Overnight Session Spurs Volatility

By Lawrence G. McMillan

Yesterday saw steady rally for nearly the entire day.  That had some ramifications beyond merely an oversold bounce.  However, it’s what has happened overnight that has been extremely volatile and interesting.  First, just after yesterday’s close, Turkey announced that they were intervening on their currency, and S&P futures rallied 13 points from yesterday’s close.  Frankly, I am surprised that this much attention is being paid to Turkey’s currency, but similar things have (rather rarely) happened in the past, so it is what it is.  That 13-point rally held until about 3 am, and then the wheels began to come off.  S&P futures have dropped 33 points since 3 am, meaning they are now down nearly 20 points from yesterday’s close.  That is a huge move for overnight trading, and it seems to be related to the fact that the intervention in Turkey did not work (shock!), and that currency is now trading back to pre-intervention levels.  But, of course, we know the problem is deeper than that.  This market was extremely overbought, and there are a lot of people looking to sell.  That is harder to quantify, but it is the real problem.  It probably doesn’t help that, a mere week into what is probably a market correction, charts comparing this market to 1929 are being circulated.  I have seen two separate analysts presenting such charts, and I’m sure there are many more.  But don’t most market tops look like the 1929 top – at least at this point?  I think “yes.”

Meanwhile, don’t forget that the Fed will announce its actions this afternoon – sure to induce even more volatility.  From a technical perspective, $SPX has support at 1770, There is now resistance at 1810 (the old support), and then above that at 1850...  

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