SSEC index dropped 108.22 or 4.27% to 2427.05 as at 3.01 am EDT. This means that SSEC index has just broken below the 'horizontal' support (S2-S2) at 2500. See Chart 1 below.


Chart 1: SSEC index's daily chart as at June 28, 2010 (Source: Stockcharts)

From Chart 2, we can see that today's sharp fall has also violated the Channel line support at 2450. The next support would be from the horizontal lines at 2400 & 2100.


Chart 2: SSEC index's daily chart as at June 28, 2010 (Source: Stockcharts)

The bearish breakdown in SSEC could be in reaction to the result of the G-20 meeting which seems to put more emphasis on fiscal tightening. This has disappointed many economists who think that the global economy recovery is too fragile for any significant withdrawal of economic stimulus. Paul Krugman wrote an interesting opinion piece entitled 'The Third Depression' recently on this topic.

In view of the role of SSEC index as a 'leading' index among equity markets- it was the first to recover in late 2008 & the first to peak in mid-2009- its bearish breakdown could be a warning of further downside for the equity market.