The U.S. stock market is set to capture another hard week of losses, and there’s no doubting that the stock market bubble has today burst. Coronavirus cases have began to surge around Europe, as well as one million individuals have lost their lives worldwide because of Covid 19. The question that investors are actually asking themselves is actually, how low can this stock market possibly go?
Are Stocks Going Down?
The short answer is yes. The U.S. stock market is actually on the right course to record its fourth consecutive week of losses, and it looks like investors and traders’ priority these days is keeping booking profits before they see a full-blown crisis. The S&P 500 index erased all of its annual benefits this specific week, plus it fell straight into negative territory. The S&P 500 was able to reach its all time high, and it recorded 2 more record highs just before giving up all of those gains.
The fact is actually, we have not seen a losing streak of this particular duration since the coronavirus industry crash. Saying that, the magnitude of the present stock market selloff is currently not so powerful. Bear in mind which back in March, it took only four months for the S&P 500 and the Dow Jones Industrial Average to record losses of more than thirty five %. This time around, the two of the indices are done roughly ten % from their recent highs.
Overall, the Dow Jones Industrial Average is down by 6.04 % year-to-date (YTD, the S&P 500 has declined by 0.45 % YTD, while the Nasdaq NDAQ +2.3 % Composite remains up 24.77 % YTD.
Recommended For You
What Has Led The Stock Market Sell off?
There’s no uncertainty that the present stock selloff is mostly led by the tech industry. The Nasdaq Composite index pressed the U.S stock industry out of the misery of its following the coronavirus stock industry crash. However, the FANGMAN stocks: Facebook, Apple AAPL +3.8 %, Netflix NFLX +2.1 %, Google’s GOOGL +1.1 % Alphabet, Microsoft MSFT +2.3 %, Amazon AMZN +2.5 % as well as Nvidia NVDA +4.3 % are failing to keep the Nasdaq Composite alive.
The Nasdaq has captured 3 weeks of consecutive losses, and it’s on the verge of capturing more losses due to this week – that will make four months of back-to-back losses.
What is Behind the Stock Market Crash?
The coronavirus situation of Europe has deteriorated. Record cases across Europe have placed hospitals under stress once again. European leaders are actually trying their best just as before to circuit break the trend, and they have reintroduced a few restrictive measures. On Thursday, France recorded 16,096 new Covid-19 cases, and the U.K also found the biggest one-day surge of coronavirus instances since the pandemic outbreak started. The U.K. noted 6,634 new coronavirus cases yesterday.
Of course, these types of numbers, together with the restrictive steps being imposed, are only going to make investors more plus more uncomfortable. This is natural, because restricted actions translate directly to lower economic exercise.
The Dow Jones, the S&P 500, as well as the Nasdaq Composite indices are chiefly failing to keep the momentum of theirs due to the increasing amount of coronavirus situations. Of course, there’s the possibility of a vaccine by the conclusion of this year, but there are also abundant challenges ahead for the manufacture and distribution of this kind of vaccines, during the essential amount. It is very likely that we might go on to see the selloff sustaining with the U.S. equity market place for a while yet.
What Could Stop the Current Selloff of U.S. Stocks?
The U.S. economy have been extended awaiting an additional stimulus package, and the policymakers have failed to provide it so much. The very first stimulus program effects are approximately over, and also the U.S. economy requires another stimulus package. This particular measure can possibly overturn the present stock market crash and thrust the Dow Jones, S&P 500, and also Nasdaq set up.
House Democrats are crafting another roughly $2.4 trillion fiscal stimulus package. However, the task is going to be to bring Senate Republicans and the Whitish House on board. And so, much, the track history of this shows that another stimulus package isn’t very likely to be a reality anytime soon. This could very easily take several weeks or perhaps months prior to to become a reality, in case at all. Throughout that time, it’s likely that we may will begin to witness the stock market sell off or perhaps at least continue to grind lower.
What size Could the Crash Get?
The full blown stock market crash has not even started yet, and it is not likely to take place given the unwavering commitment we have noticed as a result of the fiscal and monetary policy side in the U.S.
Central banks are actually prepared to do whatever it takes to cure the coronavirus’s current economic injury.
However, there are many important price levels that we all needs to be paying attention to with respect to the Dow Jones, the S&P 500, and also the Nasdaq. Many of those indices are trading below their 50 day simple shifting typical (SMA) on the daily time frame – a price tag degree which often signifies the original weakness of the bull direction.
The next hope would be that the Dow, the S&P 500, and also the Nasdaq will stay above their 200-day simple carrying typical (SMA) on the daily time frame – probably the most vital price level among technical analysts. If the U.S. stock indices, specifically the Dow Jones, and that is the lagging index, break below the 200 day SMA on the daily time frame, the chances are that we’re going to go to the March low.
Another critical signal will in addition function as the violation of the 200 day SMA by the Nasdaq Composite, and the failure of its to move back again above the 200 day SMA.
Under the current circumstances, the selloff we’ve encountered this week is apt to extend into the following week. For this particular stock market crash to quit, we have to see the coronavirus situation slowing down considerably.