After a record-setting drop on Monday and Tuesday, many market players were looking for an oversold bounce, but a steady diet of headlines about the coronavirus prevented the bulls from gaining traction. There were reports of additional cases around the world, but the number of new cases in China has slowed. The big fear is that there will be an eruption in the U.S.
President Donald Trump is scheduled to address the COVID-19 issue in a press conference at 6:30 p.m. Wednesday. Trump will need to walk the line between making sure that the U.S. is well prepared, but reassuring people that the danger is relatively remote. As usual, there are the political games being played that prevent a clear picture of what is really happening.
In a different environment, the market probably would have already seen a substantial bounce, but the nature of the coronavirus' spread is keeping many folks on the sidelines. All it will take to cause some panic and another leg down is an accelerating rise of news cases in the U.S. So far that doesn't seem to be likely, but there were warnings by the Centers for Disease Control and Prevention that spooked the market and upset Trump.
Some market players are speculating that the market has already overcompensated for the coronavirus while another faction believes that with the S&P 500 not even 10% off its recent highs, there is plenty of room for further corrective action.
Even those who are looking for a bounce at this juncture don't seem particularly optimistic that the bounce will lead to a V-shaped recovery. There is still a tremendous amount of uncertainty out there and technical conditions favor some sort of retest before a bottom would form.
Microsoft (MSFT) is on the wires just now saying it does not expect to meet its Q3 guidance for its More Personal Computing sector. The stock is trading down a couple of dollars on the news. This may not be a major adjustment, but it is an indication that there is likely to be a series of other companies lowering guidance.
The risk to the downside remains very high. Don't let zeal to catch a bounce blind you to the risk involved in this market right now.
Have a good evening. I'll see you tomorrow.