The Coronavirus continues to run amok and is creating havoc on human lives and the markets. So rather than focus on opinions about whether or not it will become a worldwide pandemic, let’s look at the immediate impact. First and foremost, Apple was hit hard this week and ended down over -2.5% on Friday and is now off -5% from its recent highs. Considering Apple is the biggest component in our key benchmark indexes, it’s not something to dismiss.
China’s central bank has pumped in almost $500 billion dollars of liquidity to try to offset the impact of the virus. The question is will this huge injection will be enough to get people out of isolation and maybe risk their lives to go out and buy products (like a new iPhone). The pressure worldwide on rates trickled down to US long bonds which hit all-time lows in yield. Meanwhile, Gold hit seven-year highs and Gold Miners are looking to break out of a seven-year basing pattern. Volatility jumped and soft commodities (helped by a spreading locust) look poised to join the rally in metals. Switzerland stock market firmed, not surprising considering the flight to gold.
This week’s highlights are:
- Risk Gauges backed off to full Risk Off
- Leading tech sectors (XLK, SMH) were hit hardest on this sell-off
- Safety plays such as Utilities and Consumer Staples firmed
- Brother Biotech acted well on a relative basis and closed positive for last five days, while Retail firmed
- Market Internals went negative along with Sentiment
- Volume patterns reversed from last week and now showing Institutional selling across all key benchmarks
- Volatility jumped, confirming this week’s permission
- Bonds, Gold & Gold Miners (GDX +8.23% on the week) all rallied to new multi-year highs
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