Coronavirus Is Turning Market Psychology Negative: Is Panic Selling Next?

2 | By Shah Gilani

The big selloff yesterday, as broad and deep as it was, coming on huge volume, wasn’t unexpected.

Historically, some of the markets’ biggest drops have come on Mondays.

Typically, the previous week’s selling, whatever triggers it, crescendos on Friday afternoon before markets close for the weekend.

As scared investors worry that more bad news over the weekend will tank stocks on Monday, they sell futures, which draws attention to Monday’s expected weak opening – making a Monday selloff almost self-fulfilling.

Coronavirus fears triggered all that last week with investors shedding stocks going into the weekend and selling futures right up to the open. That’s why Monday’s big selloff wasn’t unexpected.

But it wasn’t panic selling. For the most part, selling Monday was orderly.

The worst news of the day was benchmark indexes couldn’t bounce and ended near intraday lows.

What’s happening right before our eyes is investor psychology turning negative.

The question investors should be asking now is, will more negative news and fear trigger panic selling?

It could and probably will.

Here’s what’s changed, what could trigger panic selling, how to see it coming and what to do about it

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Capital Wave Forecast: We Need to Continue with a Hard Break from the Stance We’ve Been Enjoying

0 | By Shah Gilani

Last week’s Capital Wave Forecast was a hard break from the bullish stance we’ve been enjoying.

I said on Tuesday, “This Capital Wave Forecast is your first warning. Markets are overly optimistic, have risen too far too fast, and are prone to a correction in the coming weeks.”

That abrupt turnaround last week came on the heels of a long weekend of research into how high and how fast benchmarks had moved up in the face of the coronavirus spreading, as opposed to the fake news out of China that infection rates were slowing.

Equities were moving higher in anticipation of a quick resolution to the spreading virus, mostly fueled by new cash plowing into “passive” funds.

That worked…until it didn’t.

Today’s forecast is your second warning

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