Roll of the dice today in terms of how this roller coaster of a ride will play out. Personally, I’m looking for a potential fatigue in some of the selling — at least in the short term.

Over the last four days, the S&P 500 has fallen 258 points, or just around 7.5%. The bulk of those losses have come in the last two sessions. The damage has been similar, if not worse, in percentage terms for the other major indices.

By now you know, the “catalyst” of course has been the concern about the spread of the Coronavirus outside of China and the attendant impact on economic and earnings growth. The assumption, for many, is that the impact is going to be deeper and longer than previously thought.

The added fear, which brewed yesterday, is that the U.S. is not going to be immune from the contagion (shocking i know) and could soon find itself caught up in a nesting/lockdown mode that has severely weakened economic activity in China, northern Italy, and other locales. Added to the fears is the difficulties that a free market democratic union would face in the face of a lockdown relative to an authoritarian/communist regime.

That fear is very real. But if you take a step back for a moment, the reality is that there are still very few reported cases of Coronavirus in the U.S., yet the rapid escalation of cases in China and South Korea have caused some angst that those fears will be realized, which is partly why there has been a defensive orientation, and risk-averse mindset, in capital markets.

TECHS:

The intensity of the selling in recent sessions, though, has presented that the (formerly) overbought stock market is now (currently) oversold on a short-term basis and likely soon due for a bounce after the S&P 500 closed below its 50-day moving average on Monday and its 100-day moving average on Tuesday.

The bears will argue that a test to the 200-day moving average (3045 give or take) might be in order to gain a better sense of whether a rebound effort is going to have legs. The idea being that a successful defense of that key technical level will inspire confidence in a sustainable rebound try, whereas, a failure at that level on a closing basis could open the door for another wave of concerted selling interest.

The check of that level isn't going to come at today's open, however. The major indices are all poised to open about 0.3-0.4% higher in the same patented buy-the-dip trade that was seen before yesterday's open, and which ultimately failed miserably. I for one am looking for setups like AAPL above where a very well defined trend line is in place and can be traded against.

One of the keys to yesterday’s market failure was the ongoing strength in the Treasury market, which took the yield on the 10-yr note below 1.32%. It is a continued “safety trade” that effectively stole the stock market. Therefore, the Treasury market's behavior will continue to be a focal point in today's action.

The 10-yr note yield lifted to 1.37% following yesterday's close before driving back below 1.32% in overnight action. It currently sits at 1.36% in what has been a roller-coaster trade.

As always, remember to filter out the noise and focus on the price action on your screen. People can have whatever opinions they want, those have no impact on the prices on your screen. It is the buying and selling that impacts this.

The main note to leave with is a reminder that the last two instances that the market has been sold off like this we saw an intraday capitulation bottom followed by an aggressive reversal to the upside. I am not in the business of “predicting” what will happen, but I did find that it was relevant to note.

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