Dow Jones Testing Critical Support As Fear And Greed Index Drops to Monthly Lows

The Dow Jones finished yesterday at the four-week lows as risk-off sentiment prevails. Increased worries about a second wave of coronavirus infections threats the fragile reopening of businesses around the globe. New coronavirus cases in South Korea, China and Germany shows that maybe is too early for the reopening of economies. Japan PM Abe decided to lift the state of emergency in 39 prefectures, but not Tokyo. 

President Trump Wants Stronger USD

President D. Trump in an interview with Fox Business News said: “It’s a great time to have a strong dollar (USD) because the whole world – you know, we’re paying zero interest now, right. That’s never happened either. We’re paying so low. Everybody wants to be in the US dollar because we kept it strong. I kept it strong.”

He also reiterated his will for negative interest rates, just like Japan and Germany. Trump is also looking at Chinese companies that are trading on NYSE and NASDAQ, but they don’t follow the U.S. accounting rules. 

Yesterday, Fed chairman Jerome Powell rejected the case for negative interest rates. 

Futures in Wall Street trading mixed, the Dow Jones futures are 0.12% lower, while Nasdaq futures are 0.23% higher at 9,013.

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Fear Returns As the Fear and Greed Index Drops

The fear and greed index continues to drop this week, and today stands at 38 one point lower from yesterday and three points lower from the previous week. Fear is driving the market now after the increase in coronavirus cases in some countries that proceeded with the reopening of the economy. 

The CBOE Volatility Index (VIX) or fear index ended yesterday 8.69% higher at 35.91.  

Dow Jones Technical Analysis

Dow Jones finished yesterday 2.17% lower at 23,248 finding support at the 50-day moving average. Today’s trading session is very critical for the short term trend as a break below 22,980 might trigger a sharp sell-off targeting 21,500. The long term technical outlook remains bearish as the index trades below the 100 and 200-day moving averages. 

On the downside, initial support for Dow Jones Industrial Average is at 23,067 yesterday’s low. Next strong support for the index will be met at 22,618 the low from April 7th. A break below might open the way for a test of 21,661 the low from April 6.  

On the other hand, minor resistance for the Dow Jones stands at 23,708 yesterday’s high. A move above might test 24,381 the high from May 12. The next supply zone for the longer term is at 24,759 the high from April 29.  

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