CORONA VIRUS THE TRIGGER FOR A BROAD MARKET SELL OFF? HERE ARE WHAT TO LOOK OUT FOR.

As anticipated, much of the news coverage today was focused on the corona virus.

We do not know much of the virus yet, in terms of its origins. ( Likely bats - again. People, please just stop eating them ).

We do know that the Mortality rate is lower compared to Sars - less deadly. ( thank God )

But the corona virus is more contagious.

For the next few weeks, you will want to monitor this heat map.

Why is this significant?

The corona virus has already proven that it is a virus that has the capacity to have a SARS like effect - situation in Wuhan is dire - and the rate at which the virus is spreading across China is alarming.

The virus has all the innate capacity to repeat the SARS crises of 2003.

The only thing going for us, is that the world is better prepared to deal with this epidemic. Crucially, with SARs, it took close to 4 months before governments around the world knew what hit them.

Today, Governments are more vigilant. The hope is that this crises can be now contained within China. The expectation at this moment is that we can.

If we start seeing a rapid rise in cases outside china - this market will really sell off hard, and I will explain why later in a bit.

The fact that the corona virus is more contagious means that we have all the conditions to repeat a SARS like period - should containment fails.

The only thing that is going for us now - is that world governments could contain it early. China could not because they reacted too late, and did not. 

With regards to the market.

For months we have warned about that all important MULTI YEAR RESISTANCE NODE on the DJIA and the ES. I've warned my subscribers to brace for a period of increased market volatility - which is exactly what we are seeing now.

You can see my Early Warnings HERE.

Crucially, any eventual move off these levels, will be of greater magnitude.

Meaning the strength of the moves will be alot stronger as we are dealing with Yearly Timeframe nodes.

Bottom line - BE VIGILANT.

During recent times - we had IRAN missle strikes, US CHINA Trade War, and now the Corona Virus.

IF we do get a market Sell off - The Corona virus could very well be the trigger.

Again you will want to watch the Heat map to stay ahead of the curve.

Let me bring your attention to the charts once again.

ES Yearly Charts

IF we do get sell off I wouldnt be surprised by the extent of the move - and possibly the speed. At the moment, for Corona virus to be the trigger, the Heat map will give the earliest indication.

ES Weekly

We will be testing Weekly MACDP soon - which will give us the earliest indication yet.

We could very well have a stop grabber - and have markets continue to make new highs.

BUT, the longer we stay below Q OP - the riskier this situation will become.

ES Daily

So far we are supporting at Daily F3.

ES 30min

But Intraday price action today suggest price weakness - weak DP.

A retest of Quarterly OP, for me will definitely serve as strong resistance.

How all this will eventually play out - watch the Heat Map. Watch Weekly Dynamic Pressure.

If we fail to contain the virus to within China - we will trade off that Q OP - strongly.

DJIA Yearly Chart

Crucially you also want to be aware of where we are trading on DJIA.

We are reacting off Quarterly COP.

If we start trading below and staying below Yearly XOP, the odds of a massive move down increases significantly.

I had been sounding the alarm bells for the months - with regards to where we are trading on the higher timeframe charts. I expected the volatility.

So far we had Trade wars, Iran Missile strikes - we had that volatility, but non was the trigger.

We did even see NEW MARKET HIGHS.

BUT WE DID NOT BREAK THESE YEARLY RESISTANCE NODES.

I think the RISKS for a MASSIVE market DECLINE is increasing, by the day.

We are starting to see some signs with price.

Bottom line

YEARLY RESISTANCE NODE.

All we need is a TRIGGER! 

Corona Virus could very well be that trigger. 

Developments in CHINA already shown us that the epidemic is comparable to SARS.

If containment fails... Be braced for a MASSIVE SELLOFF.

Watch our indicators for clues.

Watch the Heat Map.

Please Stay Safe

Joseph AuXano

DiNapoli Trading Academy

P.S. I wont hesitate to go long this market if price shows strength, but not only will I go short if we start breaking below Y XOP... I will start stocking my Trading Room with Supplies - and lock the door. =)

P.P.S. Stay sharp for the next weeks. We are tracking the latest with regards to the Corona virus, and reading price action on a daily basis. 

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