Market participants have enough on our plate. Just when we have been balancing geopolitical uncertainty with the FOMC meeting…BOOM covid headlines makes a return.

Covid is once again hitting China hard. Shenzhen, the tech city of China, is now under lockdown. The 17.5 million residents will not be able to leave Jilin for at least a week, marking the first time the government has sealed off an entire province since the area surrounding Wuhan was isolated in early 2020.

The Shenzhen lockdown is already affecting big tech companies listed on the US exchange. Apple Inc supplier Hon Hai Precision Industry Co., known as Foxconn, said it was halting operations at its Shenzhen sites, one of which makes iPhones. Shenzhen is also the home for the headquarters of tech giants such as Tencent and Huawei.

Other restrictions have been implemented in other parts of China. Most significantly in Shanghai, which has seen classes return back to online format, and the restriction of travel into the city.

A bit worrying especially since the country is around 85% fully vaccinated with more than 1 billion people fully jabbed up.

The Chinese markets are getting absolutely decimated. Just like the weekly reversal pattern trigger I have spoken about on the S&P 500, the Shanghai Composite Index also confirmed a reversal breakdown on Friday. It has been red ever since. A huge 4.95% move down as I am writing this.

Panic selling not seen since the GFC of 2008. The reason being provided is that Chinese investors are concerned about the nation’s ties with Russia and the regulations/sanctions that might come with it. Perhaps…but maybe there is something worse happening behind the scenes. Maybe China’s credit crunch. I say this because the Evergrande and other real estate problems are not over.

Hong Kong is also feeling the pressure market wise. But also covid wise. Hong Kong is holding off on restrictions and lockdowns for now, but the country is now seeing the world’s highest death rate.

But it isn’t just Asia seeing a resurgence of covid. I was speaking to a friend in Spain, and he told me that headlines in Spain and in his native country, the Netherlands, were all about covid. A new Omicron subvariant BA.2, also known as the ‘stealth’ variant, is causing cases to rise in the UK, Germany, France, Switzerland, Italy and the Netherlands. I wouldn’t be surprised if we start hearing about cases in the US and Canada. The big question is how will the government respond? The real economy wouldn’t like it…but central banks would have an excuse to keep the cheap money going.

When it comes to covid, we do need to talk about vaccines. The CEO of Pfizer has come out saying a 4th shot will be ‘necessary’ for protection. Actually, we might need more than four. Continuous boosters might actually be a reality. If so, this would mean pricing in more $$$ and positive forward guidance for the jab companies.

Pfizer has reversed. We have climbed back above $50 and have broken above a downtrend line and a resistance zone. Looks very bullish. A possible pullback to retest $50 before we continue to make new higher lows and higher highs.

Moderna is the one I prefer just from a technical perspective. It is beginning to meet a lot of my criteria. A long downtrend, price finding support, and a potential reversal pattern forming at said support.

I am seeing the beginning of an inverse head and shoulders structure here. The trigger? A daily break and close candle above $180. The pullback I am seeing on March 15th isn’t too concerning. On the contrary, it gets me more bullish because this could be the right shoulder setting up on our inverse head and shoulders.

I would also look at all those other covid plays such as zoom, clorox, e-sports and anything to do with staying at home. I bet we might be seeing similar looking patterns. In summary, keep an eye on what is happening in China. Relentless selling not seen since 2008 is reason to be wary. So far, no impact on US markets, but that could be because we have the Fed coming up on March 15th.