Trading on the Dow Jones Industrial Average resumed this afternoon with a massive 12% plunge after the overnight circuit breaker halted trading on the Dow Jones futures. The Dow is now trading at 20811 following Sunday’s interest rate cut and launch of a new quantitative easing program.
Investors appear spooked by the rapidity with which things have happened in the US over the weekend. Data from John Hopkins show that the number of coronavirus cases in the US may be far higher than initially thought. The Centre for Disease Control (CDC) is now advocating for a ban on gatherings of more than 50 people as part of measures to curb ongoing transmission. New York City is also shutting public schools on Monday, as well as nightclubs and movie theatres. Several states are taking similar measures as the number of US coronavirus cases tops 6,000.
Goldman Sachs is predicting a 5% GDP drop in Q2 2020; this shows the level of pessimism that has gripped the investing community about the impact of the coronavirus pandemic on the US economy.
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Technical Outlook for the Dow Jones
Today’s price plunge has found temporary support at the 20448 price level, where we see previous lows of 27 March and 15 May 2017. However, if there is retest of this price level which eventually leads to its capitulation, price will have a chance to target the Feb 2017 lows at 19956.6, with August 2016’s previous highs at 18726.6 also making itself available as a potential support to future downside price action.
On the flip side, 22107.7 could become a resistance level of interest if today’s bounce is able to find some more momentum to the upside. The Nov 2017/Feb 2018 lows at 23330.8 continues to remain relevant as a potential resistance, pending further price recovery of the Dow.
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