Covid-19 Became a Vivid Problem

The official blow has been dealt the moment the outbreak started to catch fire in US. Before that, there was still hope that it will somehow miss the US. After the realization is official, US markets were awakened by the obvious supply chain issues in China that will ultimately affect the world to a certain degree. The issue that we should be discussing now would be, “how hard will the blow be to the market?” At the moment the US market has retreated from its all time highs to a low of 2850 before finishing the last trading day with a solid green candle. This also explains the many news over the weekend suggesting that the virus has by and large reach a point of no return. Presently, at the rate of infection, many experts are concerned about the capabilities of third world nations to contain the virus. Thus pointing towards a global declaration of a pandemic rather than an endemic.

STI – Updated Weekly Chart

The drop as shown in the chart is rather telling. The market is filled with sellers and buyers aren’t interested to turn the tides as set forth by funds and institutions. With such extreme dips, there is also a chance for a faster recovery once the doubts are cleared about the impact of the virus on global supply chains. Surely, it is time to be cautious but not afraid to take advantage of the lows to grab some discounts for businesses that are still crucial to the international functioning like transport and telecommunications.

Monthly Chart shows signs of panic

This level of panic is not unlike the financial crisis during 2008. Apparently it is not solely due to the virus, whereas markets are simply waiting for legitimate triggers to act. I do not believe markets are that efficient to reach a consensus that quickly. Hence, it is arguable in my point of view for the markets to be grossly oversold at the moment. Next major support would be at around 2980 as indicated by the fibo retracement lines, however it is still unknown if the issue or fear will escalate given that we live in the times of social media induced panic.

Author’s Call as of 01 Mar 2020

• STI has broke its Monthly support levels and has since retreated to 3000 levels
• Next major resistance at 2980 levels. Good time to buy banks as banks are generally doing well and are distributing higher yields 5-6%
• Looking out for news items to substantiate claims of a pandemic in the coming week or weeks to resume BAU in the world
• Great time to pick up shares which have to go on regardless of SG economic performance

Author’s Call as of 23 Feb 2020

• STI breakout of 9 and 20 Weeks MA was unsuccessful despite the supposed boost from the budget
• Market is still in the red thinking that further developments of Covid-19 can threaten upside in near term
• Some affected counters are in deep red at the moment and it will be wise to pick some up for higher yield and await for recovery
• Week ahead will present new info on the outbreaks in other developed countries