• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Investing
  3. / Stocks

Global Markets Clobbered by a One-Two Punch of Coronavirus Fears and Oil Wars

While a bounce could come soon, recession fears and massive uncertainty will stop a quick recovery.
By JAMES "REV SHARK" DEPORRE
Mar 09, 2020 | 07:07 AM EDT

The S&P 500 is indicated to open down around 5.5% about three hours before the opening bell in New York. This will undercut the low hit on February 28, but a substantial margin and also breaches some of the support levels that developed back in August. There is little in the way of support at this point, but when the market sells off this aggressively, this quickly, support levels don't tend to be very meaningful.

The news headlines are that the spread of the coronavirus and a war over oil prices enacted by Saudi Arabia are causing intense selling. Oil took a hit of 25% and there are fears that the drop will lead to debt defaults across the sector.

The real problem here is that there is massive uncertainty about how this will play out and that it may lead to a worldwide recession. A number of Asian stock markets have already fallen more than 20% and are now in what is what is technically defined as a bear market.

It is important to understand what is happening to the stock market and why, but it is even more important to develop a strategy for dealing with it. It is particularly important to be clear about your trading and investing approach. Longer-term positions are likely to rebound over time, but it will take time and won't occur quickly or easily.

Markets that fall this fast almost always see a bounce, but this is not a situation that is likely to lead to the V-shaped bounces that have bailed out bulls so many times in recent years. The catalysts for this drop are quite different and it should be readily apparent that even the dovish central banks are not going to find it easy to support the market.

U.S. markets are now anticipating that the Federal Reserve is going to cut rates to zero. There is a Fed meeting coming up soon and there is little question that there will be more cuts announced. As we saw on the Fed's recent half-point cut, the Fed is causing more panic than confidence as throwing cash at the market is not fixing the underlying problems that are building.

It is likely that the U.S. Treasury Department will be looking for ways to support the market with fiscal moves, but if the economy is falling into a recession as feared, it is going to be a process that will take some time before the market finds a bottom.

The best approach right now is:

  1. If you have long exposure don't rush to sell into this open. Wait for some stabilizing and then make decisions about stocks. It is never too late to sell. You can always buy back positions and it is perhaps good strategy to move into different stocks as you look for a market recovery.
  2. Don't anticipate a V-shaped bounce this time. While a countertrend bounce is very likely to occur, especially if there is some fiscal or monetary policy moves, there is a major downtrend now in place and it is going to take time for the market to find its footing. The risk of a failed bounce at this juncture is very high.
  3. This is index driven action. Stocks will mostly move in tandem and there are no safe havens. Once things calm down, there will be a good opportunity for individual stock picking, but move slowly in building new positions.
  4. Read my weekend article, Buying Stocks in a Downtrending Market: Better Late Than Early. In order to better navigate the action in a downtrend, it is important to understand the psychology that develops.
  5. Maintain a positive mindset. While it is nearly impossible to avoid losses in the near term if you have any long exposure, this action is going to lead to some exceptional opportunities over time. Make sure you protect capital as best you can, stay patient and have an opportunistic view of the action

There is some real panic out there this morning and no signs of support so far. This is the worst action since the 2008-2009 bear market and should not be viewed as just a temporary setback that will be quickly forgotten. The shocks and reverberation are going to produce a very unstable environment.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Rev Shark had no positions in any of the securities mentioned.

TAGS: Commodities | Economy | Investing | Markets | Oil | Stocks | Trading | Energy | U.S. Equity |

More from Stocks

Can Rhythm Pharmaceuticals Keep Up This Tempo?

Bruce Kamich
Aug 8, 2022 3:01 PM EDT

The stock has surged amid an analyst upgrade.

What AIG's Charts Say About the Stock Ahead of Earnings

Bruce Kamich
Aug 8, 2022 2:03 PM EDT

The stock just tested the underside of the declining 50-day moving average.

Solar Firm Sunrun Continues to Run on the Upside

Bruce Kamich
Aug 8, 2022 1:24 PM EDT

Here's what the longer-term picture looks like.

Weariness Sets in During This Bear Market Phase

Bob Lang
Aug 8, 2022 1:00 PM EDT

Sentiment is starting to turn bullish, but painted with a skeptical eye as the wall of worry is up high.

Tyson Foods: Should Investors Fly the Coop After Earnings?

Bruce Kamich
Aug 8, 2022 12:38 PM EDT

The shares gapped lower as the chicken supplier reported quarterly numbers. Let's check the charts.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 09:24 AM EDT PETER TCHIR

    Jobs Report Reaction: Incredibly Strong, But Questions to Ask

    An incredibly strong July jobs report. Not only d...
  • 08:54 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    The Secret to Dealing With FOMO
  • 03:51 PM EDT REAL MONEY

    AMD Second-Quarter Earnings Live Blog

    Real Money's Eric Jhonsa covers 's second-quarte...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login