- Summary:
- Dow Jones industrial average declined in the premarket as the market received weak mortgage lending data and weak nonfarm payrolls numbers from ADP
The Dow Jones Industrial Average CFDs declined by more than 3% as investors continued to worry about Coronavirus and the damage it is causing. As we wrote last week, a study by Washington University, showed that more than 81k Americans would die from the disease. In a statement yesterday, Donald Trump upped the figure to between 100k and 250k.
There is a sense in which the risks of a recession are not being taken seriously. For example, there is a major risk that major American financial companies could be affected as the number of Americans out of work rise substantially.
A good example of all this is in the auto sector, where Americans owe more than $1.2 trillion to banks. A substantial amount of those loans are subprime, meaning that many Americans will struggle to pay them. The same is true with the mortgage and corporate sector. As more people get laid-off, America could struggle to pay the money.
Just today, a report by ADP showed that the economy lost more than 27k jobs in March. This data was better than the expected decline of more than 150k jobs. The number came a day before we receive the crucial jobless claims data for the previous week. This data is expected to show that more than 3.5 million Americans filed for unemployment claims.
Meanwhile, the mortgage industry is not doing good either. Data from the Mortgage Bankers Association showed that mortgage applications dropped by a whopping 24% in the previous week. This was the lowest decline since the association started to take the survey. Meanwhile, refinance applications rose by 26% and are 168% than where they were a year ago.
If you remember, the last financial crisis was driven by a weak performance of the housing sector. A weak housing, corporate, and auto sectors could lead to significant challenges in the economy.
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Dow Jones Index Technical Analysis
The Dow Jones index declined to a low of $21,000 as I had predicted in the yesterday’s report. Looking at the hourly chart, we see that the index is sitting on a major support level. It is an important support because of the psychological aspect of $21,000. Most importantly, as shown below, the index has recently found resistance and support at the level. In addition, the RSI has hit its lowest level since March 23. Therefore, moves below this support could see the index move significantly lower.