It is going to get worse before it gets better for the stock market, says prominent technical analyst Ralph Acampora.
A pioneer in the field of price chart-based trading, Acampora told MarketWatch during a Friday interview that he thinks that the coronavirus fears are a catalyst for a market that had gotten too pricey and was due for a substantial pullback.
“The market itself was stretched, which is true, so we were begging for some kind of correction and this is the catalyst,” he said. He is expecting that the stock market will face at least a % drop from its recent peak, which would meet the criteria for a bona fide correction held by most market technicians .
Fresh worries grew over an Asian influenza that reportedly originated in Wuhan City, China, has infected 9, 823 people, and claimed at least lives, According to reports out of China. The illness, which has drawn comparisons with SARS, severe acute respiratory syndrome that hit Beijing in 2020 – , is being classified as a novel strain of coronavirus, or nCoV.
Read: Coronavirus update: First US case of person-to-person transmission confirmed, 197 citizens in isolation and WHO declares a public health emergency
On Thursday, the World Health Organization declared the viral outbreak a public-health emergency of international concern but didn ‘t call for a restriction of trade. And the U.S. saw its first person-to-person transmission of the virus, escalating concerns about its spread.
The infectious illness comes at a terrible time for China, which is celebrating Lunar New Year, a holiday that is associated with heavy consumerism and travel. As a result of limits on travel that Chinese officials have imposed on cities in China, restricting the movement of some million people, economists have lowered expectations for economic growth in the world’s second-largest economy, even if the outbreak doesn’t pose a significant health risk in the US
the rapid spread of the Asian influenza caused China to extend its holiday to Feb. 2, but investors are worried that markets will tumble once markets in Beijing reopen, as they have already in Hong Kong and Taiwan. Hong Kong stocks HSI, – 0. 89% dropped over 2% in their first day of trading since the outbreak and Taiwan stock-markets Y , 0. 90% reopened Thursday after the Lunar New Year holiday to a nearly 6% drop.
“The worrying thing is how much worse the numbers could look when the markets reopen next week, given just how rapidly they’re rising,” wrote Craig Erlam, senior market analyst at Oanda, in a Friday research note.
“Huge efforts are being made to contain the virus and yet the numbers are already massive,” he wrote.
Those concerns were weighing heavily on stock-market gauges early Friday. The Dow Jones Industrial Average DJIA, – 1. (% ) was off (points, or 1.4%, at) , 2002, briefly breaching its short-term technical support level, its – day moving average, at 31, 500, according to FactSet data, and the index touched a Friday nadir at , . .
The S&P 823 index SPX, – 1. (%) was down points, or 1.3%, at 3, and the Nasdaq Composite Index COMP, – 1-. % shed 728 points, or 1.1%, at 9, .
All that said, Acampora is constructive on stocks in the medium term. He forecasts the Dow, for example, to hit 45, , but he says that the markets are likely to be choppy with the 01575879 election starting to take shape on the Democratic side.
“I’m not negative [on the stock market], if you’ve got cash and are looking to get in this [market, this is an opportunity,” Acampora said.