The virus outbreak fears sent investors running for cover yesterday wiping out this year gains in the biggest point decline since October last year.  A parade of talking heads hit the financial news yesterday, trying to convince the reaction was overblown and some even talked up the idea of buying the pullback.   Although very self-serving as they talked up their book, the most certainly could be right even though the confirmed cases more than doubled to 4500 overnight.  Set that aside, and we still have to deal with broken trends and price supports, which now place some resistance above.  Stay focused on price for clues.

Asian markets not closed for the holiday struggled last night with South Korea stocks falling 3% as the virus deaths climbed over 100.  European markets are modestly green across the board as cautious investors monitor earnings and virus news.  US Futures, on the other hand, point to a gap up open with Dow suggesting about a 100 point gain ahead of several market-moving earnings and economic reports.  Be careful chasing the gap and consider your risk carefully when we reach up to test price resistance.

On the Calendar

On the Tuesday earnings calendar, we have a big day with nearly 100 companies reporting their profit or loss results.  Notable reports include AAPL, MMM, AMD, ALK, AOS, BXP, CNI, CIT, EBAY, EQR, HOG, HCA, LEA, LMT, MKC, NUE, NVR, PNR, PFE, PII, PHM, SBUX, UTX, XRX, & XLNX.

Action Plan

Fears around the coronavirus outbreak put substantial pressure on the major averages wiping out the year’s gains in one fell swoop.  The question is it justified or has virus fear lept over common sense?  That’s hard to tell with the number of individuals with the illness more than doubling overnight to 4515 confirmed cases.  With just five confirmed cases in the US and the CDC monitoring possibilities in 26 states, it seems to pretty contained at least at the moment.  The industry sent a string of talking heads out yesterday trying to convince the investors there is no need to panic with several trying to convince folks this is a buying opportunity.  While appearing very self-serving talking up their book of business, they most certainly could be current.

Although the drama of the Trump impeachment trial continues to grow, the market itself seems to have very little concern about the proceedings at this point.  Focus today will be on the big round of earnings reports punctuated by the APPL results coming after the bell today.   Durable Good’s, Case-Shiller, and Consumer Confidence numbers will also have some influence on the sentiment of the day as the FOMC meeting begins.  Technically speaking, index trends and price support levels broke with yesterday’s selloff.  That means as the buy the dip crowd rushes back in, it would be wise to remember, we now have price resistance levels above that must be recovered before moving higher.  Certainly doable but never forget that is also the place to watch for potential failures if virus fears remerge or key earnings reports happen to disappoint.

Trade Wisely,

Doug