer is MLPQ and REML, ut since I get paid to Wait, the Flu will eventually be last weeks headline.
Sure glad i never bought VET, that Div Cut was no surprise.
The Sun will rise tomorrow.
The biggest problem is 12000000 illegal aliens, residing in USA and entitled to limited hospital bed's, which should be allocated to America citizens, paying taxes. Because of PC, nobody mentions this factor.
PendragonY profile picture

Well, actually I think it isn't mentioned because of this pesky little thing called the law. And the pesky fact that leaving sick people, even those who are here illegally, to die in the streets and infect others isn't good policy.
Maybe also not mentioned because most of them are in a family that has at least one person working and paying taxes.
@GHFISHER many illegals don’t pay taxes. It’s a cash economy. A lot of that cash is shipped out of the states.
Be thankful to benign nature of CovID-19:

- common Flu corona virus = most contagious/least deadly;
- Cov-19 corona virus = more contagious/more deadly;
- MERS/SARS corona viruses = less contagious/much more deadly.

Thus far, the airborne common flu because it is the least deadly is pooh pooed most times but actually the one that kills most over the years/decades, simply because people don't take preventive measures and therefore got infected most often.

CovID-19 initially or hastily called Corona-Virus is also a member of the corona family of viruses due to their similar thorny structures, difference is that it is less communicable since it can be transmitted more via droplets; but then again more deadly comparatively.

Unfortunately, due to highly congested cities in China where people live in close quarters at home, on the streets, and during working hours; including their low-standards of health care, lots of people became infected very very fast and became pandemic soon enough. Similar to Africa where outbreaks of different Ebola viruses kept happening over the years, aggravated by poverty and low-standards of living and healthcare including ancient traditions of how they take care of family members and their burial procedures - that resulted into extensive physical contacts with infected individuals/dead persons and therefore inevitable pandemic infections.

Similarly with the common Flu, CovID-19 affected mostly older people specially those with compromised immune systems or systemic or preexisting more deadly diseases due to complications.

Those are my understanding, please correct me if i'm wrong.

- Ebola viruses: www.google.com/...

- HIV/AIDS viruses: www.google.com/...

Those are the deadliest, albeit least communicable requiring extensive contacts or bodily fluid transfers.


Far worse were/are innumerable (deadly) natural disasters all over the world such as drought and famine, earthquakes, floods, etc. that are so common mass media found extremely boring unless they become the 'once in the lifetime' variety.

Worst still were/are disasters caused not by nature but rather by HUMAN such as wars and civil stripes, terrorism, industrial accidents, car/plane accidents, etc. and their attendant horrible consequences. But again become mostly boring for mass media once they become commonality.


We should not be overly alarmed on 'new' unknown viruses that kept mutating over and over again that no scientists nor governments could possibly control (/except biological weapons).

New strains of viruses are facts of life nobody could identify/understand immediately, fortunately CovID-19 has been identified among the less deadly and soon enough will become another incidence the mass media over-hyped for being misunderstood at the beginning.

@aarc Coronaviruses cause some colds, but influenza (flu) is not caused by them.
Everyone is looking at the death rate but for me the more instructive number is the percentage requiring intensive care. That appears to be around 5%. The US has 95k intensive care beds which won't take long to exceed. If they don't come up with a drug treatment in the next month and as cases spread they will have to institute rolling quarantine to reduce the load on hospitals. Don't think this is the bottom. An effective drug might change the above equation by allowing home treatment earlier before needing intensive care.
Donggle profile picture
@itsyourmoney Flip a coin, sometimes logic does not work. What you can hope for is that it will hit seniors, and they will stop being a drag on the health care and social security system, numbers wise. I'm a senior but its only numbers.
So that's the plan to shore up social security.
Dividend Don profile picture
I couldn't agree more with this article. I think it's right on the money.
The cytotoxicity axis is also very important. In an in VITRO study, cytotoxicity is bad (nitazoxanide, high doses of remdesivir). These studies are equivalent to PRE-clinical drug trials. While some in vitro data may seem promising, there are still a lot more variables (risks that they won't work) in actual humans.

For example remdesivir - cytotoxicity starts to spike at higher doses. What if higher doses are needed in humans? It's a pro-drug, the metabolite is actually active. How efficient is in vivo conversion at different doses? Simple examples.

I don't want to pour cold water on your hope for a treatment - I believe we'll find one. However in terms of financial risks and time frames, clinical trial data will be much much more informative.

Disclaimer - I worked in Biotech for 12 years as a PI post PhD. Then founded a Pharma tools start-up (analysis, purification, production) based on my own inventions - and did all the background research into how pharmaceuticals and pharma companies work for our proof of concepts and our market analyses for 5 more years
Trapping Value profile picture
Notably, two compounds remdesivir (EC50 = 0.77 μM; CC50 > 100 μM; SI > 129.87) and chloroquine (EC50 = 1.13 μM; CC50 > 100 μM, SI > 88.50) potently blocked virus infection at low-micromolar concentration and showed high SI
Trapping Value profile picture
Warren et al. showed that in NHP model, intravenous administration of 10 mg/kg dose of remdesivir resulted in concomitant persistent levels of its active form in the blood (10 μM) and conferred 100% protection against Ebola virus infection.7 Our data showed that EC90 value of remdesivir against 2019-nCoV in Vero E6 cells was 1.76 μM, suggesting its working concentration is likely to be achieved in NHP.
PendragonY profile picture
So far this year, my income from dividends has been $8,033, about $600 more than my projection from the beginning of the year. ETrade is predicting $5,380 in dividend payments this month versus my projection of $,650. And I will add to my income for this month this week as well.
So far it's just markets that are panicking, wait to the general population does. How well do you think most americans will respond to quarenteens?
Donggle profile picture
@paulspevacek the Beak masks on Amazon are sold out.
Read what the pundits were saying before, during, and after the Financial Crisis to see how silly these kinds of predictions are.
Donggle profile picture
@CaasiNotwen someone is right and someone is wrong, you just have to pick the right person! Are you feeling lucky today.
Olja S.A profile picture
I wish so, but it is aggressively spreading. It is about the interruptions of supply chains, and the impact on the global economy. I wish I can agree. THANKS RIDA KEEP THE GOOD WORK!
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