Emerging or Submerging?

March 1, 2020

Weekly Market Outlook

By Keith Schneider

The Corona virus continues to spread, and equity markets tanked globally. US equity markets were down -11% on average and there was not one foreign stock market positive for the week. This is one of the worst weekly selloffs ever, and the fastest correction from new all-time highs on record.

US long bonds was one of the few bright spots and markets are now pricing several rates cuts this year with one coming this month. Economic data was tepid at best and most major financial institutions are bracing for further weakness.  The panic set off margin calls and even gold, which was performing well, got hit by the need for cash. The bigger picture for the yellow relic is positive as even more sovereign debt has a negative return ($14.5 trillion) making holding an asset that has no yield very enticing.

This week’s highlights are:

  • Risk Gauges are still strongly in risk off mode
  • Utilities got hit hard and now under performing verses SPY over the last month
  • Growth Stocks are still strong compared to Value plays despite the carnage
  • Even Safety plays such as Utilities and Consumer Staples sold off hard
  • Brother Biotech and Sister Semis’ both held their 200 DMA ‘s and bounced
  • Market Internals and Sentiment are both showing extreme oversold bearish extremes
  • Volume is showing Institutional selling across all key benchmarks
  • Volatility almost doubled in price in less than 5 trading days, although last half hour of trading shows a possible blow off.

One thing to note is that our triple play indicator found an interesting development which is Emerging Markets. Based on our indicator, Emerging Markets are breaking out relative basis but still acting poorly based on pure price action. If we can get a decent bounce and an improved market phase it could be a great opportunity. It could also mean that commodities are getting ready to move quickly off their 100 year lows relative to stocks.(To know more about our indicator, click here).

Best Wishes for your trading

Keith Schneider

CEO -Marketgauge.com

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