The recent news about the swine flu is horrible. Absolutely horrible. Almost 200 people have died.
Now, let's face reality. 36,000 people in the US die from flu-related complications every year. If we have 200 people die in a week from the flu, we're IMPROVING.
Not only that, but this strain is readily treatable with Tamiflu. This is a real overreaction. Let's quantify the overreaction. The market is down about 4% since the news broke. People compare this with the 1918 outbreak, and say that it's worth -4.8% on our GDP.
My prediction is that the smart money is waiting for this main-street-media-talk... garbage to finish. I would like to point out that the Treasuries are counter-correllating during all this. That is, yields are going up, even as the market goes down. It's not much, but imagine what would happen if the market pops. There's about 30 basis points of pent up sell-side pressure in the 30 yr. bond, in my opinion. The yield is quietly rising. This is the same yield that the entire US Congress is betting on to stay low enough to finance their ridiculous multi-trillion-dollar deficit spending.
What should one do? Put in percent-trigger orders, so if the SPY bounces up over 1% you buy TBT (as much as you're comfortable with). I expect SPY will be a leading indicator for the bond market this time.
Full disclosure: no position in TBT at this time