A micro-flash crash is being suspected after the S&P 500 and the Nasdaq 100 indices plunged 0.5% in four minutes, shortly after the market open. The S&P 500 index has gone on to add more losses and is now trading 1.32% lower on a day where risk-taking seems to have taken the back burner.
Fuelling the slump in the day’s prices is the selloff of the technology stocks. The Tech index component of the S&P 500 index is down 2.69%, as traders dump the risk-linked tech stocks.
Also putting pressure on the S&P 500 index is the downbeat Factory Orders data, which showed an improvement from -0.5% to 1.1% but failed to meet the market expectation of 1.3%. Also, the Economic Optimism Index fell from 56.4 in April to 54.4 in May.
Technical Levels to Watch
The steep drop on the day has violated the 4150.4 support quite steeply and looks set to hit the 4113.2 mark where the lows of 12 April and 20 April lie. Below this level, a further decline could target the 4062.8 support (38.2% Fibonacci retracement of C-D wave in the “W” harmonic pattern).
On the flip side, bulls would be expecting a lift above 4218.8, which is where the all-time high now resides, for price continuation towards the 4225 and 4250 targets set by Credit Suisse following a correction. Therefore, dip-buying should be the priority of the bulls, targeting the various support areas displayed on the
chart as a potential lift-off point.
S&P 500 Index; Daily Chart
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