In a stunning demonstration of the extent to which algos control the market, ES soared 56.50 points after the World Health Organization declared the Wuhan coronavirus a public health emergency of international concern.

While it’s true the press conference felt more like a China tourism promo, the declaration in no way reduced the risk the virus poses. Nor did it reduce the potential economic risk or stock market downside.

ES came to its senses after the close, reversing at its SMA10 and dropping back through its SMA20. If today weren’t the last day in January, a month clinging to a positive return for posterity’s sake, we would have seen the next leg down already.Meanwhile, we have scads of economic data coming out at 8:30 and earnings galore to digest.

continued for members…

The bigger picture.

Note that VIX held above the red TL as well as its SMA200 – both positive signs for the bears. I don’t place a great deal of importance on PCE, as it’s a made-up number that doesn’t really reflect much of anything. It is a good signal, however, of what the Fed has in mind. Chicago PMI and Consumer Sentiment are likely to matter more unless PCE comes in very hot, which it won’t.CL is still loitering around 51.62 – the threshold between a bounce and armageddon. This chart emphasizes the lows……while this one emphasizes the peaks.

While RB continues to bounce – mostly sideways.I would remain long on each, especially following CL’s lows yesterday. But, tight stops are warranted.

After regaining its flag pattern, USDJPY is again showing signs of weakness.  I suspect it’ll be the trigger for the next leg down in stocks.

The bond market continues to signal lower prices for stocks, with the 2Y dropping through 1.40… …the 10Y continuing to settle lower… …and the 2s10s still broken down and heading south.Last, for those watching gold, it continues to test 1588. Recall from our last update that I am still bullish on it but would not jump back on the long side until it pushes back through 1588.20.  There’s a decent chance it will pull back from the .618 before pushing higher.I have to be out of the office until 1pm today, will post more later.

GLTA.

UPDATE: 1:45 PM

Quick update in between appointments – everything moving along nicely. Watch out for a potential bounce at ES/SPX 3200. UPDATE:  4:00 PM

Coming into the close, and ES has managed to tag and bounce off its SMA50 – a legit reversal spot which would require minor adjustments to the purple channel we were hoping to backtest.   SPX only reached 3214.68, so didn’t quite tag its SMA50 at 3209.24 (it’ll be 3211.30 on Monday.) This is not the end of the world. We’ve seen big bounces off ES backtests where SPX fell short. I wouldn’t bet big on it either way – especially since VIX did reach our next upside target, a legit reversal point……though I still like the red .886 at 23.28 MUCH more……and CL closed back above its .618.  To me, this is the most important support of any chart I’m watching.The big picture channel support is still intact – which is extremely important to the bull case for stocks. Arguing for more downside, the 10Y looks like it has legs… …and the 2Y is way down at 1.33… …and, though the 2s10s bounced, it wasn’t enough to make waves.

Last, USDJPY is below support with more downside potential…as both it and the euro… …beat the USD like a red-headed stepchild today.  So far, the EURUSD is just a backtest. But, it bears watching.

Almost forgot, SPX closed slightly below its Dec 31 close, meaning January is a slight 0.16% loss. Interesting.  Check out DJIA, though, where January came in at a 0.99% loss.  More importantly, it has further to go in order to do any kind of backtest. The neckline is down at 27670 and the SMA100 is at 27740. Reaching either of those would mean a proper purple channel backtest for ES and SPX.  Just saying…

I hope to do more big picture charting this weekend, but it’s shaping up as pretty busy.  A reminder, I’m out all day Tuesday, probably Wednesday as well. And, Thursday could very well be post-op drug-induced gibberish.