U.S. Equities tumbled, with the S&P 500 dropping the most since February 2018, as authorities struggled to keep the coronavirus from spreading more widely outside China. Safe Havens including Treasuries and Gold surged.
In a dramatic day across markets, these were some of the standout moves:
All three main U.S. stock benchmarks slumped more than 3%. The Dow Jones Industrial Average and S&P erased all of their gains for the year. All 11 sectors of the S&P closed in the red.
The FANG cohort of megacap tech shares that led the year’s rally plunged more than 4%. AMD Corp. led losses in chipmakers exposed to China, at one point sinking more than 10%. High-flyers Virgin Galactic and Tesla each fell more than 5%. Alpha Pro Tech, maker of protective clothing and masks, surged more than 25%.
The Stoxx Europe 600 Index slid 3.8% on trading volumes well above average for the largest drop since 2016 as investors fled travel and luxury-goods shares. A gauge of credit risk on the region’s high-yield companies jumped.
The yield on 10-year Treasuries approached the 2016 record low.
South Korea’s benchmark dropped 3.9%, leading declines across Asia, though Japan’s markets were shut for a holiday.
Spot Gold approached $1,700, while Brent crude oil tumbled about 5%.
The risk-off mood hardened as the epidemic spread to more than 30 countries, with South Korea reporting a jump in infections and Italy locking down an area of 50,000 people near Milan. Finance chiefs and central bankers from the largest economies warned this weekend that they saw the virus bringing downside risks to global growth. Governments and companies are curbing travel and trade in an attempt to contain a novel pathogen that can be transmitted by people without symptoms. Today’s market moves follow on last week’s surge into havens after fresh warnings by companies over the potential impact of the virus on business and global supply chains. Adding to the anxiety Monday was China announcing an easing of the quarantine of Wuhan, only to retract the statement hours later. Elsewhere, Italian Bonds dropped on concern that the spread of the coronavirus may push the economy into a recession. The Australian Dollar weakened to an 11-year low and the offshore Yuan held most of last week’s decline. Bitcoin slumped.
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For anyone following my Platinum Service it lost 150 points yesterday and is now ahead by 818 points for February, 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
The S&P 500 Index sank 3.4% to 3226, the lowest in more than three weeks on the largest tumble in two years.
The Dow Jones Industrial Average fell over 1000 points to close at 27,961, the lowest level in eleven weeks on the largest tumble in more than two years percentage wise.
The Nasdaq 100 fell 3.9% closing at 9079.
The Stoxx Europe 600 Index fell 3.8% to 411.
Currencies
Here is a summary of the main Changes in F.X. Markets:
The Bloomberg Dollar Spot Index climbed 0.1%.
The Euro was little changed at $1.0848.
The British Pound dipped 0.3% to $1.2926.
The Japanese Yen strengthened 0.8% to 110.72 per dollar.
Bonds
The yield on 10-year Treasuries declined ten basis points to 1.37%, which is the lowest level in more than three years.
The yield on 30-year Treasuries fell eight basis points to 1.83, the lowest on record.
Germany’s 10-year yield fell five basis points to -0.48%.
Britain’s 10-year yield fell three basis points to 0.54%.
Commodities
West Texas Intermediate crude sank 4% to $51.24 a barrel.
Gold strengthened 1% to $1,659.38 an ounce.
This morning on the Economic Front we already had the release of German GDP which came in as expected with a reading of 0.00%. At 11.00 am we have the UK CBI Distributive Trades Survey. This is followed at 2.00 pm by the U.S. Housing Price Index. Finally, at 3.00 pm we have Consumer Confidence and the Richmond Fed Manufacturing Index.
March S&P 500
The S&P had one of its largest point declines in many years, closing 111 Handles lower than Friday’s 3337 closing price. As a result of this decline the market has left a 78 Handle ‘’Open Gap’’ from Chicago’s Friday close to yesterday 3259 rebound high. This is one of the largest Gaps in many years and I have no doubt that the market will try and fill some if not all of this Gap at some stage. Yesterday’s NYSE Advance/Decline ratio was negative 9-to-1 which is the strongest downside breath since September 2016. In terms of volume, 92% of the volume on the Big Board was to the downside. Only six days ago, the S&P was up 5% for the year, while at last night’s close it is down 0.15%. Incredibly the VIX closed 46% higher at 25.03. Just as I posted yesterday morning the S&P was trading at my second buy level at 3268 for a 3279 average long position before stopping me out of this trade 30 minutes later at 3258 and I am now flat. Given the extent of the Global losses in equity markets across the board, the Central Banks will not let this continue and in my opinion will try and stabilise the market. This morning the S&P is trading 30 Handles higher at 3256. I will be a buyer on any dip lower to 3220/3233 with a 3209 stop which is just below yesterday’s low print. With the S&P trading at the bottom of its Daily Bollinger Band I do not want to be short the market at this time.
EUR/USD
The Euro just missed my 1.0790 buy level and I am still flat. Today I will raise my buy level to 1.0770/1.0810 with a higher 1.0725 stop.
March Dollar Index
I am still flat the Dollar and today I will lower my sell level to 99.45/99.85 with a 100.15 stop.
March DAX
The DAX closed over 400 points lower from Friday’s close. As I was already long both the S&P and Dow I did not buy the DAX or the FTSE. It is very difficult to use a stop in these markets given the volatility. You are better off trading in smaller size using a mental stop instead as many times you will stopped out before the market rebounds strongly as we have seen already this morning in most Indices. The DAX has strong support from 12900/12980 and I will be a buyer on any dip to this area with a 12840 stop.
March FTSE
This morning the FTSE is trading near the top of yesterday’s buy range. If you did buy the market I would take your gain here and go flat. The FTSE is oversold and has support from 7040/7090 where I will be a buyer with a wider 6995 stop.
Dow Rolling Contract
The Dow recorded its largest one-day fall (1030 points) since 9/11 as anyone buying this market (including me) got slammed. As I was already limit long the S&P I waited to buy the Dow which I did at the bottom of yesterday’s range at 28270 before getting stopped out of this trade at 28160 and I am now flat. Today I will be an aggressive buyer from 27810/27960 with a 27690 wider stop. Given how oversold the Dow is trading I would expect the market to rally back and test its 50 Day Moving Average at 28800 sooner rather than later where I will be a seller from 28750/28900 with a 29050 wider stop.
March NASDAQ
After In was stopped out of all long position the NASDAQ finally traded lower to my 9050 aggressive buy level. After I bought the market here we rallied back to my 9170 T/P level and I am now flat. Today I will be a buyer on any further dip lower to 9050/9120 with a 8990 stop.
March BUND
Shortly after I posted the Bund traded higher to my 175.80 sell level. This morning the Bund opened below my 175.40 T/P level at 175.30 where I was able to cover and I am now flat. I will now look to sell the Bund again from 175.70/176.20 with a 176.55 stop. If I am taken short I will have a T/P level at 175.35.
Gold Rolling Contract
Frustratingly Gold missed my 1692 sell level with a 1689 high print before getting crushed as expected and hit an overnight low at 1632.50. I am still flat and today I will lower my sell level to 1675/1690 with a 1702 stop. Remember sentiment is at extreme levels and does not justify Gold at these lofty prices.
Silver Rolling Contract
Overnight Silver traded lower to my 17.30 buy level. I am still long and I will now lower my T/P level to 17.55. I will now raise my stop on this position to 16.85. If any of the above levels are hit I will be back with a new update for my Platinum Members.
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