Is Coronavirus Enough To Start A Correction On StocksToday’s analysis is about indices because it looks like, we are approaching another correction on the stock market. Current drops are contributed not to the US-China trade wars or US-Iran conflict but to a new player in the game: Coronavirus sweeping across China.
In the beginning of the week, we got information, that situation is under control and spreading is contained. New cases, discovered also outside of China, showed us that it may not be the truth.
SP500 is trying to create a double top formation. It is still in the early stages, so it does not have to ring the bell yet. The thing that can be of concern here is the breakout of the lower line of the channel up formation. This is nothing major but can be a good start for a bigger correction. The big picture here is that as long, as we stay above the blue up trendline, the sentiment is still positive.
Let’s see DAX. Yesterday’s candle is ugly but hey, we reached new long-term highs intraday! That is definitely not the best situation to talk about major correction or a reversal. Despite the bearish candlestick, sentiment is positive. In my opinion, the major signal for a reversal will be the breakout of the second horizontal support around 13k. As for now, sentiment is still bullish.
Now FTSE, which is moving more horizontal than the previous colleagues. The price just bounced from the July highs and is trying to create a double top formation. Breakout of the yellow support can activate this pattern but a real reversal should come only after the breakout of this green major support. As long as we stay above, situation is similar to this one in SP500 and DAX: positive.