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 10% 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 9,500 people, [1]and claimed at least 213 lives, according to reports out of China. The illness, which has drawn comparisons with SARS, severe acute respiratory syndrome that hit Beijing in 2002-03, is being classified as a novel strain of coronavirus, or 2019 nCoV.
Read: Coronavirus update: First U.S. case of person-to-person transmission confirmed, 195 U.S. citizens in isolation and WHO declares a public health emergency[2]
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 50 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 U.S.
Check out: Why investors should buy stock-market dips as WHO declares coronavirus a public health emergency — and dump equities as they rebound[3]
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, -0.52%[4] dropped over 2% in their first day of trading since the outbreak and Taiwan stock-markets Y9999, +0.64%[5] reopened Thursday after the Lunar New Year holiday to a nearly 6% drop.
“The worrying thing is how much worse the numbers...