S&P 500
The Dow Jones futures extended its plunge on Thursday to officially take the index futures into the bear market territory, following the decision by the US to ban all flights from Europe into the US for the next 30 days.
The ban comes in the wake of further explosive spread of the coronavirus across the United States.
The World Health Organization (WHO) has now upgraded the status of the coronavirus outbreak to a global pandemic. According to the WHO Director-General Tedros Adhanom Ghebreyesus, the spread of the coronavirus outside of China in the last two weeks has increased 13-fold. The US now boasts of more than 10,000 cases, with a lot of them in the New York area where the physical exchanges of the US markets are located.
The travel ban could add further damage to global economic activity, which has already taken a hit from the ongoing outbreak.
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Having dropped below 20% of their original peaks on Wednesday, the Dow Jones and other US markets have fallen into the bear market territory. This drop has been extended in Thursday’s trading, as the Dow Jones index futures have lost 5.22% on the day (as at the time of writing).
The Dow is now approaching a support level formed by the 25 September 2017 previous low. A breakdown of this price support opens the door for further declines towards 21636 (prior lows of 18 August 2017 and 24 December 2018). The lows of 5 May and 7 June 2017, located at the 21078 price level, mark new support that could emerge if 21636 is broken decisively by a double successive closing penetration to the downside.
On the flip side, any form of recovery (from profit-taking of shorts or some action that alters risk-averse sentiment) could allow the Dow Jones futures to attain the 23248 price level in the short term. Only a firm risk-on attitude can send prices up to the 24922 previous support (turned resistance in role reversal).