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The Charts Say We're Consolidating At Lower Levels (Technically Speaking For 3/5)

Mar. 05, 2020 12:36 PM ETSPY, QQQ, IWM, IEF5 Comments
Hale Stewart profile picture
Hale Stewart


  • The Reserve Bank of Australia observed that global growth will be lower due to the coronavirus.
  • Former Fed President Yellen observed that the shock from the virus will be temporary.
  • The moving averages of the index-tracking ETFs indicate prices will consolidate at lower levels.

The Reserve Bank of Australia cut rates 25 basis points earlier this week. Here are the bank's observations about the global economic situation (emphasis added):

The coronavirus has clouded the near-term outlook for the global economy and means that global growth in the first half of 2020 will be lower than earlier expected. Prior to the outbreak, there were signs that the slowdown in the global economy that started in 2018 was coming to an end. It is too early to tell how persistent the effects of the coronavirus will be and at what point the global economy will return to an improving path. Policy measures have been announced in several countries, including China, which will help support growth. Inflation remains low almost everywhere and unemployment rates are at multi-decade lows in many countries.

Other central banks and bankers are issuing similar statements. (See the Fed's and The Bank of Canada's recent policy comments.)

Former Fed Chair Janet Yellen added her thoughts to the coronavirus discussion at a recent panel discussion (emphasis added):

“We could see a significant impact on Europe, which has been weak to start with, and it’s just conceivable that it could throw the United States into a recession,” Yellen said Wednesday at an event in Michigan. “If it doesn’t hit in a substantial way in the United States, that’s less likely. We had a pretty solid outlook before this happened -- and there is some risk, but basically I think the U.S. outlook looks pretty good.”

She did offer this hopeful comment (emphasis added):

Yellen did point out that economists have looked at what’s happened with past epidemics such as the SARS outbreak in 2003, and typically, there’s a short-term impact. “Longer-term, it seems to have relatively little influence, and I think many observers are hoping

This article was written by

Hale Stewart profile picture
Hale Stewart spent 5 years as a bond broker in the late 1990s before returning to law school in the early 2000s. He is currently a tax lawyer in Houston, Texas. He has an LLM in domestic and international taxation (MagnaCumLaude). He is the author of the book The Lifetime Income Security Solution. Follow me on Twitter at @originalbonddadYou can read his legal analysis on his law office's blog.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (5)

Subprime was contained too.
"Former Fed President Yellen observed that the shock from the virus will be temporary"

This is the same Yellen that said back in 2017:
"I don't believe we'll see another financial crisis in our lifetime"

SP 500 could go 2600~2700 level in next couple weeks ..
xrmfgk profile picture
For the SPY, the MA (200) would be ~255. Others' view a break below 255 as increasing the risk for a further drop to the 240 - 220 range of next support. If reached that would be ~25% decline and likely trigger some buying.
SPY at 156-164 would take us back to tops of 2000 and 2008, which seems unlikely
I'm sightly confused - the S&P 500 200 day EMA is 3077 according to Yahoo, the 200 day SMA about 3050.

How can the 200 day MA be around 2500 if the index hasn't been below about 2700 in over a year?
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