The blood bath continues.
The Dow Jones is down another 1,255 points, as the 10-year Treasury yield hit an all-time low of 0.318% amid a flight to bonds. All thanks to coronavirus fears.
Global cases of the infection are now up to 109,000 with at least 3,801 deaths.
And there’s little hope for containment.
“We’re past the point of containment,” Dr. Scott Gottlieb, former commissioner of the Food and Drug Administration said, as quoted by MSN. “We have to implement broad mitigation strategies. The next two weeks are really going to change the complexion in this country. We’ll get through this, but it’s going to be a hard period.”
Italy just locked down 16 million people – more than a quarter of its population to help halt the spread of the virus. Its death toll is now up to 366. Saudi Arabia just imposed a temporary lockdown on the eastern Qatif province. Germany just topped 1,000 cases.
Of course, that fear sent markets screaming lower.
However, the pullback in world markets isn’t a shock.
As we’ve noted, “Investors should be wary of further virus pullbacks. Should the virus start to spread in the U.S., we could see further panic-induced pullbacks. While the dip may appear attractive today, it may not tomorrow.”
Analysts agreed. Economist Mohamed El-Erian even noted, “I stress, this is different. Just because buying market dips has worked in the past does not mean it’s going to work this time. I would continue to resist, as hard as it is, to simply buy the dip.”
Wait for the Correct Buy Signals, Says BNY Mellon
“We do think by the summer, this will be a memory and that growth will recover,” says BNY Mellon chief strategist, Alicia Levine, as quoted by MarketWatch.
Reportedly, the analyst is “watching out for signs of a dramatic daily drop in China infections, and pickups in usage of coal, electricity and road and rail in that country, alongside property sales. As well she wants to see signs that the mortality rate is lower, which will mean fewer quarantines and containment shutting down activity.”
Others aren’t waiting for that.
As we noted on Feb. 27, others are trading the immense volatility with:
ProShares Ultra VIX Short-Term Futures ETF (UVXY)
The ETF was designed to match two times (2x) the daily performance of the S&P 500 VIX Short-Term Futures Index. Since Feb. 27, UXVY jumped from $19 to $36. In pre-market on Monday, the UVXY was up to $52.15.
VelocityShares Daily 2x VIX Short-Term ETN (TVIX)
This ETF tracks an index of futures contracts on the S&P 500 VIX Short-Term Futures Index. TVIX traded around $85 on Feb. 27. It’s now up to $170. In pre-market on Monday, it soared as high as $300.
iPath S&P 500 VIX Short-Term Futures (VXX)
The VXX ETN provides exposure to the S&P 500 VIX Short-Term Futures Index Total Return. As volatility shoots higher, so does the VXX. On Feb. 27, the VXX traded at $22. It’s now up to $29.82. In pre-market Monday, it was up to $40.75.
