Safe-Havens Rally To Open The Week

The post-President’s Day trading week has started on a bearish foot for U.S. stocks. At about the halfway point of the American session, the DJIA DOW (-185), S&P 500 SPX (-15), and NASDAQ (-13) are all trending south. For the moment, it appears as though coronavirus fears are fostering the negative sentiment. Safe-havens are benefitting, led by an $18+ per ounce jump in gold.

Today’s action in U.S. stocks is a bit counterintuitive. On Monday, the World Health Organization (WHO) reported that the number of new coronavirus cases is declining in China. However, the WHO also stated “that it’s too early to tell if this reported decline will continue. Every scenario is still on the table.” In addition to the somewhat optimistic coronavirus news, there are a few other pieces of data worth noting from earlier:

Event                                                                               Actual    Projected    Previous

NY Empire State Manufacturing Index (Feb.)           12.9             5.0                 4.8

3-Month T-Bill Auction                                                 1.545%         NA               1.550%

6-Month T-Bill Auction                                                 1.51%          NA                 1.51%

All in all, Treasury yields continue to be depressed as institutional hedging demand remains constant. However, this morning’s big story is the performance of the NY Empire State Manufacturing Index (Feb.). The report came in extremely strong at 12.9. This level more than doubled projections (5.0) and the previous release (4.8). It also came in at its highest level in nine months.

However, the robust NY Empire State Index hasn’t been enough to boost sentiment. For now, it’s risk-off and bids for the safe-havens.

Safe-Havens Rally In Post-Holiday Trade

While the safe-haven gold has been stronger today, the USD/JPY is trading in a whipsaw fashion. Bidders are in the process of erasing early-session losses and preserving the daily uptrend.

Here are the key levels to watch in this market for the near future:

• Resistance(1): Swing High, 110.13
• Support(1): Bollinger MP/Daily SMA, 109.56
• Support(2): 38% Current Wave Retracement, 109.43

Bottom Line: At this point, a long-side bias toward the USD/JPY is warranted. In the event we see safe-havens show strength on Wednesday, a buying opportunity may set up from downside support.

As long as the Swing High (110.13) remains intact, I will have buy orders in the queue from 109.56. With an initial stop loss at 109.21, this trade produces 35 pips on a standard 1:1 risk vs reward ratio.