Markets Calming For The Moment?

Coronavirus racked up another win Monday, taking down US markets just as they had Asian and European markets before the US opening bell.  After the gap-down of over 1.5%, the rest of the day was a grind as the bulls tried to fade the gap and the bears said not so fast.  At the end of the day, we were left with indecisive candles with large upper wicks with the SPY down 1.60%, the DIA down 1.57%, and the QQQ down 2.07%.  The VXX gapped higher and after volatility ended near the highs, up 10.39% to a still low 15.72.  However, the T2122 has now fallen well into oversold territory at 8.26.

The economic impacts of coronavirus led the news all day Monday.  It is now reported that many US companies are suspending retail as well as production operations as a result of the threat.  (Bear in mind that the production part of this is not yet a real impact as pretty much all operations in China are normally shut down for many weeks at this time of year.)  Other news included reports that over 100 deaths and 4500 diagnosed cases have been reported worldwide.  In the US, the CDC has confirmed at least five cases, while 110 patients across 26 states are being monitored as possible cases.

In other news, Huawei has been officially allowed to be part of the UK’s 5G infrastructure, defying US pressure to exclude the company on security grounds.  BA was able to secure $12 billion in financing to get it through the 737 Max crisis.  Finally, President Trump’s impeachment defense will rest today. The rumors are that the Sunday bombshell about John Bolton may have changed the math in favor of the demand for witnesses. If true, this would very likely drag the trial on past the date of State of the Union speech.

Tuesday’s major economic news is limited to the Dec. Durable Goods Orders (8:30 am) and Conf. Board Consumer Confidence (10 am).  Major earnings on the day include MMM, AOS, HCA, HOG, LMT MKC, NUE, PCAR, PNR, PFE, PHM, UTX, and XRX before the open.  After Tuesday’s close the market hears from ALK, MXIM, SBUX, EBAY, AMD, AAPL, BXP, CHRW, EQR, PFG, SYK, XLNX.

Overnight, Asian markets are mostly closed (Lunar New Year), but the NIKKEI was green as it shook off virus fear.  In Europe, markets are also green across the board at this point, as fear seems to have subsided for now.  As of 7:30 am, U.S. futures are pointing to a significant gap higher of between half and eight-tenths of a percent.

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It looks like market fears may be calming a bit after a rough couple days. However, nothing has improved on the coronavirus front and that story is very likely to get worst before it gets better. So, be careful and don't assume the market has moved on from the story once and for all. Still, the bulls have remained very resilient for months. 

Regardless of what happens, all we can do is stick with the trends.  In this case, that may well mean stepping aside, hedging more or getting small until markets settle. If you do look for trades, hedge your risks, keep taking profits and move your stops to protect yourself. Above all, wait for any new trade to come to you...plan your trade and trade your plan.  

Ed

Sorry, but no Swing Trade Ideas for your consideration and watchlist today. Trade smart, take profits along the way and trade your plan. Also, don't forget to check for upcoming earnings. The stocks/etfs we mention and talk about in the trading room are not recommendations to buy or sell.

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