The spread of the Coronavirus rattled global financial markets, sending U.S. stocks to their worst week since the financial crisis more than a decade ago. Demand spiked for safe assets from Treasuries to the Japanese Yen. The S&P 500 plunged 11% in the five days and the Dow Jones Industrial Average careened to the lowest since June, wiping out almost $3 trillion in value from American equities. Treasuries surged, pushing yields on the 10- and 30-year notes to record lows during the period. Oil plunged toward $45 a barrel in its biggest weekly rout since 2008. Battered bulls got a boost Friday when Federal Reserve Chairman Jerome Powell said the Central Bank is monitoring the virus and will act as appropriate, adding that the “fundamentals of the economy remain strong.” Bank of America strategists now expect the Fed to cut rates by 50 basis points at its March meeting. White House Economic Adviser Larry Kudlow suggested investors “buy the dip.” The S&P 500 fell 0.8% in the final day of the week, rallying back in the final 15 minutes of trading from losses that topped 3%. The index still dropped for a seventh day, its longest slide since 2016. The CBOE Volatility Index hit the highest in two years. The Nasdaq indexes ended higher. Banks led Friday’s drop, with JPMorgan sinking 4%, as travel restrictions took hold and trading floors scrambled for contingency plans if offices are required to close. Airlines tumbled after Lufthansa curbed short-haul flights and United pared back travel in Asia. The worst stock rout since the global financial crisis showed signs of at least a pause on Monday, prompted by optimism that Central Banks will once again save the day. Asian trading began Monday with further declines in stocks and gains in bonds, before the Bank of Japan joined the Federal Reserve in issuing a rare statement assuring “appropriate” actions will be taken. In Australia, an Interest-Rate cut is now seen as a done deal on Tuesday. U.S., Australian and New Zealand 10-year bond yields hit fresh record lows. The yen slid.
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For anyone following my Platinum Service it made 765 points on Friday to close February with a gain of 2223 points, having made 2142 points in January, 818 points in December, 780 points in November, 1649 points in October, 1620 points in September and 2387 points in August Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points
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Equities
U.S. equity markets shuddered as the World Health Organization raised its global risk level for the virus and a White House official suggested some schools could close. More major companies warned that disruptions could upend sales and profit forecasts. Germany said it will intensify border checks and Switzerland banned large events, leading to the Geneva car show being cancelled. Iran and South Korea revealed more infections while the first cases appeared in Mexico and Nigeria, Africa’s most populous country. Downgrades to the global outlook keep rolling in and Money Markets now see three Federal Reserve Interest-Rate cuts this year. Bank of America predicted that the global economy will see its weakest year since the financial crisis as the virus damages demand in China and beyond.
The S&P 500 Index fell 0.8%, closing at 2954 which was 99 Handles above its intra-day low at 2855.
The Nasdaq 100 Index rose 0.3%, closing at 8461.
The Dow slid 1.4%, for a 357 point decline to close at 25,409.
The Stoxx Europe 600 Index decreased 3.5%.
Germany’s DAX Index slid 3.9%.
The MSCI Asia Pacific Index dropped 2.6%.
Currencies
Here is a summary of the main Changes in F.X. Markets:
The Bloomberg Dollar Spot Index rose 0.2%.
The Euro fell less than 0.1% to $1.10.
The British Pound dipped 1% to $1.2760.
The Japanese Yen strengthened 1.28% to 108.20 per dollar.
Bonds
The yield on 10-year Treasuries declined nine basis points to 1.17%.
The yield on two-year Treasuries decreased 13 basis points to 0.93%.
Germany’s 10-year yield decreased five basis points to -0.60%.
Commodities
West Texas Intermediate crude sank 5% to $44.73 a barrel.
Gold Futures decreased 3.4% to $1,586 an ounce.
Bloomberg’s commodity index sank 2%.
This morning on the Economic Front we have German, Euro-Zone and U.K Markit Manufacturing PMI at 8.55 am, 9.00 am and 9.30 am respectively. Also at 9.30 am we have UK Consumer Credit, Mortgage Approvals and Net Lending to Individuals. At 2.45 pm we have U.S ISM Manufacturing PMI, Finally, at 3.00 pm we have Construction Output.
March S&P 500
Bear Markets always cover more ground in a shorter space of time than Bull markets, which is why an investor has to prepare ahead of time for its emergence. Bear Markets rarely give you time to think, assess and then act. The S&P has declined 16% over the span of just seven trading days. The current decline is ‘’the fastest ever in history’’ from ”Bull Market” to ‘’Correction”. There have been single day declines that were larger, for instance the crash of 1987, but none have occurred directly from an all-time high like this one. The Dow’s decline is 17% in the span of just eleven trading days. Last week was the worst weekly percentage declines since the week of October 10, 2008, during the height of the Great Credit Crisis. Various market measures have reversed in an equally swift manner. The percentage of stocks at new 52-week highs was 97.51% on January 16. It is now at 0.82% which is the lowest since December 2018. The Daily Sentiment Index of S&P Traders rose to 92% bulls on the same date, January 16. On Friday it declined to just 9% bulls. Incredible the McClellan Oscillator closed with a reading of – 408, a new record low close.
My S&P plan worked well on Friday with market trading the whole of my sell range for a 2885 average long position before rallying to my 2915 T/P level with a closing Futures high at 2990 and I am now flat. The Futures got slammed on the re-open at 11.00 pm last night, hitting a low at 2889. This morning on the back of the news that the Japanese Central Bank bought some ETFs we are trading 120 Handles higher at 3008 as I go to press. It is only a matter of time before the rest of the Central Banks join the party and today I will be a buyer from 2950/2970 with a 2935 wider stop. Given how oversold the market is trading I do not want to be short the S&P at this time.
EUR/USD
The Euro continues to rally as expected as we trade higher at 1.1065. Frustratingly the Euro just missed my 1.0950 buy level with a low of 1.0951 before rallying and I am still flat. The Euro has strong resistance at 1.1100 and if we can break and close above this level for a few days then we may have seen more than just a temporary low at last month’s 1.0770 print. The world needs a weaker Dollar to stimulate growth. Today I will raise my buy level to 1.0970/1.1020 with a 1.0935 higher stop.
March Dollar Index
I am still flat the Dollar. The Dollar has fallen 200 points in the last 10 trading sessions. Resistance comes in at 98.20/98.60 and I will be a seller in this area with a 98.95 stop.
March DAX
Incredible sell-off on Friday with the market closing 4% lower. This morning we are opening with solid gains, now 2% higher as I go to press. It on a matter of time before the Fed cut Interest Rates and we will see more QE from the ECB as they try and stop this market crash from becoming a rout. Today I will be a small buyer from 11880/11940 with a 11825 stop.
March FTSE
My FTSE plan worked well with the market trading lower to my 6495 buy level before rallying to my 6575 T/P level and I am now flat. This morning the FTSE is trading at 6740 as I go to press. The FTSE is severely oversold on both a Daily and Weekly basis. We have short-term support from 6600/6650 where I will be a buyer with a 6555 stop.
Dow Rolling Contract
It took a scary few hours trading on Friday for the Dow to regain the key 25000 pivot point. Having traded to a low at 24681 the market reversed in the last 30 minutes of trading and that reversal has continued this morning as we trade at 25900 as I go to press. The VIX spiked to a high at 49.48 last Friday. This is the fifth time that the 50 level has been tested since 2011 and each time the VIX has subsequently collapsed. On Friday we closed nearly 10 points lower from this intra-day high at 40.11. My Dow plan worked really well on Friday as after the market traded the whole of my buy range for a 25000 average long position we rallied to my 25330 revised T/P level and I am now flat. Overnight we hit a low at 24860 before rallying an incredible 1000 points so far. The Dow will have short-term support at last Friday’s close at 25409 and today I will be a small buyer from 25350/25500 with a 25250 stop. If I am taken long I will have a T/P level at 25630.
March NASDAQ
I mentioned on Friday for the bull market to have any chance of stabilising then we need the NASDAQ to hold its 100 Day Moving Average at 8139. This market was tested after I posted on Friday with the NASDAQ hitting my 8160 buy level before rallying to my 8310 T/P level and I am now flat. This morning the NASDAQ is trading higher at 8610. Today I will be a buyer on any dip lower to 8410/8470 with a 8345 stop. If I am taken long I will have a T/P level at 8540.
March BUND
My Bund plan also worked well with the market trading higher to my 177.70 sell level before selling off to my 177.35 T/P level and I am now flat. The Bund is extremely overbought have risen over 700 points in the last few weeks and I will be a seller from 177.60/178.00 with a 178.35 stop.
Gold Rolling Contract
Gold hit a low at 1577 on Friday some $110 lower than the high made last Monday. Yet again the DSI proved what an incredible technical tool it is. Unfortunately my Gold plan did not work well on Friday as after the market hit my 1600 buy level I was stopped out of this trade at 1587 and I am now flat. Gold has short-term support from 1565/1575 and I will be a buyer in this range with a 1557 stop.
Silver Rolling Contract
Silver got hit hard on Friday, trading to a low at 16.50 and I am still flat. Today I will be a buyer from 16.25/16.65 with a 15.90 stop. If I am taken long I will have a T/P level at 16.95.
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