There is something unusual going on, but it is not clear what it is. There were widespread and diverse computer failures yesterday. The New York Stock Exchange was down for three and a half hours. United Airlines suffered a system failure. The Wall Street Journal was off-line and the financial site Zero Hedge went dark for several hours. It is unlikely all of those system failures were not connected, but the connection isn’t known and isn’t being discussed.
At the same time the disastrous decline in Chinese stocks continued, despite heroic efforts by the Chinese government to halt it.
The effect on the market was a sharp decline in the S&P500 mini futures. They finished the day at 2039.25, down 35 points from the previous close, but slightly above the low of the day. Once again the support in the 2030-35 area halted the decline.
Today
Given the turmoil in the markets some kind of bounce may occur today, but do not expect it to last long. Since the Greek referendum last Sunday the markets have been a study in volatility. We expect that to continue.
The ES has lost its major support line around 2050-55, broke the 200-day moving average line, and closed below the yearly pivot level. There is heavy buying of SPX Puts at the 2020 and 2000 strike prices. If SP500 cash index goes under 2038 level, it could trigger panic selling.
The FOMC minutes today hint that the Fed may delay any interest rate increase. But that wasn’t enough to entice buyers back into the market. Most will stay on the sidelines until the dust settles, or until we find out what is breaking Wall Street’s computer systems. Is somebody out to get us?
Major support levels for Thursday: 2028-30, 2018-21, 2006-03, 1980-75]
major resistance levels: 2085-86, 2093.75-95.50, 2105-06
