Market Commentary & Analysis February 26, 2020

The stock market sold off again yesterday, as the global extent of the corona virus proceeded to undermine growth expectations as well as exacerbate the flight for safety in United States Treasuries. 

The technology-heavy Nasdaq Composite index dropped -2.8% and turned to negative territory for the year. The broad S&P 500 index dove -3.0%, DJI Average plummeted -3.2%, and small-cap Russell 2000 index  dropped -3.5% on the day.

CBOE Volatility Index (VIX) jumped to near 27% as the stock market took another hefty beating while the United States Ten-year yield caught a record low. In these circumstances of risk-reducing, even Gold – considering its record fund long – was struggling to obtain a bid.

Gold Technical Analysis and Outlook: Target at Outer Gold Rally $1,672 and extended Inner Gold Rally $1,690 were completed with the stocks guidance. The primary support now stands at previously completed Inner Gold Rally $1,635 and Maginot Line of $1,600 as well as Mean Sup $1,546. The Key Res stalls at $1,660 and established a new six-year high marked at $1,689.30.

Gold Market

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Market action

The market session began in positive territory in a lukewarm effort to buy Monday's plunge, even though the corona virus continued to plague many countries outside of China and expanded to new regions within the Eurozone. 

The succeeding, tranquil retreat in stocks, nevertheless, suggested that Wall Street began to get worried concerning the virus outbreak increasing in North America.

All eleven S&P 500 sectors ended with steep losses varying from consumer staples posting -1.8% to energy print -4.3%. The traders and investors chose to sell now (risk-on or being risk-off). And ask questions later while they monitored news updates from numerous companies and organizations. 

It is immaterial for buyers (Bulls) to insist that the current deterioration is an overreaction to the corona virus outbreak. The stocks were overvalued and exaggerated way before the virus struck. Notwithstanding the drop, it continues to be exceeded after - it is not the size of the needle that matters, but the size of the massive bubble we are in.

We at TradingSig are usually very lightweight in politics. However, as stated in our weekend commentary, there was one development that comes to the fore – many small investors and traders continue to purchase the dips, with the late week market losses have triggered a rush in buying tops among many S&P 500 index stocks. 

However, with the enormous losses on Monday's session, many of these issues have already been milked out, yet, two days of trading is typically not enough to wipe away several weeks, months worth of issues.

Elsewhere

The rally in the United States Treasuries market continued amid the underlying companies' growth concerns. The Two-year yield declined six basis points to finish at 1.20%, and the Ten-year yield dropped five basis points to conclude at 1.33% after establishing a record low at 1.31% on the day. 

The United States. Dollar Index (DXY) declined 0.4% to close at 98.99. West Texa Intermediate (WTI) crude oil tumbled back below $50 level, ending the trading session down with 2.7% loss, posting a closure of $49.89/bbl

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