U.S. stocks continued an incredible slide, as the coronavirus situation continues to look bleak.
All three major U.S. indexes were down hugely on Tuesday, with the S&P 500 down 3.08%. The index is down 7.8% from its all-time high, which it hit last week.
The coronavirus is nearing pandemic status, according to the World Health Organization. Monday, the market roiled as the virus spread to Milan, Italy where there is a manufacturing hub for other European nations.
Investors, expecting 2020 economic growth to fall from previous expectations, are rushing to safety, sending the 10-year treasury yield down to 1.2%, but ended Tuesday at 1.34%. The 3-month yield is at 1.53%, which is an inversion to the 10-year.
Wall Street has advised to buy a virus-induced dip, as the eradication of the virus would see economic activity resume, creating favorable comparisons for revenue and earnings for 2021.
For those looking to buy the dip at its bottom, one strategist has some advice.
Currently, only 10% of S&P 500 components are trading above their 10-day moving averages.
Historically, in order for stocks to bounce, 90% of S&P components need to be trading at below their 10 day moving averages, according to Tony Dwyer, chief market strategist at Canaccord Genuity. That means stocks may bounce soon, but the market is at this lvel, not past it.
Also, the Volatility Index spiked 45% Monday and sat at above 25 Tuesday. It’s historical average is below 15.
Usually, “jumps of more than 45% in the VIX led to mixed SPX performance over the next two weeks, but more consistent gains a month later,” Dwyer said.
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