Market Direction: BEARISH alert issued 4/2/2020
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Market Direction Week Review: Stocks
declined last week amid soft economic data and the extension of
social-distancing guidelines. Oil surged 32% on prospects of a global deal to
cut output and support prices, but the positive sentiment was undercut by the
release of regional economic activity surveys that signal a sharp decline in
global growth1. Employment indicators also showed stress in the labor market,
with the U.S. economy losing 700,000 jobs in March and unemployment rising from
record lows. With 10 million Americans filing for unemployment benefits in the
last two weeks, unemployment will likely continue to rise in the coming months.
Equity markets in China were relatively stable over the week, supported by above-consensus March purchasing managers’ index (PMI) data and by further policy announcements, including both a rate cut and a reduction in the required reserve ratio from the People’s Bank of China (PBoC). The Shanghai Composite Index and the CSI 300 Index of large-cap stocks both eased back on Friday by 0.6% to end the week broadly flat.
Markets appeared to draw comfort from the statement that followed the weekly Politburo meeting of China's leaders on March 27. Without giving details, it called for more fiscal stimulus to help stabilize the economy, signaling a willingness to adopt a larger budget deficit for 2020. If the delayed National People's Congress goes ahead in April, fiscal policy measures are likely to be announced then. On the coronavirus health front, a county in Henan province was expected to undergo a second lockdown due to a small number of reported infectious cases.
Stocks in Europe lost momentum over the week, ending little changed as data indicated that the economy would suffer a severe recession this year triggered by the coronavirus. The STOXX Europe 600 Index ended 0.45% lower. Germany’s Xetra DAX Index declined 1%, France’s CAC 40 Index fell 4.26%, and Italy’s FTSE MIB slipped 1.75%. The UK’s FTSE 100 Index weakened 1.3%, partly due to a stronger UK pound, which weighs on exporters, a significant part of the benchmark.
How the market finished last week, the S&P 500 down 2.1%, the Nasdaq down 1.7%, and the Dow down 2.7%.
Market Direction This Week: We track the stock
market based on our Bullish and Bearish Alerts a new Bearish Alert
recently started on 4/3/20 and we suggested to our followers not to trade any
new long positions. We will continue to provide you the current stock market
conditions as they develop. The current stock market environment is in a correction
so trade with caution (see Market Direction Mid Week Update: Trading Strategies).
COVID-19 cases are on the rise and have yet to show signs of stabilization in the U.S. As of Sunday morning, there were 1.216 million confirmed cases globally and 65,711 confirmed deaths, according to Johns Hopkins University data. In the U.S., there were more than 312,000 cases and 8,503 deaths.
According to RBC’s March 2020 Equity Investor Survey, investors said outlook surrounding the coronavirus is critical. RBC surveyed 185 institutional investors between March 25 and March 30, and found “78% believe that a decline in new coronavirus cases in the US is needed for the equity market to stabilize. Additionally, 54% believe that significant progress on new drugs to treat the coronavirus and/or a vaccine is needed for stabilization.”
With market volatility largely expected to continue for the time being, RBC’s survey found that 57% of investors believe the market will bottom in the second quarter of 2020. Only 19% of participants believe the market has already seen its low. Meanwhile, “bearish economic outlooks have risen. In total, 43% said their view on the US economy over the next 6-12 months is either bearish or very bearish, the highest since our survey began.”
The standard caveat still applies; “President Trump’s tweets still trump everything else”.
Economic Calendar: FOMC Minutes (4/8), Weekly Jobless Claims (4/9), Producer Price Index (4/8), Consumer Price Index (4/9)
It is gearing up to be another potentially volatile
week for markets as coronavirus cases continue to rise and economic data
reveals the outbreak’s damage on the U.S. economy.
While it will be a shortened trading week with major markets closed Friday in observance of the Good Friday holiday, coronavirus developments will continue to take centerstage for investors. COVID-19 cases are on the rise and have yet to show signs of stabilization in the U.S. As of Sunday morning, there were 1.216 million confirmed cases globally and 65,711 confirmed deaths, according to Johns Hopkins University data. In the U.S., there were more than 312,000 cases and 8,503 deaths.
According to RBC’s March 2020 Equity Investor Survey, investors said outlook surrounding the coronavirus is critical. RBC surveyed 185 institutional investors between March 25 and March 30, and found “78% believe that a decline in new coronavirus cases in the US is needed for the equity market to stabilize. Additionally, 54% believe that significant progress on new drugs to treat the coronavirus and/or a vaccine is needed for stabilization.”
With market volatility largely expected to continue for the time being, RBC’s survey found that 57% of investors believe the market will bottom in the second quarter of 2020. Only 19% of participants believe the market has already seen its low. Meanwhile, “bearish economic outlooks have risen. In total, 43% said their view on the US economy over the next 6-12 months is either bearish or very bearish, the highest since our survey began.”
The standard caveat still applies; “President Trump’s tweets still trump everything else”.
Economic Calendar: FOMC Minutes (4/8), Weekly Jobless Claims (4/9), Producer Price Index (4/8), Consumer Price Index (4/9)
Some of the major earnings announcements on deck: No Earnings.
$tockMarketDirection proprietary model is currently BEARISH. We strongly encourage you to monitor positions closely, exercise proper money management strategies and follow us at $tockMarketDirection for ALERTS we may issue advising a change in the current market direction. Stay tuned and follow us. If you have a testimonial or comment of how this website has helped you we would like to know, email us. Building a community of investors one trade at a time. Share with a friend. Cha-ching!
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