- Summary:
- Today, the Dow Jones slid to a new monthly low and remained below the 200-day-average. At the same time, the Fear and Greed Index neared its 2019 low.
Dow Jones futures slid to a new monthly low in today’s European trading session, as the German DAX index, and UK FTSE 100 traders and investors sold in panic in the early morning. However, following the sell-off at 9 am London time, the Dow Jones and European indices have recovered. The growth rate of coronavirus cases in Italy has moderated compared with yesterday’s figures, and the Fear and Greed index has dropped to oversold levels.
Daily Coronavirus Spread in Italy at 16%
As of 11:38 London time, Italy has reported a total of 374 coronavirus cases, a 16% growth from last night’s figure of 322. There are about 12 hours left of the day in Italy, so more cases will probably be reported by the end of the day, but as it is looking right now, the rise in cases is not as aggressive compared with yesterday, when the growth in the number of cases exceeded 100%.
As I reported in our exclusive webinar about the similarities between the 2003 SARS breakout and the recent Coronavirus crisis in China, the local stock markets tend to bottom our when the percentage growth rate of the virus is around its maximum. It is too early to know what will happen in Italy, but the affected communities have already isolated themselves, something that the Chinese did, and it eventually stopped the virus growth in China.
Read our Best Trading Ideas for 2020.
Dow Jones Technical Analysis
Yesterday, I reported that the December 3 low of 27362 was an interesting level in the Dow Jones. I also reported that the 200-day-moving average was around the same level. The Dow Jones tend to have a bullish reaction around the moving average.
Yesterday, the price reached the low, and today the Dow Jones extended its losses below the 200-day average, however, as seen in the chart below we are starting to see a less bearish reaction in the index. As you will also see below, the CNN Fear and Greed index is also nearing oversold levels, which hint of a potential short-term low in the Dow.
Traders will now be watching what happens in the US session as I suspect long-term traders will try to carve out a low between the October 10 low and the current price at 27100 over the next few days. If bullish traders fail to stabilize the Dow and the index slides below the December 10 low, the index might slide to the August low of 25069.
CNN Fear and Greed Index Nears Oversold Levels
The Fear and Greed index is nearing oversold levels as the index is nearing its 2019 lows. The low readings suggest that we should soon reach the end of the panic selling in the Dow Jones. However, there are instances when the index has slid to lower levels, such as in 2018, so it is essential to use the indicator in combination with other technical indicators.
ECB’s President Lagarde is speaking today at 13:30 GMT, and she might share her view on the markets and the monetary policy in the light of the latest Italy Coronavirus spread. Later, US home sales are on deck.