S&P500 clears key support as panic sets in

Panic is at large across financial markets not over rate hike from US Federal Reserve but hard landing of Chinese economy.

Market participants are doubtful that Chinese Authorities will be able to prevent stock market crash, further devaluation of Yuan, ailing exports and economic health and encourage deleveraging in China's corporate sectors.

Today's preliminary reading of manufacturing PMI further strengthens the view, which dropped to 47.1 for August, lowest level in more than six years.

Investors preferred to withdraw money and park it as cash and into safe haven assets, such as treasuries, Yen, Franc and Gold to some extent.

S&P500, which is one of the most stubborn index to risk aversion cleared a crucial resistance at 2040 area, which bulls were successful in defending since February this year.

Where S&P500 might be heading to?

• S&P500 is currently trading around 2026, up from its low around 2011 area. The way it looks, selloff might get extended to next week too. While S&P500 might try to pose a comeback, it is most likely to encounter sellers around the broken support area of 2040.
  
• Focus now is on Psychological level of 2000 and crucial support around 1980, which has not been broken since October last year. Breaking that level will not be easy, however breaking it might lead to massive sell off like last September.