There is blood in the street this morning with the virus news not getting any better and plunge in oil prices that’s shaking up currency markets around the world.  During the night, US futures trading halted as the 5% circuit breaker tripped.  Suffice it to say we face a very rough day in the markets with a huge gap down and the real possibility that more circuit breakers could trip during the day as investors run for the doors.  Expect extreme price volatility and hazardous market condition in the days ahead.

Asian markets plunged during the night, with Japan falling over 5% by the close.  European markets are sharply lower this morning with the DAX, FTSE, and CAC all down by more than 6%.  US Futures point to a gap of more than 1200 points down as the market grapples with plunging oil prices, currency fluctuations, and an outbreak continuing to spread uncertainty of economic impacts.  Expect a very rough day!

Economic Calendar

We have a very light day on the economic calendar with a 3 & 6-month bond auction as well as the TD Ameritrade IMX report at 12:30 PM eastern time.

Earnings Calendar

Monday begins with just short of 100 companies fessing up to quarterly results.  Notable reports include CASY, SOHU, SFIX, & MTN.

Top Stories

With OPEC failing to cut a deal with Russia, they have decided to dump a glut of oil onto the market, driving the prices sharply lower, punishing Russia for not joining their attempt at price controls.  At the opening of the futures market on Sunday evening, oil price plunged, pulling the overall market down as it fell.  The plunge in oil prices is also creating substantial currency fluctuations putting central banks between a rock and a hard place.  Cut rates to stimulate the economy or raise rates to support currency valuation.  What a tangled web this has suddenly become.  Even the cryptocurrencies are feeling the pain with $26 billion wiped away in the last 24 hours.

With the futures pointing to massive losses during the night, a 5% down circuit breaker tripped halting futures trading to prevent them from falling further.  If the selling resumes during the day, we could trigger more circuit breaker trading halts as investors run for the doors.  A drop of 7% in the SP-500 halts trading for 15 minutes, a decline of 13% will once again stop trading for 15 minutes.  A decline of 20% will stop trading for the rest of the day.

When it comes to the outbreak news, the spread continues around the world, and here in the United States as the governor of New York said, it’s like trying to stop air.  Long story short, it will likely get worse in the days and weeks ahead, and the uncertainty of the economic impacts will continue to worry investors and make the price very volatile and trading very dangerous in the near term.

Technically

The charts are simply a mess due to the very high emotion and uncertainty the market faces.  If circuit breakers begin to trigger the panic could much worse.  You can just imagine the phones ringing off the hook at mutual funds, 401K plans, and brokerage firms as investors pull the plug to stop the pain.  With the market gaping the DIA and SPY below their 500-day averages and the QQQ open below its 200-day where this panic selling end is anyone’s guess.  Hold on tight this could be a very wild week.

Trade Wisely,

Doug