The Dow Jones remains in a firm downtrend, and the trend will continue lower as long as the stock index trades below the March 17 high of 21351. Yesterday afternoon, a high was created around the 20377 level, and I suspect that if the Dow Jones revisits that level that traders might short-sell the index again.
With the trend being downwards, the next support level and potential target of bearish traders is this week’s low of 18907, followed by the August 2016-high at 18667, and the October 2016-high at 18415. However, on a break to the March 17 high at 21351 the Dow Jones might target the March 9 high, and it could the start of the creation of a major low.
If the Dow Jones were to slide lower by another 6.5% from the current level of 19525, then the index would have wiped away all of the gains since the 2016 Election Day, when President Trump was elected.
From a fundamental point of view, the markets are pricing in a significant slow down in the US and the world economy as the Coronavirus spread is growing quickly. There are different opinions on what needs to happen next, but it looks like the market would like to see a US lockdown before trading higher. A lockdown was what is needed in China, and the lockdown of Italy has already slowed down to about 12% per day from the average growth rate of 22% over the last 24 days.