Coronavirus could bleed Wall Street further

The Dow finished down over 600 points on Friday, and things look very uncertain going into Monday.  Analysts are expecting the Shanghai Stock Exchange to get rocked as it opens up for trading for the first time since January 23rd.  If indeed it does happen, you can expect it to take down the global markets. Fear seems to be the driving factor pushing the markets lower. And cautious seems to be the term that best describes how our pros are approaching the current market. They expect the market to move fast, and the swings to be massive. 

Wall Street has been eyeing 3-5% drop in the markets and we are currently a little over 3%.  It is becoming more evident that things are much worse in China than have been reported (shocker!).  How bad remains yet to be seen, but Friday’s move was a pretty good indicator that no one wants to hold over the weekend because of the uncertainty of where things will be after a couple of days.

It looks like Wall Street may have a little bit more to go on this move lower.  The S&P is currently just touching the bottom Bollinger band on the daily chart and is at a mini-level of support on the weekly chart.  The monthly is just pulling itself back within the top Bollinger band as we would expect it to do after going outside.

Make no mistake, we are still in a long-term uptrend and the monthly chart energy hasn’t really budged from the high 30’s.  Still room to run.  I expect to see the market rebound Monday if things look a little better on the virus, otherwise, we will go a little lower until we are outside the daily Bollinger band and then either pause to let the bands widen or bounce back in and put in a level of support.