With the hope and rumor of Fed intervention we had our first glimmer of hope of a relief rally on Friday albeit a very volatile beginning.  During the weekend we learned the virus has spread to 70 cases in the US with 2-fatalities.  It would seem this is just the beginning of what could be a very challenging time for the US market as fear and uncertainty of what comes next weigh on traders and investors.  If the overnight price action in the US Futures is a clue we should continue to expect very challenging volatility with fast price action and quick intra-day news-driven reversals.

Overnight Asian markets closed positive despite their PMI falling to a historic low and Macao gaming plunging over 87%.  European markets are decidedly bearish across the board and the US Futures gyrate all over the place as it tries to deal with the massive uncertainty and hopes of a Fed stimulus package.  What comes next is anyone’s guess.  Even very experienced day traders are likely to find this morning’s price action to be very challenging.  Be careful, and remember cash is a position!

On the Calendar

On the Monday earnings calendar we have more than 130 companies reporting quarterly results today.  Notable reports include GSKY, JD, TERP, TLRY, & UNIT.

Action Plan

After a very rough week of selling it was nice to see a little relief rally by the end of the day on Friday with the market hoping for Fed intervention.  With 70 sporadic cases of the virus showing up in a handful of US communities over the weekend it seems likely the infections will get worse before its better.  What that means for the market is anyone’s guess but if the very volatile overnight futures session is a clue of the kind price action that lies ahead it could be another very challenging week.  It will be interesting to see how the market responds when the impacts of the virus and supply chain issues begin to show in economic reports and company earnings. 

We have another big week of earnings and an economic calendar topped by the Employment Situation report on Friday morning.  After dropping about 4000 points last week it would be nice to see a little relief rally and if the FOMC does chime in with an intervention of rate cuts or quantitative measures spirits would be lifted at least for the short-term.  However, with such a huge cloud of unknowns facing the market and the virus spread just beginning in the US, I think there is more pain to come.  With volatility closing just above a 40 handle any new news could trigger quick intra-day reversals.  Expect sizable opening gaps making it difficult for swing traders to hold positions overnight.  As I mentioned last week we are now in a Day-Traders market but it will take significant trader experience to deal with the speed of the volatility and a tremendous focus on price action to bring home profit.

Trade Wisely,

Doug