Stocks Plunge as Coronavirus Not Contained

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There’s a lot going on this morning. S&P futures were off as much as 97 points earlier……nailing our downside target from Feb 14 [see: A New Day, Same Old Nonsense.]

As we discussed then (and just about every day since then):

The big picture for stocks hasn’t changed. There are upside targets which have opened up as the result of “breakouts,” but IMO the breakouts are bogus. So, I’m expecting more downside…

Central bankers will certainly do their best to contain the damage the coronavirus is doing to markets. But, it remains to be seen whether the usual gimmicks will be up to the task, especially if the virus grows at the same rate as Italy with cases and deaths doubling every few days.

Even though the US has relatively few cases, it’s only a matter of time before the coronavirus affects every single person in the US. My projections indicate we’ll see over 500 deaths within the next month. How many businesses will remain open?

Can Bullard’s and Buffet’s cheerleading on CNBC possibly be enough to offset the most serious threat to the global economy in the past 20 years?  I seriously doubt it.

Other targets tagged this morning include VIX……which has tagged our 23.28 target from Jan 27 [see: More Where That Came From.]  Remember it was our daily VIX chart which suggested that this downturn would likely arrive in late February.

And, perhaps most alarming, the 10Y has dropped through our 14.50 target – not to mention its Sep 2019 lows. Our forecast ultimately calls for much lower lows, but the lack of even a bounce here at 14.29 should trigger additional selling from the algos.

If ZN breaks out past our 133’040 target from last year, things could get very ugly very quickly.

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