At the time of writing, the Dow Jones was up by near 5% from its weekly low, as Italy had taken decisive steps to contain the coronavirus spread by locking down the whole country.
The Italian lockdown is not as strict as in China, but in the next few weeks, it should have an impact on the number of coronavirus cases in Italy. It took about two weeks for the percentage growth rate of new cases in China to peak after the closedown of about 60 million citizens.
Italy’s action is also opening up the possibility for France, Germany, and Spain to follow, and if they go ahead, it could put a halt to the spread in Europe. It would also slow the European economy, and this could drag down the Dow Jones. However, the question is if a halt to Europe’s economy is not already priced into the stock markets. Also, the Chinese President visited Wuhan today to mark the start of normalization to the battered city, and this shows that there is a way to defeat the coronavirus.
The challenge for the Dow Jones is how the virus will spread in the US, and how quickly the US government will be able to defeat the problem. Last night in a tweet by President Trump, he compared the current crisis with the regular flu.
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Dow Jones Technical outlook
The Dow Jones remains in a short-term downtrend, and the trend will prevail as long as the price trades below the 2298 level. In the chart below, we have drawn Fibonacci retracement levels, and we can see that the price has corrected a bit more than 38.2% of the slide from the March 4 high. This correction could be enough for traders to target this week’s low of 23444. However, trades that want to better the risk-reward ratio will probably wait for a 50% correction before adding to their bearish exposure.
The next support levels below this week’s low, are the 2019 low of 22581, followed by the 2018 low of 21590.