Central banks induced rally on Sunday night designed to cause a gap-up opening on Monday thus trigger a short-covering rally to prevent global financial contagion from two Italian banks that collapsed last week Friday.
The stock market did opened with a gap-up on Monday, and a huge gap-up open for NQ. However, heavy selling came in soon after the open and then continued all day long into the close with some lunch bounce.
Come Tuesday central banks is certain to intervene aggressively to prevent further contagion and market meltdown, but fear of contagion has now permeates inside the psyche of traders and investors. As such, going forward, the stock market volatility is likely to start increasing. It is just the characteristics of topping pattern and actions.
On the daily chart, NQ looks ready to tank hard. Key price level for NQ on Tuesday will be 5795.
-- If they are able to push NQ back up above 5795 and remains above 5795 then selling pressure should be kept under control, and NQ can rally, resistance is again at 5860
-- Should NQ failed to re-break back above 5795, heavy selling should resume, lower supports are 5700 (the 50-DMA on the daily chart) then 5643, a triple bottom low with June 12 and 15 low.
ECB shuts down Veneto Banca and Banca Popolare di Vicenza.
When banks fail and regulators decide to liquidate them, it happens on Friday evening so that there is a weekend to clean up the mess. And this is what happened in Italy – with two banks
