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Banks “to the rescue”, declines in the markets and other news

Due to the Evergrand case, we did not start off on a right foot this week. This Chinese giant has got the market into an uneasy situation, to say the least. That is because on Monday, it was stated that Evergrande did not have the capital to continue paying its liabilities in the amount of $ 310 billion.

This news led to an immediate decline in Chinese stock indices, later on, fear spread to markets around the world. Gradually, classic indices such as the S&P500, and Dow Jones, as well as for cryptocurrencies, also began to decline. Shortly after, the central banks began to react. China's central bank was the first to respond, providing $ 18.6 billion in liquidity.

At the traditional meeting yesterday, the Fed itself calmed the situation. According to the US central bank, the major interest rates will not be rising yet. As for the purchase of bonds, benefits will soon be reduced there. This mild rhetoric by Fed was mirrored by growth in markets.

Key zones on S&P500 chart

This chart clearly shows why many people immediately started thinking in terms of crisis. After a very long time, the S&P500 fell through the trend. Furthermore, the Evergrande case is very similar to the case of 2008, when the collapse of Lehmann Brothers caused a global crisis. Be that as it may, there is a strong line between a correction and a crisis. I have marked two basic levels that the S&P500 should maintain. This is a level of 4269 and 4057 points. These are really two strong swing levels that the S&P500 should maintain. If we keep them, we can be sure that what we have here is a correction, not a bear market.

SP500 on D1 chart Figure 1: SP500 on a daily chart

Conclusion

In a few months' time, I am also waiting for a deeper correction, and perhaps I would dare say even a crisis. However, I do not think it will be because of this case. In my opinion, the Evergrande case is only intended to scare people into selling. As long as central banks come to the rescue, the situation is relatively safe.

Jakub is a crypto trader and founder of Trader 2.0 project, which helps hundreds of traders from central Europe to understand cryptocurrency trading and its challenges. Jakub not o...

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