US Open – Markets focus on Apple and Fed, Virus infects almost 6,000, Oil bottom in place, Gold eases, Bitcoin Breakthrough

Investors are waking up to green across the screen.  The coronavirus continues to spread with almost 6,000 people becoming infected, surpassing the total SARS saw 17 years ago.  The virus is spreading as individuals who never went to China have been infected in Germany, Taiwan, Japan and Vietnam.  The death toll has risen from 106 on Tuesday to 132 on Wednesday, while the confirmed cases jumped 25% to 5,974.  Despite all the negative virus headlines, risk appetite is roaring higher on strong earnings, which saw Apple crush it after yesterday’s close and on expectations the Fed policy meeting will deliver no surprises. 

Apple, GE, and McDonalds delivered great earnings results and yet S&P 500 futures are still 1.5% away from record highs. If US stock index futures do not see fresh record highs this week, we might see stocks stuck in a range until we see thecoronavirus fears ease with the Chinese seeing some normalcy in travel over the next couple weeks.  The tentative return date to work of February 10th is key and if that date gets pushed back, a greater setback on Chinese growth will be expected and that could derail this latest rebound. 

Oil

Oil’s rebound could be short-lived if we continue to see further signs of acceleration in the spreading of the coronavirus.  Disruptions with Libyan oil output and larger than expected drawdowns with US stockpiles will only deliver tentative rebounds.  Oil needs to see the return of some normalcy in travel otherwise we could see selling pressure test the $50 a barrel level. 

Gold

Gold prices are tentatively struggling finding a catalyst to breakout higher.  Profit taking on the last leg of the gold run is taking place as strong earnings are preventing global equities from falling off a cliff on virus concerns. The reasons to own gold easily outweigh the ones not too, but right now a pullback is needed before we can see the next leg higher.  Fed policy is entering a state of hibernation but we should see risks to the outlook start to shift expectations for the next move to be a rate cut. 

Bitcoin

Bitcoin is rising on both optimism that cryptocurrencies could see a major improvement with transaction speed and after seven cryptocurrency exchanges were granted access to Nasdaq’s security technology to detect fraud and manipulation.  Bitcoin surged beyond the $9,000 level and seems poised to test the upper boundaries of the $6,500 to $10,000 trading range that has been in place since late September. 

Bitcoin transactions are still relatively slow when compared to other cryptos and other established retail electronic payment networks.  If Bitcoin adopts the Lightning Network, speed would improve drastically as small transactions could happen “off-chain”. 

Twitter CEO Jack Dorsey’s payments company is Square is focused on scaling the Lightning Network for the masses.  Bitcoin needs mainstream acceptance, and if this add-on to the blockchain network delivers, it we could see renewed interest in cryptocurrencies allow prices to rally towards $12,500. 

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