38% Fibonacci Proves Valid Resistance For The DOW

Posted Wednesday, March 11, 2020 by
Shain Vernier • 1 min read

The sky is once again falling on the U.S. stock market as COVID-19 fallout continues to dominate sentiment. At the halfway point of the American session, the DJIA DOW (-1100), S&P 500 SPX (-120), and NASDAQ (-330) are plummeting into the red. At press time, it appears that the March E-mini DOW has rejected a key Fibonacci resistance level.

Most analysts credited Tuesday’s rally in equities to hopes regarding a coming U.S. fiscal stimulus package. Following today’s statements from Treasury Secretary Stephen Mnuchin, the passage of a comprehensive COVID-19 stimulus appears thin:

“The president very much wants to consider a stimulus bill, whether it is through a payroll tax or otherwise. We realize that may not get done this week, so we want to get done what we can do this week and come back.”

In short, there’s no huge, sweeping bailout as we saw in 2008 coming in the near future. However, Mnuchin did suggest that a program of business loan guarantees could be passed as early as Thursday. 

DOW Fails At Key Fibonacci Level

The March E-mini DOW continues to fall, mowing down equities bulls. As you can see in the chart below, prices have failed to eclipse the daily 38% Fibonacci retracement. Accordingly, a bearish bias is appropriate and all roads point south.

March E-mini DOW Futures (YM), Daily Chart
March E-mini DOW Futures (YM), Daily Chart

Here are two key levels to watch as we roll into the late session:

  • Resistance(1): 38% Fibonacci Retracement, 24,819
  • Support(1): Spike Low, 23,424

Overview: Although encouraging, the positive sentiment of yesterday is long gone. In the past hour, the World Health Organization has officially labeled the COVID-19 outbreak a pandemic. Since then, U.S. stocks have fallen precipitously. Until we see prices break and close above the 38% Fibonacci retracement, a short-side bias is warranted toward the March E-mini DOW.

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