The Stock Market Is Dropping Again. What to Watch for a Hint It’s Safe to Go Back In.

A majority of investors are willing to trade growth opportunities for downside protection, a survey says.

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7:51 a.m. Oh look. The stock market is dropping again. Do you need me to tell you the reason?

Of course not. At this point, we all know that the coronavirus is rattling the stock market. As the number of cases keeps growing, the disease continues to spread to new countries, and Seattle schools close, the market is engaged in a near-futile attempt to predict just how devastating coronavirus will be, both in terms of out health and for the economy.

“It’s another ugly morning as futures are down sharply on the same issue as Thursday: The growing spread of the coronavirus and fears of a larger economic slowdown,” writes The Sevens Reports’ Tom Essaye. “There was no notable, new news overnight, but the virus continues to spread in the U.S. and the number canceled travel plans and conferences/events continues to grow.”

In moments like these, I often turn to the charts to help me gauge the possibilities, at least from a markets point of view. As I noted earlier this week, when the swings are this big, they don’t mean much—it’s the ranges and levels that matter. And the S&P 500 is coming very close to a level that needs to hold: 2990.

That would be the bottom edge of support for the index, according to Fairlead Strategies’ Katie Stockton, which sits between 2990 and 3030. When I talked to Stockton on Thursday, she told me she was waiting to see if the market could hold 2990 at Friday’s close before recommending investors buy stocks. If it holds, the S&P 500 could be headed toward resistance near 3200. If not, it could fall toward 2750. “That’s quite a spread,” she said. “The wait and see approach is appropriate.”

That’s particularly true given that we have so little to go by. We know the disease is spreading, but even in China, where coronavirus seems to be under control, the economy has been slow to restart. Starbucks (SBUX), for one, provided an update last night that second-quarter sales in China will be 50% below what they were the previous year, even as it aid that it expects the hit to be temporary.

So perhaps the best we can do is look to the market to tell us how worried we should be. When it calms down, maybe we can all relax.

Dow Jones Industrial Average futures have dropped 606 points, or 2.3%, while S&P 500 futures have fallen 2.6%, and Nasdaq Composite futures have slumped 2.8%.

Write to Ben Levisohn at Ben.Levisohn@barrons.com

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