For a few decades the first thing I have done each morning after turning on the coffeemaker is to check the movement in futures markets. I follow the financial and energy sectors closely. My checklist includes stock indexes, interest rates, precious metals, crude oil and currencies. If these sectors have unusually large ranges, I immediately check news stories from around the globe to see what catalyst stirred the markets. I learned to do this very early in my career. Being already technically sound in my approach, this habit taught me how to react when the fundamentals changed.
The coronavirus has spread exponentially, and we have learned a lot from the extraordinary moves in many markets. Stocks have taken a huge hit because of the probable disruption in supply chains. Oil has gone down dramatically because of a likely interruption in travel, which causes demand to decrease while supply increases. Gold prices have risen quickly, and so have bonds and notes. These markets are commonly thought of as safe havens in times of chaos and conflict. The Japanese yen dropped at first but recovered quickly. It tends to rally when gold and bonds do.
By focusing on the correlations between the sectors, we may be able to identify when markets are ready to reverse. If gold, bond and yen prices stabilize, it may be the first sign that bear markets in stocks and oil may be nearing an end.
No one seems to know how deeply this virus will embed itself, though it has spread to all continents. The projections for affected humans and deaths are terrifying. My wife is an infectious control practitioner for a trauma hospital. Obviously, the staff there is taking this virus very seriously. She says there are ways to protect yourself. It is imperative that you wash your hands often. She claims a 20-second cleansing is ideal. Keep a bottle of sanitizer handy, especially when in public areas. Also, refrain from touching your face because that is how the bug enters your body. Be careful and pass this information to family and friends.
John Seguin
Senior Futures Instructor
Market Taker Mentoring, Inc.
