First and foremost, the sole purpose of me writing this column is to help investors, who are anxious as the coronavirus spreads. An important piece of information that investors should have had is news around coronavirus-testing kits.
First, let’s look at a chart to develop the necessary background to understand this piece of information on the stock market.
Chart
Please click here for an annotated chart of the Dow Jones Industrial Average ETF DIA which tracks the Dow DJIA.
Note the following:
• The chart tracks monthly changes, something that is of great value to long-term investors at this time.
• The chart shows a trendline from the start of this massive bull run in the stock market to the present.
• The chart shows that the stock market deviated from the long-term trendline (at the first “Arora buy signal,” which was given when Donald Trump was elected).
• The chart shows that even after the recent drop in the stock market, the market is still levitating significantly above the long-term trendline shown on the chart.
• The chart shows that the RSI (relative strength index) is still not oversold even after this big drop in the stock market. The chart shows a white horizontal line that marks the point where RSI gets oversold. RSI has a way to go before it gets oversold. In plain English, this means that the stock market will have to fall further before the natural buying that comes in when the stock market is oversold occurs. This is a negative from a long-term perspective.
• The chart shows that the volume is not high. This is a negative.
• This is a long-term perspective and not intended to call daily fluctuations.
• From a long-term perspective, investor portfolios are overly concentrated in five big companies: Apple AAPL, Amazon AMZN,, Facebook FB and Alphabet GOOG, GOOGL. This is a negative.
• Investors ought to consider reading “Prudent investors should look at these four stock charts as coronavirus spreads.”
• Investors should stop thinking in terms of percentages. Please see “This is the No. 1 mistake investors are making now — here’s how to avoid it.”
Coronavirus scandal
Reports of coronavirus emerged as early as November 2019. Unfortunately, many of the reports seem to have been deleted.
China alerted the World Health Organization (WHO) about several unusual pneumonia cases Dec. 31. On Jan. 7, 2020, coronavirus was identified. On Jan. 11, the first death in China from coronavirus was announced.
We are now in March. So far in the United States, only a tiny fraction of the people who should have been tested for coronavirus have been tested. The availability of test kits in the U.S. has been extremely limited. Further, the policy on who should be tested has been restrictive.
Testing for coronavirus is not difficult. It has not been an issue of science and technology but an issue of policy and execution. Other countries such as South Korea have been able to test a large number of patients in a very short time, but not the U.S. “Scandal” is a strong word, but what else can you call lack of testing in the United States? It may not be politically correct, but investors ought to call a spade a spade to develop the proper perspective for the current stock market conditions….Read more at MarketWatch.
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