As global credit contraction continues to intensify causing key carry trade funding currency the Japanese Yen to strengthen, triggering the unwinding of the carry Trades, resulting in global stock markets selloff on Monday.
NQ dropped about 100 points on Monday while S&P dropped over 45 points, with major indices all closing near the day low.
This type of very large down-day is normally followed by a narrow-range consolidation day prior to resuming the downtrend, but with the declining momentum so powerful on Monday, it will not be abnormal for Tuesday's to be another large-range down-day, but we will just have to wait and see.
Key support level to watch for on Tuesday is 3430 for NQ and 1735 for ES. Also key market to watch for is the Japaneses Yen and the yield on the 10-year treasury note, key yield at 2.6%
-- Breaking down below key support is an indication the market is still in freefall, NQ next support is 3400, and NQ 1:1 downside target on the daily chart is 3362.
-- Next support for ES is 1720, ES 1:1 downside target on the daily chart is 1710.
