The stock market sold off hard on Tuesday, three days ahead of money market reform that's due to come into effect on Oct. 14, overwhelming the Fed buyers. NQ sold off almost 100 points form last Friday closing price. NQ bounced off it very critical support at 4800.
Going into Wednesday, a clear and sustained break below 4800 could trigger an avalanche of selling that could quickly crash NQ down to the next major support at 4550, with potential support at 4700 area.
NQ key support on the short term time frame is 4800. But keep in mind that NQ daily chart is trying to confirm a massive bearish MACD divergence. A clear break below 4800 on the daily chart is likely to trigger an avalanche of sell orders, a down-move targeting 4450.
A $7 Trillion Moment of Truth in Markets is Just Three Days Away
Not since the financial crisis of 2008 has Libor, to which almost $7 trillion of debt including mortgages, student loans and corporate borrowings, is pegged — experienced such a surge. The three-month U.S. dollar Libor rate has jumped from 0.61 percent at the start of the year to 0.87 percent currently — a 42 percent rise — ahead of money market reform that's due to come into effect on Oct. 14.
The new rules require prime money market funds — an important source of short-term funding for banks and companies — to build up liquidity buffers, install redemption gates, and use 'floating' net asset values instead of a fixed $1-per-share price. While the changes are aimed at reinforcing a $2.7 trillion industry that exacerbated the financial crisis, they are also causing turmoil in money markets as big banks adjust to the new reality of a shrinking pool of available funding.
The new rules require prime money market funds — an important source of short-term funding for banks and companies — to build up liquidity buffers, install redemption gates, and use 'floating' net asset values instead of a fixed $1-per-share price. While the changes are aimed at reinforcing a $2.7 trillion industry that exacerbated the financial crisis, they are also causing turmoil in money markets as big banks adjust to the new reality of a shrinking pool of available funding.
