Although it likely helped significantly, the freshly printed 1.3 Trillion yuan injected into the Chinese market last night did not stop the Shenzhen from falling more than 7% by the close of the session. Other Asian markets saw their 8th straight day of declines with the outbreak reaching more than 17,000 infections and 361 deaths. With the Iowa caucuses set to begin and a big week on the earnings and economic calendar, the stage is set for continued volatility and challenging price action for traders to navigate. Plan your risk carefully as big daily gaps and overnight reversals are likely to continue as the uncertainty continues to unfold.
Asian markets had a rough night with the reopening of the Shanghai composite but the HSI managed a modest gain of 0.17% by the close. European markets are cautiously and modestly higher across the board this morning as they track Brexit & virus outbreak developments. US Futures are putting on a brave face this morning, indicating a Dow gap up of more than 100 points ahead of earnings and economic reports. Be careful not to chase into price resistance levels.
On the Calendar
On the Monday earnings calendar, we have 64 companies set to report quarterly results. Notable reports include ACM, GOOGL, HIG, HP, LEG, NXPI, ON, SYY, & VVV.
Action Plan
Fear and uncertainty brought out the bears on Friday, wiping out all gains year-to-date. Let’s hope the old saying, ss January goes, the year. As the virus outbreak continues to weigh on the on investors, my major concern was how the reopening of trading in Shanghai would affect today’s open. It’s not a big surprise that the index fell more than 7% but it could have been much worse without the 1.3 trillion yuan they injected into the economy. Dumping all that cash all at once into the system also sent the yuan sharply lower against the greenback during the night. Over the weekend, the confirmed cases of infection grew to more than 17,200 with 361 deaths creating the 8th straight day of selling in some Asian markets.
With Iowa caucuses just around the corner, the market could react to the outcome depending upon the strength of the results and the candidates that emerge on top. We also have a very big week of earnings to keep us on our toes as if we didn’t already have enough factors injecting price volatility. This morning the US Futures are pointing to a gap up open of more than 100 Dow points. Perhaps recognizing Friday’s price action was an overreaction, and of course, the market loves freshly printed money no matter where the injection originates. Just keep in mind this morning’s gap up will not be challenged by price resistance levels above. Be careful chasing.
Trade Wisely,
Doug
Comments are closed.