Investing in coronaviurs time
Tags: Coronavirus, Forex, Invest, Stocks, Copy Trading

These days we all see the news, the daily charts of how the crisis is evolving and all the countries being confined. We read hard news about the worst falls in the history of the stock market and everyone is running to sell.

Now, we start to see the end and everyone is running to buy. But what does the past say? Are we in the worst moment in the markets? Should we buy? Should we stay out of it?

In this article I want to be objective about the markets and give a view without sensationalism or flashy headlines.

I am particularly interested in analysing Europe and the US because it is easy to invest in them, China is easy too, but we do not have much stock market history to compare it with.

Europe — DAX 30

I use DAX 30 as a European representation, it is a clear reference index in Europe. The macro trend in Germany has been clearly upwards in the last decades and this crisis has caused the market to go to the bottom of the channel created by Germany for decades.

If we have stayed watching TV, we probably haven’t taken advantage of an opportunity like this macro trend, where you can keep buying for years and enjoy it like a small child.

In my opinion, any opportunity to get in under 9,000 euros is great. Moreover, in the 8,000 euros we can place the Stop loss in a comfortable way, it is below the channel, it is a round number (and consequently psychological) and below the maximums of 2000 and 2007. A marvel to be placed.

In short, Germany has had a major setback but that does not take them out of the bullish path. The market believes that German economy will recover without problems in the next few years. The opposite will be true if it is quoted below 8,000, then we will be in the real crisis and we can go to 4,000.

USA — SP500

In the United States I like to follow the SP-500 because of its tremendous representation of the economy.

The macro trend is still strongly upward and in this case we have not even reached the bottom of the channel. If things get worse in the US we can go over 1600 which would be a great level to buy. For now the break has been at the first major resistance, the ’15 — ‘16 and mid channel break.

In which case can we go to the bottom? Right now it is taken for granted in the markets that with certain measures, the economy can continue without a break. The US is supportingr the economy and the market likes this. If this fails and the virus begins to spread widely, it is possible that there will be a strong stop in the economy and then if there are options to see 1600 points again in the SP.

Certainly, right now it seems to me an unlikely scenario if the distancing measures are effective.

As you can see, compared to history, we are facing a good bump, but only this. If the crisis were to reach the US then we would see the 1600 levels from my point of view.

Europe — IBEX 35

Within Europe you know that we have large diferences betwen north and south.

Ibex has not been at all trendy after 2000. It has been stable with clear bottoms. The 6,000 was the level to take into account these days, but be careful because this chart worries me.

Surely the IBEX is the one that has rebounded less in its levels and also has a very weak macro trend.

As you can see in the chart we have a fairly clear floor but we have some upward minimums that lead us to a kind of triangle. The good news? This is usually a sign of a continuation of the trend, so in the next few years we may see the IBEX take off, but beware that breaking the 6,000 leaves us in a free fall to 4,000 points and the fundamentals that buy and hold will sweat a little more if possible.

I know that many of you are allergic to charts and technical analysis, but it works for me and prevents from being bought when everything goes wrong. We saw this same figure in the bitcoin a few years ago. I’ll leave you with the graphic because it might remind you a bit of the today’s IBEX. Isn’t it curious?

Conclusions

Investing when everything goes up is quite easy, we come from a few years where making a mistake when buying was difficult. The problem is not when to buy, the problem is when to go out. And this means that many people now have to hold trades with pre-covid levels.

If you buy in relevant levels with tight but reasonable stops, you can take advantage of the upside without fear of suffering the downside. You can take advantage of these rare levels to make profit in the long run.

Some ideas that worked for me

- Use finviz to find interesting companies. For example, using the screener and filtering by dividend >10% you will find a lot of big oil companies, with a little research there are good companies at levels close to supports. If the price of oil rises again, you can get an exceptional dividend portfolio. If not, the stop will save you. Anyone doubts that planes and cruises will be back? This is the large oil demand needed.

- Use copy trading. As always I recommend Zulu4me, your recommended Zulutrade traders are one of the few investments that have generated returns for me in the midst of falling markets without spending any time on them. This is the good thing about having a small part dedicated to Forex, it diversifies you and lowers the volatility of the overall portfolio, and if someone who knows about it does it for you, much better.

- Buy flats. This is playing harder. But possibly in the next few months we’ll see good prices because of a fear on the demand side and a rush on the supply side. Another option is to look for a good REIT that diversifies you well. Avoid REITs that rent for companies by now.

- If you are conservative, you can look for a structured product on indexes, with a low risk you can get good coupons for the next years.

There are plenty of options, you just have to find the one that best suits your goals. Good luck in the markets!