Yesterday we experienced a record-breaking bounce on hopes of a big central bank intervention.  While it was wonderful to get a relief rally in the selling this all or nothing market price action remains very dangerous due to the extreme volatility.  The market loves freshly printed money and lower interest rates but one has to wonder how effective such a move will be against a virus outbreak.  Plan your risk carefully and be prepared for very fast price action and news-driven reversals.  This is not a market for the faint of heart or those without sizable tolerance to risk.  Plan carefully!

Asian markets closed mixed overnight as the RBA cuts the cash rate to new record lows.  European markets are decidedly green this morning on huge stimulus hopes and US Futures point to an extension of yesterdays rally at the open.  It would be wise to note significant price resistance levels are still above in the major indexes.  Chasing this wild rally could prove dangerous considering the wild volatility.

Economic Calendar

Earnings Calendar

On the Tuesday calendar we have 90 companies reporting with a heavy concentration of retail reports today.  Notable reports include TGT, AVAV, AZO, HPE, IGT, KSS, JWN, ROST, URBN, & VEEV.

Market New Highlights

Yesterday the Dow bounced nearly 1300 setting a record for the largest one day gain in history on hopes of central bank intervention.  Overnight Australia cut interest rates to 25 basis points and President Trump has already chimed in urging the Fed to follow suit with a big rate cut. 

Polls are open for Super Tuesday with Burnie Sanders currently leading in delegates but Joe Biden seems to be gaining some traction getting the endorsement of several former candidates that have now dropped out of the race.  The outcome of Super Tuesday could have a market effect in the coming days.

On the virus front the confirmed cases in the US is now over 100 as the fast-spreading illness is now in 10 states.  Fearful consumers, expecting the worst, cleared shelves of long shelf life food products, vitamins & sanitizers with the Governor of Washington suggesting avoidance of public gatherings.  South Korean infections continue to accelerate as more and more countries report newly discovered cases.

The Technical s

The incredibly wild price volatility continues to plague price action making it very challenging and very dangerous except for very experienced traders with a substantial tolerance to risk.  Even with the big move yesterday the Dow remains more than points below its 200-day average and significant level of price resistance at 27,300.  The SP-500 rallied above its 200-day and the QQQ used the 200 as a launchpad but remained below its 50-day average resistance.  Overnight futures were once again very volatile and continue to bounce around significantly this morning.

Action Plan

Traders unable to deal with the extreme price volatility should protect their capital and watch the show from the sidelines.  We are in a day-traders market and we should prepare for news-driven intra-day reversal and large overnight gaps.  Although the market is betting on a huge central bank bailout one has to wonder how effective that will be against a long-term virus threat.  Only time will tell but one thing for sure the fear of this outbreak may be along way from calming down as the spread continues.

Trade Wisely

Doug