Coronavirus Fears Escalate; Futures Down

A new threat to the market comes from a virus as outbreak continues to spread. As the Swine Flu and Ebola virus the threat is real and human life will be impacted. Will it be contained? The optimist says yes, but we are not here to predict when or whether the virus will be stopped. Our stock market had been on quite a tear and in need of a consolidation period. Will the Coronavirus be the catalyst for a correction or a stock market crash? Our job in the market is not to predict what will happen but interpret the price action through our trading process. We will react accordingly and will keep an open mind in this market. There is no need to panic. Time to buckle up, keep our emotions in-check, and let this market play out.

Past breakouts like the Ebola virus has always been preceded with some sort of correction. At this point, given the level of urgency we should see this market react negatively. Again, from a pure price standpoint, a correction here is not out of the question. We need to digest the current run up since October. For more than 3 months we have seen this market race higher without a sniff at testing the 50-day moving average. In addition to the overall market consolidating we should see new bases and new entry points if this is a short-term correction. We must be prepared for whatever this market will throw at us. Position sizes and exits must be obeyed. There is no room for emotions in this game and especially in this stock market environment.

Crude oil continues to fall after the Iran incident. The commodity is down more than $1.50 this morning trading around $52.60. Could it fall further? It most certainly can and the further it falls the better for the US consumer. Natural gas is holding above its 1/21 low. In 2016, Natural gas fell to $1.61. We are still above that low, but something to watch if energy continues to stumble.

Let’s not forget earnings this week. Tomorrow we have AAPL reporting its latest quarterly earnings. MSFT reports on Wednesday along with FB. We should see the market move on these technology giants’ earnings reports. Best to continue to work your trading plan and leave the guess work and bloviating to the market pundits. There is no need to waste our time.

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