Dow Jones Industrial Average (.DJI) investors grappled with fresh worries about the spread of a new virus in China that threatens global economic growth
The sell-off gave the Dow its first 5-day losing streak since early August and handed the S&P 500 its worst day since early October. Both indexes were off about 1.5 percent, giving up a significant portion of their gains this month.
The latest bout of selling on Wall Street came after China announced a sharp rise in cases of the virus.
Airlines, resorts and other companies that rely on travel and tourism suffered steep losses. Gold prices rose as did bonds as traders sought refuge in safer holdings. The yield on the 10-year Treasury fell to 1.60 percent, its lowest level since October. The market’s broad slide followed a sell-off in markets in Europe and Japan.
“Over the weekend you saw more cases,” said Quincy Krosby, chief market strategist at Prudential Financial. “That got investors and traders worried that this may be a longer event. The next question is, ‘What happens to global growth if this does continue and magnify?’ “
The Dow Jones Industrial Average fell 453.93 points, or 1.6 percent, to 28,535.80. The Dow had been down nearly 550 points. The S&P 500 index dropped 51.84 points, or 1.6 percent, to 3,243.63. The Nasdaq lost 175.60 points, or 1.9 percent, to 9,139.31. The Russell 2000 index of smaller company stocks gave up 18.09 points, or 1.1 percent, to 1,644.14.
Most markets in Asia were closed for the Lunar New Year holiday, but Japan’s Nikkei fell 2.03 percent, its biggest decline in five months. European markets also slumped. Germany’s DAX and France’s CAC 40 dove 2.7 percent.
Chinese health authorities have confirmed 2,750 cases of the virus along with 81 related deaths as authorities extended a week-long public holiday by an extra three days as a precaution against having the virus spread still further. The virus has spread to a dozen countries, including the U.S. Besides the threat to people’s lives and health, investors are worried about how much damage the virus will do to profits for companies around the world.
Even if they’re thousands of miles away from Wuhan, the interconnected global economy means U.S. companies have plenty of customers and suppliers in China. It’s the world’s second-largest economy, and it accounts for 6 percent of all revenue for S&P 500 companies over the last 12 months. That’s nearly double any other country besides the United States, according to FactSet.
Resort operators were among the biggest losers in the S&P 500. Wynn Resorts led all company’s in the index lower with an 8.1 percent tumble, while Las Vegas Sands dropped 6.7 percent. The companies get most of their revenue from the Chinese gambling haven of Macao. MGM Resorts fell 3.9 percent.
American Airlines lost 5.5 percent and Delta dropped 3.4 percent as part of a broad slide for airlines because of concerns international travel will decline amid the virus’ spread.
Booking companies and cruise-line operators also got hurt. Expedia Group fell 2.7 percent and Carnival slid 4.7 percent.
Chinese companies that trade shares in the U.S. also declined. Search engine operator Baidu fell 2.9 percent and e-commerce company JD.com dropped 4.8 percent.
The technology sector, the biggest in the S&P 500, also saw heavy selling. Apple, which relies on China for supplies and sales, fell 2.9 percent.
Financial stocks also took steep losses. Citigroup dropped 2.2 percent.
Energy stocks fell broadly as U.S. oil prices fell 1.9 percent on worries about reduced demand from China. Schlumberger skidded 5.1 percent.
Utilities, real estate stocks and household goods makers held up better than the rest of the market, though they still finished in the red. The sectors are viewed as less-risky and are not as affected by international issues and developments.
A few companies managed to climb against the sliding markets. Bleach and cleaning products maker Clorox rose 1.1 percent.
Overall, the bias in prices is: Sideways.
The projected upper bound is: 29,018.34.
The projected lower bound is: 28,087.03.
The projected closing price is: 28,552.69.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 31 white candles and 19 black candles for a net of 12 white candles.
A falling window occurred (where the bottom of the previous shadow is above the top of the current shadow). This usually implies a continuation of a bearish trend.
A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 23.6634. This is not an overbought or oversold reading. The last signal was a sell 3 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 44.30. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 4 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -149.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a sell 3 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 1 period(s) ago.
Rex Takasugi – TD Profile
DJ INDU AVERG closed down -453.930 at 28,535.801. Volume was 31% above average (neutral) and Bollinger Bands were 9% narrower than normal.
Open High Low Close Volume___
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 29,059.06 28,376.43 26,977.28
Volatility: 12 10 14
Volume: 303,988,896 260,255,424 265,616,688
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
DJ INDU AVERG gapped down today (bearish) on normal volume. Possibility of a Runaway Gap which usually signifies a continuation of the trend. Four types of price gaps exist – Common, Breakaway, Runaway, and Exhaustion. Gaps acts as support/resistance.
DJ INDU AVERG is currently 5.8% above its 200-period moving average and is in an upward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect volume flowing into and out of .DJI at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on .DJI and have had this outlook for the last 30 periods.