European Equities: A Week in Review – 29/02/20

The Majors

It was a week to forget for the European majors and beyond.

Market reaction to the continued spread of the coronavirus drove demand for safe havens in the week.

For the DAX30, it was 7 consecutive day in the red, sinking the German Boerse into corrective territory in the week. It was even more dramatic for the EuroStoxx600, which fell from an all-time-high 433.9 on 19th February into corrective territory, with a 10% loss coming in just 6 trading sessions.

So, looking at the numbers, the DAX30 ended the week down by 12.44% to lead the way. The CAC40 and EuroStoxx600 weren’t far behind with losses of 11.94% and 12.25% respectively. Heavy losses on Friday just added salt into the wounds, with the majors not only in corrective territory but also in the deep red for February.

The CAC40 fell by 8.55% in February, with the DAX30 and EuroStoxx600 sliding by 8.41% and by 8.54% respectively.

We aren’t in bear territory yet, but we could be should economic data begin to spook investors alongside the coronavirus.

The Stats

It was a relatively busy week on the Eurozone economic calendar.

Through the 1st half of the week, key stats included German business sentiment figures and 2nd estimate GDP numbers for the 4th quarter.

Business sentiment improved in February, with the IFO Business Climate Index rising from 96.0 to 96.1. The upside came off the back of a pickup in business optimism that was partially offset by negative sentiment towards the current state of the economy.

Interestingly, the figures failed to reflect any negative bias stemming from the spread of the coronavirus. The timing of the survey likely failed to capture the spread across Europe and the U.S.

Germany’s GDP numbers were in line with 1st estimates, affirming the stall in the economy in the 4th quarter. Not great with what’s on the horizon…

Later in the week, French consumer spending and 2nd estimate GDP numbers and German unemployment figures were in focus on Friday.

A slide in consumer spending in January will be yet one more concern for the ECB. It wasn’t all bad, however, with Germany’s labor market resilient at the turn of the year.

On the monetary policy front, ECB President Lagarde was of the view that the spread of the virus had yet to have enough of an impact on inflation to warrant monetary policy support. Next week’s stats could change that narrative…

The Market Movers

From the DAX, it was a bearish week for the auto sector. Daimler and Volkswagen led the way down, with weekly losses of 11.62% and 10.67% respectively. BMW and Continental weren’t far behind, with losses of 9.37% and 9.42% respectively.

It was a particularly bearish week for the banking sector, with Deutsche Bank and Commerzbank tumbling by 16.88% and 20.09% respectively.

From the CAC, things were not much better for the banks. BNP Paribas slumped by 17.74%, while Credit Agricole and Soc Gen seeing losses of 17.73% and by 17.64% respectively.

The French auto sector took a more modest hit, with Renault and Peugeot sliding by 16.35% and 8.57% respectively.

Travel and tourism stocks were worse hit, however. Germany’s Lufthansa tumbled by 21.17%, with Air France-KLM ending the week down by 23.90%.

On the VIX Index

The VIX rose by 2.43% on Friday. Following on from a 42.09% surge on Thursday, the VIX ended the week up by a whopping 134.84%.

Risk aversion plagued the global financial markets driving the VIX to its highest level since hitting 50.3 back in February 2018. On Friday, the VIX had hit a week high 49.5 before easing back.

Updates of the spread of the coronavirus led the U.S equity markets into corrective territory and the largest weekly slide since the Global Financial Crisis.

For the week, the S&P500 slid by 11.49%.

VIX 29/02/20 Daily Chart

The Week Ahead

It’s another busy week ahead on the Eurozone economic calendar. Through the first half of the week, private sector PMI numbers are due out of Italy and Spain. Finalized numbers are also due out of France, Germany, and the Eurozone.

Expect Italy’s manufacturing PMI on Monday and the Eurozone’s composite on Wednesday to have the greatest influence. There could be revisions to German and French numbers to look out for, however.

On Wednesday, German and Eurozone retail sales figures will also be in focus ahead of German factory orders on Friday.

The markets will be looking for some indication of what impact the coronavirus has had on the economy. February and March numbers will be a better guide.

From elsewhere,

Private sector PMI numbers out of China and the U.S in the 1st half of the week will also influence. Expect manufacturing PMI numbers out of China from the weekend and on Monday to have a greater impact, however.

It will ultimately boil down to updates on the coronavirus, however. The next big risk to the market is for the WHO to announce the coronavirus as a pandemic and for more cases in the U.S…

S&P 500 Weekly Price Forecast – Stock Markets Have Worst Weekend Years

The S&P 500 has had a horrific week, showing extreme volume to the downside. By reaching all the way down to at least the 2900 level during the week, the market looks as if it is starting to change its tune in general. That makes quite a bit of sense as coronavirus is starting to spread, and there’s no way to price and what kind of damage a global epidemic could cause. At the very least, you will be looking at economies slowing down, if not grinding to a standstill.

S&P 500 Video 02.03.20

I believe at this point it’s very likely that the market participants will continue to see value hunters eventually, but we need to see some type of headway made when it comes to the coronavirus and its spread. There might be central bank coordinated efforts over the weekend, but quite frankly that will only be a temporary solution to this very major problem. At this point, rallies are to be sold into, and certainly can’t be trusted, at least not until some type of major change comes along. This has been absolutely brutal week, and typically weeks like this down end up being a “one-off event.” With this, I remain bearish but recognize that a relief rally probably comes relatively soon. That relief rally will simply be an opportunity to get short yet again or perhaps short covering done by others. It’s not assigned to start jumping into the market without some type of actual fundamental change in what’s going on.

S&P 500 Price Forecast – Stock Markets Have Wild Ride on Friday

The S&P 500 broke down significantly again during the trading session on Friday, showing signs of stability midday. Having said that, the market is extraordinarily oversold, and we have just seen one of the worst selloffs ever. At this point, the market is likely to see a hard bounce, but that bounce may or may not be sustainable. Quite frankly, I don’t think it’s likely to happen. The 200 day EMA above will more than likely offer resistance, and it’s not until we clear that level on a daily close then I think the market can truly bounce.

S&P 500 Video 02.03.20

The weekend can bring anything, not the least of which would be central banks deciding to cut rates or do something to help markets. That being said though, it can only help so much and at this point I think that the markets are probably resigned to sell rallies in the short term, at least until the coronavirus disappears or at least gets under control before the market can truly gain for a longer-term move. To the downside, if we were to break down below the lows of the Friday session this could really start to unwind things in cause a lot of problems. At this point, I don’t see an argument to start buying, at least not without some type of major help from outside. Overall, this is a market that if you try to bite here you might be “catching a falling knife.” Any bounce later in the day could be simple short covering than anything else. At this point, the sellers are still very much in control.

Gold Price Forecast – Did Gold Prices Peak?

Since January, we’ve been calling for Gold to reach $1700 by March. Prices hit $1691.70 on Monday before reversing sharply. The massive liquidation in stocks this week may have forced a premature top in Gold.

On Monday I wrote, Gold Nears $1700 Target as Stocks Plummet. Our Gold Cycle Indicator jumped to 405 and entered maximum topping, suggesting the 6-month cycle was nearing maturity. I assumed prices would stretch a little higher, but the ensuing market liquidation proved overwhelming.

Correction Target

If the gold cycle peaked at $1691.70, then I won’t expect the next 6-month low until late April or early May. Preliminary analysis supports a decline to $1480 – $1520.

A close up of a map

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What could change our outlook? If stocks continue to plummet, then the Fed will be forced to cut interest rates, and that could put gold back on its feet. With the S&P 500 down 13.40% for the week (as I write), the Fed could announce something as soon as this weekend.

Don’t Let The Bull Throw You

Despite all the volatility, precious metals and miners are in long-term bull markets. There will be pullbacks and corrections, sometimes deep – don’t let these events shake you. The bull is powerful and will do its best to throw you. Grit your teeth, cinch down that flank strap, and decide not to be thrown.

AG Thorson is a registered CMT and expert in technical analysis. He believes we are in the final stages of a global debt super-cycle. For more information, please visit https://goldpredict.com/

 

Gold Daily News: Friday, February 28

The gold futures contract lost 0.04% on Thursday, as it continued to fluctuate after retracing most of Friday’s-Monday’s rally. The daily trading range remained relatively big yesterday, as it reached over 25 dollars. It shows how high short-term volatility is. Investors were buying the safe-haven asset amid corona virus outbreak, economic slowdown fears recently. But gold has retraced a big chunk of that rally after bouncing off $1,700 mark.

Gold is 1.3% lower this morning despite stock market’s sell-off and the mentioned corona virus fears. What about the other precious metals? Silver lost 1.00% on Thursday. Today silver is 4.0% lower after breaking below January lows. Platinum lost 1.02% on Thursday, and right now it is trading 3.3% lower. The metal broke below $900. Palladium was the only gainer again, as it advanced by 1.68% yesterday. However, it is 3.9% lower this morning.

The financial markets went risk-off since last Friday, as corona virus fears came back again. Yesterday’s Durable Goods Orders release was mixed, the Preliminary GDP was in line with expectations and Pending Home Sales number was better than expected. However, stocks accelerated their sell-off and the S&P 500 index lost a stunning 4.42%.

Today we will have the Personal Spending and Personal Income numbers release at 8:30 a.m. Then at 9:45 a.m. the Chicago PMI will be released. There will also be Michigan Consumer Sentiment number release at 10:00 a.m. So a lot of news releases ahead of us this morning. However, economic data releases seem less important than the mentioned virus scare recently.

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Paul Rejczak
Stock Trading Strategist
Sunshine Profits – Effective Investments through Diligence and Care

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Disclaimer

All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

The S&P 500 Enters Correction, Coronavirus Fear Grows, Consumer Data Still Solid

The U.S. Market Is Down In Early Trading

The U.S. index futures are down hard again in Friday trading. This is the 7th day of decline and puts the major indices deep in correction territory. The Dow Jones Industrial Average, S&P 500, and NASDAQ Composite are all down more than 10% in that time.  The Dow Jones Industrial Average fell nearly 1200 points in Thursday action, its biggest one-day drop on record. This has been the worst week for equities since 2008 and the pain is not yet over.

The sell-off was sparked by the coronavirus and the market’s realization it will have a profound impact on global GDP this year. Yesterday’s warning from Goldman Sachs, that EPS growth would fall to 0% or lower, is the prime example. In virus news, the spread of the virus is not contained. New Zealand and Nigeria have reported their first cases while China and South Korean totals continue to rise. South Korea is now the center of the spread with 500 new cases. China’s epidemic appears to be slowing with only 327 new cases.

The virus is expected to gain a foothold in the U.S. and may already have done so. California reported its first case of community-based transmission and now has roughly 8,500 hundred people under observation.

 Stocks On The Move

Caterpillar is the worst-performing stock in the Dow. The bellwether of global economic activity was down as much as 3.0% in early pre-market trading but cut the losses to only -2.0% by the open of the session. Shares of Apple were also down about 3.0% in early trading while Chevron and Cisco both posted losses near 2.0%. Hard-hit S&P 500 stocks include Norweigan Cruise Lines and American Airlines are moving lower in today’s session and down more than 20% since the broad-market sell-off began.

Paypal is the latest to issue a warning about the virus. The global payments company says revenue will be impacted by the virus because the cross-border activity is slowing. Paypal says revenue will come in at the lower end of the previously stated range and below consensus.

Consumer Data Remains Strong

The day’s economic calendar is topped by the Personal Income and Spending data. The report shows income rose by a larger than expected 0.6% while spending increased only 0.2%. Analysts had been expecting income to rise by about 0.3% and spending the same. Looking in the rearview mirror, the previous month’s income was revised down by 0.1% while spending was revised higher. On the inflation front, PCE prices rose 0.1% last month and are up 1.7% YOY. At the core level, consumer inflation is up 1.6% from last year.

The Technical Chart for this Index Points to More Losses for Equities

Major global equity indices carry a strong enough correlation to warrant keeping an eye on them for potential signals for the overall markets. The UK FTSE 100 (UKX) has made a notable downside technical break that signals a bigger shift might be taking place in the markets after an already unusually large decline in the last week of February.

Technical Outlook for the FTSE 100

Specifically, the index has broken down from a rising trend channel that had encompassed price action over the last 11 years.

FTSE 100 (UKX) Monthly Chart

The monthly chart above shows the rising trend channel and the downside break as a result of this week’s price action. Further, the index shows two distinct sequences of lower highs and lower lows.

FTSE 100 (UKX) Weekly Chart

The above weekly chart shows one series of lower highs and lower lows from the peak posted in July last year. A second series, of a larger degree, can be seen from the peak printed in 2018 near the 7900 price point.

To sum up there are four things that have caught my attention from these charts. The two distinct sequences of lower highs and lower lows, the downside channel break, and lastly, the downward momentum as a result of the price action in the last week of February.

Fundamental Outlook

UK fundamentals don’t necessarily support a sharp decline in the British index. Major economic data as of late has surprised to the upside which allowed the Bank of England to remain on hold in February after having considered cutting interest rates.

At the same time, the recent escalation in Coronavirus fears might shift the central bank back towards the prospect of monetary policy easing which generally would be supportive for equities.

But the Coronavirus itself presents a tremendous amount of uncertainty, especially after it became apparent in the past week that China is not doing well to contain it.

Members of the European Central Bank and the Federal Reserve this week did not appear to see the urgency in the virus threat this week in the same manner that the markets have. Comments from officials followed mostly the same rhetoric, that it was too soon to assess if a monetary policy adjustment will be required. Meanwhile, the Fed Funds futures show that the markets have fully priced in a US rate cut in March and are starting to price in a potentially larger 50 basis point cut.

Bank of England Governor Mark Carney took a more cautious approach in an interview with Sky News and acknowledged that the virus has led to a decline in tourism and is impacting businesses that rely on supply chains originating from China. However, he did not discuss whether UK policymakers were considering monetary policy easing.

Correlations in the Global Markets

Correlations in Major Equity Indices

The above charts show that the major indices – FTSE 100, Euro Stoxx 50, Dax 30, Nikkei 225, and the S&P 500 have a fairly strong correlation with each other. It can be argued the US index is much stronger compared to the others and the correlation is not as strong.

It is very much possible that a divergence takes place, considering that the UK is about to begin trade negotiations with the EU, although this is not something I would personally count on.

As a result of these correlations, my view is that the bearish signal in the FTSE 100 is pointing to more downside to come for the global equity markets.

Bottom Line

While it could be entirely possible that the UK index is forming a bear trap, I’m taking a much more cautious approach when it comes to equities. I think it is a dangerous time to try and catch the falling knife in stocks, even though it may have worked for some in the past. Rather, I think it’s best to sit on the sidelines and let things develop and revisit getting long equities once there is more clarity surrounding the virus and its potential impacts.

Global Shares Routed as Investors Ditch Risky Assets on Fear of Worldwide Recession

The major European stock indexes are trading sharply lower on Friday after entering correction territory the previous session, after falling 10% below the record highs seen on February 19. This follows steep sell-offs in seven major Asia-Pacific markets and the United States, which have also reached correction territory.

It took just six days for the benchmark S&P 500 and NASDAQ Composite Indexes to fall from record highs into correction territory. On Thursday, the blue chip Dow Jones Industrial Average plunged 1,200 points, its biggest one-day drop ever.

In Europe, at 11:44 GMT, the UK’s FTSE 100 Index is trading 6602.33, down 194.07 or -2.86%. Germany’s DAX Index is at 11974.17, down 393.29 or -3.18% and France’s CAC is trading 5354.27, down 141.33 or -2.57%.

Global Stocks Set for Worst Week Since 2008 Financial Crisis

World share markets were headed for their worst week since the depths of the 2008 financial crisis as investors ditched risky assets on fears the coronavirus would become a pandemic and trigger a global recession, Reuters said.

Hope that Fed Comes to the Rescue

Hopes that that the epidemic that started in China would be over in a few months and economic activity would return to normal have been shattered, as new infections reported around the world now surpass those in China.

Hope remains, however, that the U.S. Federal Reserve would cut interest rates as soon as next month to support economic growth.

“We don’t even need to wait for economic data to wee how badly the economy is being hit. You can tell that the sales of airlines and hotels are already falling by a half or something like that,” said Tomoaki Shishido, senior economist at Nomura Securities.

“It is fair to say the impact of the coronavirus will be clearly much bigger than the U.S.-China trade war. So the Fed does not have a reason to take a wait-and-see stance next month,” Shishido said.

Expectations the Fed will cut interest rates to cushion the blow are rising in money markets. Analysts say Fed funds futures are now pricing in about a 75% chance of a 25-basis point cut at the central bank’s March 17-18 meeting.

Fear of Major Global Economic Slump

Fear of a major economic slump is driving commodity and equity prices lower.

Fear as measured by the CBOE volatility index or VIX, jumped to 39.16, the highest level in about two years, well out of the 11-20 range of recent months, according to Reuters.

The index, which measures expected swings in U.S. shares in the next 30 days, typically shoots up to around 50 when bear market selling hits is heaviest and approached almost 90 during the 2008-09 financial crisis, Reuters wrote.

“The coronavirus now looks like a pandemic. Markets can cope even if there is a big risk as long as we can see the end of the tunnel,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities. “But at the moment, no one can tell how long this will last and how severe it will get.”

Major Asia-Pacific Markets Tumble into Correction Territory; Investors Brace for Chinese PMI Reports

Asia-Pacific shares tumbled on Friday with China’s Shenzhen stocks diving nearly 5%, as investors feared the coronavirus might develop into a pandemic and trigger global recession. Investors continued to brace for an impact on economic growth with global shares heading for the worst week since the financial crisis in 2008.

On Friday, Japan’s Nikkei 225 Index settled at 21142.96, down 805.27 or -3.67%. Hong Kong’s Hang Seng Index closed at 26129.93, down 648.69 or -2.42% and South Korea’s KOSPI Index finished at 1987.01, down 67.88 or -3.30.

In China, the Shanghai Index settled at 2880.30, down 111.03 or -3.71% and in Australia, the S&P/ASX 200 Index closed at 6441.20, down 216.70 or -3.25%.

Coronavirus Update

New infections rapidly spread around the world with countries stockpiling medical supplies and preparing emergency responses, shattering hopes that the epidemic would be contained to China and economic activity would return to normal, Reuters said.

China to Release Key Economic Data This Weekend

While the markets are closed over the weekend, China will release reports on February Manufacturing and Non-Manufacturing PMI. The data is expected to show activity in in China’s manufacturing sector in February probably shrank at the fastest pace since the global financial crisis, a Reuters poll showed, as the epidemic took an excruciating economic toll on Chinese factories. Analysts estimate Manufacturing PMI at 45.1, down from 50.0 and Non-Manufacturing PMI at 51.4, down from 54.1.

Steep Losses in China after Stimulus Effect Wears Off

The global stock market rout knocked mainland Chinese shares lower, which have been relatively well supported this month, as new coronavirus cases in the country fell and Beijing doled out measures to shore up economic growth.

The CSI300 Index of Shanghai and Shenzhen shares dropped 2.9%, on track for its first weekly loss in three.

“Economic troubles outside China, especially in the U.S., could hurt the Chinese economy. Foreign investors, who were buying Chinese shares after the Lunar New Year holidays, have become a net seller since late last week,” said Wang Shenshen, senior equity strategist at Mizuho Securities. “Their selling might have intensified today.”

E-mini S&P 500 Index (ES) Futures Technical Analysis – Nearing Major Retracement Zone at 2876.75 – 2753.75

March E-mini S&P 500 Index futures finished sharply lower on Thursday after taking out a number of swing bottoms. The sell-off was primarily fueled by a combination of profit-taking and protective sell stops being executed. Given the downside momentum, I’m sure some of the selling was driven by computer algorithms. For those who keep track of these sort of things, the index is down over 10% from its last major top, which puts it in correction territory.

On Thursday, March E-mini S&P 500 Index futures settled at 2957.00, down 153.25 or -5.18%.

Daily March E-mini S&P 500 Index

Daily Technical Analysis

The main trend is down according to the daily swing chart. The main trend will change to up on a move through 3397.50. This is highly unlikely, however.

The market is also down six days from its most recent top at 3397.50. Usually we start looking for closing price reversal bottoms after seven sessions especially when a market is testing a major 50% to 6.18% retracement zone. So we’re going to wait until Monday before we start fishing for a bottom especially with China expected to release its Manufacturing and Non-Manufacturing PMI reports at 01:00 GMT on Saturday. This report could make or break this market on Monday.

The main range is the contract low at 2356.00 from December 24, 2018 and the contract high at 3397.50 from February 20. Its retracement zone is 2876.75 to 2753.75. Trader reaction to this zone should determine the direction of the March E-mini S&P 500 Index into the close on Friday.

Daily March E-mini S&P 500 Index

Early Forecast

We’re seeing some relatively light selling pressure early Friday. If this is able to generate enough downside momentum then look for the selling to extend into the main 50% level at 2876.75. We could see a technical bounce on the first test of this level.

If 2876.75 fails as support then look for the selling to possibly extend into the series of main bottoms at 2855.00, 2818.75 and 2787.00. These are followed by the main Fibonacci level at 2753.75 and another main bottom at 2741.75. Watch for buying at these levels also.

The Fib level at 2753.75 is also the trigger point for a potential acceleration to the downside.

We’re going to learn a lot about how investors feel about this market by how they react to 2876.75 to 2753.75. I know it’s a day early, but I wouldn’t be surprised by a major reversal to the upside following a test of this value zone. It there is no reversal then we could see an attempt to build a support base.

We’re not issuing a buy signal. We’re just saying that a test of 2876.75 to 2753.75 could bring in the bargain-hunters.

European Equities: Futures Point to more Doom and Gloom ahead

Economic Calendar:

Friday, 28th February

French Consumer Spending (MoM) (Jan)

French GDP (QoQ) (Q4) 2nd Estimate

German Unemployment Change (Feb)

German Unemployment Rate (Feb)

Italian CPI (MoM) (Feb) Prelim

German CPI (MoM) (Feb) Prelim

The Majors

It was back into the deep red for the European majors, with Wednesday’s mixed session having been just a brief respite for the bulls.

The EuroStoxx600 slid by 3.75% to lead the way down, with the CAC40 and DAX40 ending the day down by 3.32% and 3.19% respectively.

A greater spread of the coronavirus across new countries and a sharp rise in new cases in Italy weighed on risk appetite on Thursday.

Fears of a recession in the world’s 8th largest economy rattled the markets, with China, Japan, Singapore, and South Korea already under the cosh.

Travel and Leisure stocks continued to bear the brunt of investor ire, though all sectors ended the day in the red.

The Stats

It was a relatively quiet day on the Eurozone economic calendar on Thursday. Economic data included prelim February inflation figures out of Spain and finalized consumer confidence figures for the Eurozone.

Unsurprisingly, economic data continued to play 2nd fiddle to the news wires and coronavirus updates.

The Eurozone’s consumer confidence indicator came in at -6.6 according to finalized numbers, which was in line with prelim. In January, the indicator had stood at -8.1.

  • The pickup in consumer confidence was attributed to a brighter outlook on the economic situation. Sentiment will likely tumble in the next set of numbers.
  • By contrast, the Employment Expectations Indicator eased mildly from 105.3 to 105.0.

Later in the day, U.S 4th quarter GDP numbers and durable goods orders were in focus but also failed to influence late in the session.

Core durable goods rose by 0.9% in January, following a 0.1% rise in December. Durable goods fell by 0.2%, however, partially reversing a 2.9% jump from December.

2nd estimate GDP numbers were in line with 1st estimates, with even a 5.2% jump in pending home sales not enough to prevent the slide.

The Market Movers

For the DAX: autos were back into the red on Thursday. BMW and Volkswagen led the down, with the pair sliding by 3.80% and by 4.79% respectively. Continental and Daimler saw more modest losses of 2.48% and 2.69% respectively.

Things were no better for the banks, which saw heavier losses on the day. Commerzbank slid by 5.25%, with Deutsche Bank down by 5.55%.

Deutsche Lufthansa was the worst performer on the DAX for a 2nd consecutive day, sliding by 6.48%.

From the CAC, it was another bearish day for the banks. BNP Paribas slid by 5.87%, with Credit Agricole and Soc Gen seeing heavier losses of 6.16% and by 6.44% respectively.

The auto sector also struggled, with Peugeot and Renault ending the day down by 1.89% and 6.38% respectively.

Air France-KLM slumped by 7.17% on the day.

The latest sell-off leaves the majors in corrective territory, with the EuroStoxx600 way off its all-time high from earlier in the month.

On the VIX Index

The VIX resumed its upward trend on Thursday, surging by 42.09%. Reversing a 1.04% loss from Wednesday, a 5th day in the red out of 6 saw the VIX end the day at 39.2.

Risk aversion spread across the global financial markets, with the S&P500 sliding into corrective territory on Thursday. Coronavirus cases in the U.S and the talk of a U.S pandemic led the move into corrective territory.

We had seen the markets previously buy into the view that the U.S economy would likely be unscathed from the virus.

Commentary from the CDC and rise in the number of cases suggested otherwise, however, with the U.S economic outlook now also uncertain.

When considering the economies that have fallen at the hands of the virus and those at risk, the doom and gloom sentiment does seem justified.

For the current week, Monday through Thursday, the S&P500 was down by 10.76%.

VIX 28/02/20 Daily Chart

The Day Ahead

It’s a relatively busy day ahead on the Eurozone economic calendar on Friday. Economic data includes German unemployment figures and French consumer spending and 4th quarter GDP numbers.

Of less influence on the day include prelim inflation numbers out of Italy and Germany.

From outside of the Eurozone, U.S inflation, trade data,  personal spending, and Chicago PMI numbers will also influence late in the day.

While the stats from the Eurozone and the U.S will influence, expect coronavirus news to remain the key driver.

Bargain hunters may be looking for an entry point but with so much uncertainty, any upside would likely remain limited.

In the futures markets, at the time of writing, the DAX was down by 269.5 points, while the Dow was up by 62 points.

Is This A Repeat of February 2018 Market Crash?

Back in early 2018, after a dramatic rally in early January 2018, the US stock market collapsed suddenly and violently – falling nearly 12% in a matter of just 9 trading days.  Our researchers asked the question, is the current collapse similar to this type of move and could we expect a sudden market bottom to setup?

Although there are similarities between the setups of these two events, our researchers believe there are two unique differences between the selloff in 2018 and the current selloff.  We’ll attempt to cover these components and setups in detail.

First, the similarities:

_  The contraction in market price just before the end of the year in 2017 was indicative of a market that had rallied to extended valuation levels, then stalled in December as the year-end selling took over.

_  The renewed rally in early January was a process of capital re-engaging in the market as future expectations continued to drive and exuberant investor confidence in the markets.

These two similarities between 2018 and 2020 seem fundamental.

Yet, there are differences that may drive a further price contraction event – beyond what we saw in 2018.

_  The US/China trade deal disrupted market fundamentals over the past 6+ months and established a more diminished function of global economics as the trade tensions continued

_  The foreign market capital shift process, where foreign capital poured into the US stock market over the past 12+ months and supported the US Dollar was a process of avoiding foreign market risks.  This process trapped a large portion of foreign capital in the US markets prior to the 2020 collapse.

_  Global geopolitical functions are far more fragile than they were in 2018.  After BREXIT was completed and prior to the signing of the US/China trade deal, a number of concerns existed throughout the world and are still valid.

_  The Wuhan Corona Virus has changed what global investors expect and how both supply and demand economic functions are being addressed world-wide.

The potential of an early price bottom setting up after this 2020 price collapse is very real.  Yet, the ultimate bottom in the markets may be much lower than the 11% or 12% price decline that happened in 2018.  The scale and scope of the Corona Virus event, should it continue beyond April 2020 (and possibility well into June or July 2020), could extend the price decline even further.  Ultimately, this extended risk function may push the US and global markets to deeper lows before a bottom sets up – yet the outcome may be very similar.

After the double bottom in 2018 setup, a slow and stead price advance continued until the SPY price rallied to new highs in September 2018.  A very similar type of price activity may take place in 2020 after the ultimate bottom in price sets up.

Our researchers believe the ultimate bottom in the SPY will likely happen near $251 – near the middle of the 2018 price range.  Ideally, the event that takes place to create this price decline will likely happen in a “waterfall” event structure.  This means we may see a series of 3 to 9+ day selloffs culminating in a major market bottom near $251.

If our research team is correct in this analysis, a bottom will likely form in the SPY and near $251 to $265 where and extended bottom pattern may setup.  We may see a double-bottom type of pattern as we saw in 2018.  Ultimately, we believe the bottom will setup sometime in mid-2020 and the remainder of the year will continue to support an extended price rally into the end of 2020.

Are we looking at a similar type of price event like we saw in early 2018?  Ideally, yes.  Although, we believe this downside price move will be deeper in terms of the total price decline (likely 18% to 25%) and will end when price valuation levels reach a point where global investors feel opportunity exists beyond risk.

Right now, we believe an incredible opportunity for skilled investors is present and that incredible market sector price rotations are taking place.  We believe the devaluation process will move the markets lower by at least 15% to 20% or more.  That suggests the bottom in the SPY is likely near $251 before we see any real opportunity for price to form a support base and begin to rally higher.

As a technical analysis and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for both short-term swing trading and long-term investment capital. The opportunities are massive/life-changing if handled properly.

I urge you visit my ETF Wealth Building Newsletter and if you like what I offer, join me with the 1-year subscription to lock in the lowest rate possible and ride my coattails as I navigate these financial market and build wealth while others lose nearly everything they own during the next financial crisis. Join Now and Get a Free 1oz Silver Bar!

Chris Vermeulen
www.TheTechnicalTraders.com .

 

E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Driven Lower by Fear of the Unknown

March E-mini Dow Jones Industrial Average futures plunged in volatile trading on Thursday as fear the coronavirus may be spreading in the United States encouraged investors to aggressively trim their stock market exposure. The heavy selling is being blamed on a slew of corporate and analyst warnings on the economic impact of the virus.

At 21:35 GMT, March E-mini Dow Jones Industrial Average futures are trading 25630, down 1292 or -4.80%. Earlier in the session, the Dow hit its lowest level since August 14 at 25523.

The huge sell-off has essentially wiped out the entire U.S/China Phase One trade deal premium, which suggests traders don’t believe China will be able to fulfill its side of the agreement.

Daily March E-mini Dow Jones Industrial Average

Daily Technical Analysis

The main trend is down according to the daily swing chart. The downtrend was reaffirmed on Thursday when sellers took out three more main bottoms at 26592, 25978 and 25710. The next target is the August 14 bottom at 25326, followed by the major bottom at 24859 from May 31, 2019.

The main range is 24859 to 29543. Its retracement zone at 26648 to 27201 is new resistance. Trading on the weak side of this zone is also helping to generate the downside momentum.

Daily March E-mini Dow Jones Industrial Average

Short-Term Outlook

The selling stopped near an uptrending Gann angle at 25605. If this fails then look for the selling to extend into the next main bottom at 25326, followed by another uptrending Gann angle at 25229. This is the last potential support angle before the May 2019 main bottom at 24859.

By no means are we trying to predict a bottom when we mention Gann angles and main bottoms as potential support. We’re just giving you a road map. No one can predict the momentum so for all we know, the market could straddle these levels all session before moving swiftly in either direction.

We do know from experience that these types of sell-offs often end with a dramatic reversal bottom, but that is usually triggered by a catalyst. Some think the Fed will come to the rescue. This may be a temporary solution designed to stop the selling, but any technical bounce is likely to be met with fresh shorting pressure because the Fed can’t really do anything to offset the damage from the coronavirus because the problem has not run its course and no one knows what the final outcome will look like when all is said and done.

S&P 500 Price Forecast – Stock Markets Plunge Again but Find Buyers

The S&P 500 has broken down again during the trading session on Thursday, reaching all the way down towards the 3000 level in the S&P 500 E-mini futures contract. Having said that, the market has bounced hard from that level and it does look as if it is trying to hang on to the 200 day EMA. If it does, that could have been the final flush in the massive selloff and correction. If the market was to break above the top of the candlestick, it’s likely that there will be a recovery. Quite frankly, there are a lot of longer-term traders out there just waiting to happen for those who are willing to step in and pick up cheap stocks.

S&P 500 Video 28.02.20

That being said, if we break down below the 3000 handle, then the market could go even lower, reaching down towards the 2900 level. Ultimately though, the resiliency of the US stock market is something to pay attention to, and if we do in fact get a close that is closer to a hammer than not, it should be noted that the previous candlestick was an inverted hammer, and that is a two candlestick pattern the typically means that you are starting to see some indecision. In this case, indecision when it comes to the selling of the contract. At this point, it certainly looks as if value hunters will be coming back in and trying to pick this market up as it has sold off far too quickly in the last couple of sessions.

Virus Fears Scuttle Market, EPS Growth In Question, Data Still Holding Up

Equities Fall In Fourth Day Of Viral Rout

The U.S. futures market is indicating another deep decline on Thursday. The move, sparked by a growing fear of the coronavirus, shaved another -1.0% and more off of the major indices. Today’s news includes word of the first community-spread case of coronavirus in the U.S. Health officials in California report the first case in which there is no known trail of contagion. The news raises the stakes in terms of economic impact, if the U.S. shuts down like China and other countries global GDP could contract sharply in 2020.

Elsewhere in the world, China continues to report new cases despite signs its containment efforts are starting to pay off. In South Korea, the second hardest nation, the number of new cases spiked to set a new daily record. The disease is not yet contained in that country. Officials in Japan are taking precautionary efforts and have closed all schools, the number of cases is growing in the EU as well.

Stocks On The Move

Tech is among the days hardest hit. The sector has above-average exposure to China and international markets making it particularly vulnerable to the disease. Apple and Intel are among the days leaders but are not the biggest losers by far. Apple and Intell are both down about -1.5% while chipmakers NVDA and AMD have shed -2.5% and -3.9% respectively.

Microsoft and Goldman Sachs are the latest to issue warnings about the viral impact. Microsoft says it will not meet its Q1 revenue targets because the supply chain is re-ramping slower than expected. Goldman Sachs analysts issued a warning that EPS growth for the entire S&P 500 could come in well below expectations for the year, as low as 0.0% but I think their estimate is generous.

Best Buy issued a Q4 earnings report this morning. The company reports better than expected revenue and earnings that were driven by an increase in comp-store sales. Shares were up sharply following the news but have since given up their gains. Virgin Galactic got a major catalyst from analysts this morning. A double-dose of downgrades from Morgan Stanley and Credit Suisse have shares down more than -13.0%.

The Data Is Good, No Indication Of Weakness

The number of new claims for unemployment insurance climbed 8,000 over the last week but remains low and trending near historic lows. The continuing claims and total claims figures, both indicators of conditions within the broad labor market, were relatively flat over the past week. New orders for durable goods fell -0.20% over the past month. The figure is better than expected and accompanied by a double-digit increase in core capital goods orders. On the GDP front, the final read for 4th quarter GDP is 2.1% and unchanged from the previous estimate.

DAX30 Bears Fully Controlling the Market

Dear Traders,

Dax30 is in a heavy downtrend caused by a negative sentiment due to corona virus. Equities are dropping in sync and DAX is no exception.

If the market makes a bounce towards 12820. We might expect another sell. Watch for a bearish candlestick pattern in the zone 12800-20. Rejections off the zone will target 12715 and 12508. The projected low is 12138, so pay attention to a possible drop towards 12150 zone. As long as 12871 (bearish order block) holds, the DAX is strongly bearish.

The Analysis has been done with the CAMMACD.Core and Sit Systems

 

Asian Shares Mostly Lower; Bank of Korea Leaves Policy Rate Unchanged While Aussie Yields Hit Record Lows

The major Asia Pacific stock indexes traded mostly lower on Thursday as cautious investors digested the latest news over the fast-spreading new coronavirus while assessing the potential global economic impact of the virus that has so far infected more than 81,000 people and killed over 2,700.

Although most of the people infected and killed by the disease to-date are from China, the number of cases outside of the country has surged in recent weeks with countries like South Korea, Italy and Iran at the forefront.

Meanwhile, the U.S. Centers for Disease Control and Prevention on Wednesday confirmed the first potential “community spread” of the coronavirus stateside. Additionally, late Wednesday, President Donald Trump announced that Vice President Mike Pence will be in charge of the U.S. response to the deadly outbreak. Trump also said the risk of the disease to the country remained “very low.”

On Thursday, Japan’s Nikkei 225 Index settled at 21948.23, down 477.96 or -2.13%. South Korea’s KOSPI Index finished at 2054.89, down 21.88 or -1.05% and Hong Kong’s Hang Seng Index closed at 26687.89, down 8.6 or -0.03%.

China’s Shanghai Index settled at 2991.33, up 3.4 or +0.11% and Australia’s S&P/ASX 200 Index closed at 6657.90, down 50.2 or -0.75%.

Early in the session, U.S. futures markets are pointing toward a lower opening on Thursday after the benchmark S&P 500 Index wiped out $1.7 trillion in just two sessions.

Bank of Korea Keeps Policy Rate Unchanged

In an unexpected move, the Bank of Korea kept its benchmark policy rate unchanged. Central bank policymakers surprised the financial markets by holding the benchmark interest rate at 1.25% when analysts polled by Reuters were expecting a rate cut. That was despite a recent spike in the number of coronavirus cases in the country threatening its economy.

Aberdeen Standard Investments’ Leong Lin Jing described the Bank of Korea’s interest rate decision as “a little bit curious.”

“Bank of Korea has had a habit of being a little bit behind the curve … when acknowledging that growth is slowing down,” Leong said.

Australian Shares Fall for Fifth Straight Session

Increased reports of coronavirus cases around the world saw Australian shares tumble of a fifth consecutive session on Thursday, wiping out all the gains achieved earlier in the year, the Brisbane Times reported.

All sectors aside from healthcare and utilities finished in the red, led by steep declines in technology and energy shares. As was the case earlier this week, the weakness was driven by uncertainty on the human and economic toll the coronavirus may bring.

In other news, Australia’s 10-year bond yield fell to a new record low of 0.845 percent after Australia’s Prime Minister Scott Morrison said risk of global pandemic is very much upon us, while urging the need to take action.

Additionally, Australia private capital expenditure dropped -2.8% in Q4, much worse than expectation of 0.5% increase. In seasonally adjusted terms, building and structures dropped -5.9%. Mining dropped -2.7%. Equipment, plant and machinery rose 0.8%. Manufacturing dropped -10.1% and other selected industries fell -1.9%.

European Equities: Another Slide on the Cards and the Prospects of a Global Pandemic Intensify

Economic Calendar:

Thursday, 27th February

Spanish HICP (YoY) (Feb) Prelim

Spanish HICP (YoY) (Feb) Prelim

Eurozone Consumer Confidence (Feb) Final

Friday, 28th February

French Consumer Spending (MoM) (Jan)

French GDP (QoQ) (Q4) 2nd Estimate

German Unemployment Change (Feb)

German Unemployment Rate (Feb)

Italian CPI (MoM) (Feb) Prelim

German CPI (MoM) (Feb) Prelim

The Majors

It was a mixed day for the European majors on Wednesday, with investors tiptoeing back into riskier assets. Support came in spite of the continued spread of the coronavirus, with a decision by EU member states to leave borders open delivering the support.

The continued concern over the spread of the virus was evidenced in travel and leisure stocks, however, that were the worst performers on the day.

The DAX30 saw its 5th consecutive day in the red, falling by 0.12%. Finding support was the CAC40, which eked out a 0.09% gain, while the EuroStoxx600 ending the day flat.

The Stats

It was a relatively quiet day on the Eurozone economic calendar on Wednesday. Economic data included jobseeker numbers out of France.

The numbers had a muted impact on the majors, however, in spite of total job seekers falling from 3,292.9k to 3,264.8k.

Concerns over the economic outlook continue to mute the effect of historical data that have yet to reflect the impact of the coronavirus.

Out of the U.S, January’s new home sales also had a muted impact on the majors late in the European session.

A bullish start to the day across the U.S majors did provide support, however…

The Market Movers

For the DAX: autos were amongst the top performers on Wednesday as investors went bargain hunting. BMW and Daimler led the way with gains of 1.26% and 1.05% respectively. Continental and Volkswagen saw more modest gains of 0.94% and 0.24% respectively.

It was a mixed day for the banks, however, with Commerzbank falling by 0.35%, while Deutsche Bank rose by 1.38%.

Deutsche Lufthansa was the worst performer on the DAX30, falling by 1.99%.

From the CAC, it was another bearish day for the banks. BNP Paribas fell by 1.00%, with Credit Agricole and Soc Gen declining by 1.14% and by 1.01% respectively.

The auto sector found support, however, with Renault and Peugeot ending the day up by 1.22% and 4.75% respectively.

Air France-KLM continued to struggle, however, with a 0.87% loss on the day.

On the VIX Index

The VIX saw red for the 1st time in 5-days, with a 1.04% loss. Following an 11.27% gain on Tuesday, the VIX ended the day at 27.6.

While the U.S equity markets had found support through the early part of the day, news updates on the coronavirus led to a late reversal, leaving the S&P500 down by 0.38% on the day.

The reversal was not enough to drive the VIX into positive territory, however, though the downside for the VIX may be temporary…

VIX 27/02/20 Daily Chart

The Day Ahead

It’s a relatively busy day ahead on the Eurozone economic calendar on Thursday. Economic data includes prelim February inflation figures out of Spain and finalized Eurozone consumer confidence numbers.

From the U.S, durable goods orders and 2nd estimate GDP numbers for the 4th quarter also provided direction.

Expect the Eurozone consumer confidence and numbers from the U.S to have the greatest influence from the calendar.

It will ultimately boil down to news updates and the later coronavirus numbers…

In the futures markets, at the time of writing, the DAX was down by 275.5 points, with the Dow down by 218 points.

WHO, The Markets New Grim Reaper

Markets

After an up and down session with trader vacillating on the economic impact, the coronavirus will have on global growth, S&P500 was more or less flat heading into the close, having spent most of the session in slightly positive territory. Most European bourses saw very modest gains, though Asia was weaker. US fixed income rallied further, however, US10Y yields down a further 3bps to 1.33%. Oil down another 2.4%.

But for risk concerns, the bearer of the truth was WHO reporting that 427 new cases of the virus were confirmed Tuesday outside China, compared with 411 in mainland China: the first time that new case numbers outside China were higher than those from within. Of course, the spread beyond China borders has been at the core of the market’s worries since the weekend news flow pointed to a potential supper spreader around the globe and saw risk U-turn lower.

Previous crisis playbooks have all revolved around buying the dip in equities, so I wonder just how much further the fire sale will go before the market at least starts to scale in again. We saw an attempt at a bounce in the New York session before the markets new Grim Reaper, the WHO, raised its ugly head again.

But based on last night’s price action, it does appear that any bounce in stocks is likely to be short-lived. And eventually, the markets could fall deeper as investors start to think what’s the point of trying to pick the bottom in the short term.

Looking further down the line in 2020, the market continues to price in more significant haircuts to large parts of the global economy. At the same time, the idea of a v-shaped recovery seems to be the new castle in the sky. Admittedly things can pivot quickly, but if you believed in the narrative, that easy monetary policy was mainly fuelling the risk rally. Then arguably, you are going to want to see definitive signs of a Fed pivot, primarily as the fundamentals are pointing the other way before feeling confident about buying equities. But on that front, the Fed messaging continues to signal “still too soon.”

On the G-20 coordinated stimulus front and for those looking for shock and awe fiscal delivery from Europe was always likely to be disappointed. News about Germany intending to pause its debt brake sparked a recovery in stocks and a sell-off in Bunds, but it was short-lived. Still, ultimately, the cumulative effect of similarly measured responses around the world might be enough to grease the wheels of the global economy.

Oil Markets 

Traders remain hyper skittish, and oil rallies short-lived as self first ask questions later will be the theme if there is still even the slightest concern over the virus outbreak becoming a pandemic. There has been another big hit to oil on renewed super spreader coronavirus fears.

And as expected, the EIA inventory data which under normal conditions would have been bullish for oil price fell through the cracks as uncertainty over coronavirus will take its toll on oil demand sentiment until its impact can be adequately quantified.

Next week’s OPEC+ meeting should be a positive catalyst, but the fear here is that the outcome might be consigned to oblivion with the market singular focused on virus spread, which has unceremoniously shown up on the doorsteps of the US market. Still, OPEC + has enough weight, and with a hefty production cut at a minimum, it should offer a backstop, and with a problem G-20 concerted stimulus effort surely the bottom can’t be too far from here. In addition, with WTI below $ 48 it could also trigger the self-correcting US supply mechanism as more shale wells go offline due to breakeven concerns.

The Straw that could break the Oil market back?

The biggest concern and the straw that could possibly break the oil markets back is the susceptibility of the US market to this insidious virus, which from a risk perspective needs to rank beyond all other. If the virus spread rapidly in the US, you can’t unscramble that egg.

The most glaring problem is that the US has only tested 426 people, while South Korea has tested 35,000. The US guidelines were only to check those who displayed respiratory symptoms and had recently traveled to China or had close contact with an infected person. The problem is that coronavirus is asymptomatic — it is contagious before the symptoms show.

China had come in for some criticism over the handling of the outbreak. However, as the virus spreads global, those “harsh” measures appear to have been the right thing to do and arguably its Europe and US efforts that could be too complacent and porous. And not surprisingly, any excuse to sell still feels like the sentiment in the market right now.

Gold Markets

It’s too early to cap gold prices as we are not in business as usual market conditions. But of course, there is no denying gold’s safe-haven credentials have been questioned in light of a gold decline as Treasury yields also fell precipitously this week, which should have been extremely positive for gold.

But since we’re only into day three of demand depletion and given the position build of late, this week’s washout still fits into the “healthy correction” category although we might revise that view on a break of $1600.

However, as profit-taking and selling to cover margin calls in the equity markets is decreasing, so the chances of gold rebounding increase propelled by ongoing COVID-19 concerns amid volatile financial conditions.

Beyond the constant stream of buying the dip analysts banter and for investors that have sizable gold positions. there are some concerns

Government spending commitments to contain the virus and e might push bond yields higher and weigh on gold appeal, especially from the fiscal side of the equation. While the Fed advocating for patience doesn’t provide a significant impulse to push gold through $1700. But with yields so low suggesting gold downside should be limited a delayed policy market response could funnel more buying of gold as the longer the Fed sits on their hand, the worse stock market conditions could get

Currency Markets 

The US Dollar

The US dollar has lost its safe-haven status with the coronavirus arriving on the US doorstep. With Fed rate cut probabilities on the rise US bond yields sliding ,fortunately for the global risk markets, the US dollar has started to weaken as reverse Yankee mania sets in.

Asia FX

Outside of the KRW and THB, which remains high beta to further jumps on coronavirus cases withing ASEAN proxies. Asia FX has remained fairly rangebound despite all the coronavirus upheaval around the globe. To no small degree, much of the sell-off Asia FX were priced into the curve ahead of the global equity market meltdown, and at the same time, the Yuan has remained tethered to the PBoC policy anchor by maintaining a stable policy fixing.

The Ringgit

Foreign investors sidestepped Fitch warning (seldom have lasting legs) and have resumed their demand for Malaysia bonds as the BNM rate cut expectations get to move forward. Its a small but positive move in these politically charged times, which continues to weigh on the Ringgit despite the succession scrim looking a bit less messy than at the start of the week. But when it comes to Malaysia politics, all bets are off.

S&P 500 Price Forecast – Stock Markets Recover on Wednesday

The S&P 500 initially pulled back towards the 200 day EMA early in the trading session, but then turned around to form a massive hammer. Ultimately, if the market breaks above the top of this candlestick, it’s likely that the market then goes looking towards the 3250 level and trying to break above the previous uptrend line next. The 50 day EMA is starting to turn over at the uptrend line, so will see whether or not we can break back above there. Quite frankly, I think a lot of people out there will continue to look at this as a potential buying opportunity as the US stock markets have gotten cheap. Furthermore, the gap lower is trying to get filled if we do rally that high. The 50% Fibonacci retracement level has just been touched, so quite frankly there are plenty of reasons to think that at the very least people will be looking to get involved.

S&P 500 Video 27.02.20

If we break down below the 200 day EMA, then the market is likely to go down towards the 3000 level next, and then eventually the 2900 level. Stocks have gotten hammered, but people will look at US companies as a bit of a safety play again, as the coronavirus has certainly hurt most markets around the world, but these massive selloffs are healthy considering that the market was totally ignoring the rest of the world. It is still considered to be the most resilient economy, so that makes quite a bit of sense to see money flow into it. Ultimately, it certainly looks as if we are trying to make a stand.