Week Ahead: Continuing Volatility On New Coronavirus Data; Stocks, Gold Lower
Investing.com | Mar 23, 2020 00:31
- Economic data expected this week to reflect virus-related slowdowns
- S&P 500 down 30% in just five weeks; will government easing slow the negative spiral?
- EU warns of recession similar to 2009...or perhaps 1929?
This week's upcoming data releases, including German Manufacturing PMI, U.S. Core Durable Goods Orders and Crude Oil Inventories, and UK Retail Sales, are expected to begin to provide some hard numbers indicating just how severe the impact of the coronavirus pandemic will likely be on the global economy. Concurrently, fiscal and monetary policies the world over will attempt to soften the blow.
At this point, easing efforts by central banks and governments are, among other things, an attempt to shore up sinking financial markets, by regaining investor and consumer confidence while avoiding an ongoing downward spiral, which could easily spin itself into a doom loop.
h2 SPX: Down 30% In Just Five Weeks/h2The S&P 500 lost 15% of its value last week. In the process, the final portion of three years' worth of exuberant advances was wiped out. It was the worst weekly selloff since the 2008 financial crisis, on a mounting negative outlook.
Analysts at Goldman Sachs predict the U.S. economy will reflect a contraction of 24% on an annual basis in the second quarter, and the European Union warned of a recession to match that of 2009. The chairman of Alvine Capital Management, Stephen Isaacs, expects another 20% drop, which would cut the benchmark's value in half since it’s all-time, Feb. 19, high.
As of Friday's close, the S&P 500 is down a whopping 30% in just five weeks' time. After Monday's 12% crash, we were expecting an upward correction, but though the index rebounded a respectable 9.4% during the following days, losses continued into the end of the week.
We might still get an upward correction this week, as prices consolidate. What most traders may not realize is that duration, not just price retracement, can also be considered a form of correction (yellow oval). In other words, the correction may have happened without our fully realizing it, which would jibe with the virus-related economic data expected this week.
On the other hand, panicked investors may have already priced in a short term uptick, while still developing and a darker longer term outlook. Only a meaningful breakout that closes higher will signal the next upward move.
Get The App
The U.S. 10-year Treasury yield headed back below 1%, slipping to 0.885% at the close of trade last week. From a technical perspective, however, it found support at the bottom of a rising channel, which may serve as a bouncing-off point from which to retest the 1.3% area.
After surging 8% in eight sessions, the dollar retained last week's gains even subsequent to the Fed ramping up of liquidity and slashing rates.
Technically, Friday’s trading session caused an extreme hanging man to develop on the chart. With a lower close that will send a bearish signal, at least till it hits the uptrend line.
Gold rebounded Friday after dropping 12% during the previous week.
However, the yellow metal found resistance by the 200 DMA within a pennant. That suggests a downside breakout would commence next week. In such a scenario, we'd expect another leg down for the precious metal.
For the fourth week in a row, last week oil fell.
Technically, WTI has completed a bearish pennant. That pattern is normally followed by an upward correction which, in this case, means it could retest the $30 level.
h2 Week Ahead/h2All times listed are EDT
h3 Monday/h320:30: Japan – Services PMI: came in at 46.8 in February.
h3 Tuesday/h34:30: Germany – Manufacturing PMI: anticipated to keep falling into contraction, to 40.0 from 48.0.
5:30: UK – Manufacturing PMI: expected to tick higher, to 51.8 from 51.7 in the previous month.
10:00: U.S. – New Home Sales: seen to fall to 750K from 764K.
h3 Wednesday/h35:00: Germany – Ifo Business Climate Index: likely fell to 87.5 from 96.0.
5:30: UK – CPI: forecast to slip to 1.6% from 1.8%.
8:30: U.S. – Core Durable Goods Orders: expected to plunge to -0.3% from 0.8%.
10:30: U.S. – Crude Oil Inventories: anticipated to rise to 3.086M from 1.954M last week.
h3 Thursday/h35:30: UK – Retail Sales: seen to have dropped to 0.2% from 0.9%.
8:30: U.S. – GDP: expected to remain flat at 2.1%.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.