Traders have now woken up to the news that a new COVID-19 variant “NU” has been found in South Africa, and it is already starting to cause havoc across global stock markets.
US stock futures have dropped sharply in early morning trading on Friday as investors geared up for a shortened trading day and start to square positions and price in the renewed Covid fears over this new variant found in South Africa.
Futures for the Dow Jones Industrial Average are down heavily, with the DJIA likely to take a look at the 35,000 level shortly, as this big psychological number is rapidly approaching on the ticker.
A lot of the fear is coming from WHO officials, who warned that a new Covid-19 variant that’s been detected in South Africa. It worth noting that the United Kingdom has temporarily suspended flights from six African countries due to the variant, including South Africa.
The mood towards the Dow Jones Industrial Average was extremely bearish last week as the DJIA rallied. This is a big shift from the start of the month, when 70 percent of traders were bullish towards the DJIA.
The ActivTrader Market Sentiment tool currently shows that some 79 percent of traders are currently bullish towards the DJIA. I feel more losses are possible since retail traders are often on the wrong side of the market, and even more so with the NU COVID-19 fears.
Dow Jones Industrial Average Short-Term Technical Analysis
The four-hour time frame continues to show that a head and shoulders pattern has formed. These patterns are typically amongst the most bearish reversal patterns and hint at further losses.
Any pullback towards the 35,000 level or slighty under could be a huge buying opportunity this week. However, the pattern is warning that the index could dip as low as 34,500.
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Dow Jones Industrial Average Medium-Term Technical Analysis
Looking at the daily time frame, the trend is still bullish, and the bigger picture continues to show that massive broadening wedge pattern is unfolding for the DJIA.
According to the overall size of the neutral price pattern the DJIA could be ready to fall towards the bottom of wedge, around the 32,000 level. Over the medium-term, bulls need to defend the 35,000 to 34,000 area to stop a big drop towards the 32,000-support zone.
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