Price Chart Trading Pioneer Predicts Worsening Stock Market Downturn

Ralph Acampora, who is considered a pioneer in price chart-based trading, thinks that coronavirus concerns are a catalyst for a market that is overpriced and is in for an impending downturn.

What Happened

“The market itself was stretched, which is true, so we were begging for some kind of correction and this is the catalyst," Acampora told MarketWatch, "I think it’s going to be a little deeper. I am looking at 10% maybe a little bit more even."

Market concerns are mounting over the spread of coronavirus, which began in Wuhan, China. 361 deaths and 17,205 cases have been confirmed in mainland China alone, the Xinhua News Agency reported.

The Chinese markets, opened first day after the extended Lunar holiday, plummeted 8%, the biggest fall since 2015 years, according to Bloomberg.

What else is there?

Billionaire investor Ray Dalio who has studied past pandemics like H1N1, SARS, and the Spanish Flu said that the market acted in a risk-off way that is consistent with falling growth during the H1N1 and SARS epidemics. Equities declined, and gold and bonds rose, which has been witnessed in the last couple of days. Dalio believes that markets are on the same course that they took during H1N1 and SARS scares in 2009 and 2003. Regarding the current coronavirus outbreak, Dalio opined, “What we don't know is much greater than what we do know. When you don't know, the best investment strategy is to be smartly diversified across geographic locations, across asset classes, and across currencies.”

Price Action

The Shanghai Composite Index traded 7.72% lower at 2,746.61 at press time on Monday in Shanghai.