E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Driven Lower by Fear of the UnknownThe Fed can’t really do anything to offset the damage from the coronavirus because the problem has not run its course and no one knows what the final outcome will look like when all is said and done.
March E-mini Dow Jones Industrial Average futures plunged in volatile trading on Thursday as fear the coronavirus may be spreading in the United States encouraged investors to aggressively trim their stock market exposure. The heavy selling is being blamed on a slew of corporate and analyst warnings on the economic impact of the virus.
At 21:35 GMT, March E-mini Dow Jones Industrial Average futures are trading 25630, down 1292 or -4.80%. Earlier in the session, the Dow hit its lowest level since August 14 at 25523.
The huge sell-off has essentially wiped out the entire U.S/China Phase One trade deal premium, which suggests traders don’t believe China will be able to fulfill its side of the agreement.
Daily Technical Analysis
The main trend is down according to the daily swing chart. The downtrend was reaffirmed on Thursday when sellers took out three more main bottoms at 26592, 25978 and 25710. The next target is the August 14 bottom at 25326, followed by the major bottom at 24859 from May 31, 2019.
The main range is 24859 to 29543. Its retracement zone at 26648 to 27201 is new resistance. Trading on the weak side of this zone is also helping to generate the downside momentum.
The selling stopped near an uptrending Gann angle at 25605. If this fails then look for the selling to extend into the next main bottom at 25326, followed by another uptrending Gann angle at 25229. This is the last potential support angle before the May 2019 main bottom at 24859.
By no means are we trying to predict a bottom when we mention Gann angles and main bottoms as potential support. We’re just giving you a road map. No one can predict the momentum so for all we know, the market could straddle these levels all session before moving swiftly in either direction.
We do know from experience that these types of sell-offs often end with a dramatic reversal bottom, but that is usually triggered by a catalyst. Some think the Fed will come to the rescue. This may be a temporary solution designed to stop the selling, but any technical bounce is likely to be met with fresh shorting pressure because the Fed can’t really do anything to offset the damage from the coronavirus because the problem has not run its course and no one knows what the final outcome will look like when all is said and done.