NASDAQ 100 OUTLOOK:
- Wall Street’s foremost inventory indices endure heavy losses in the beginning of the week, with expertise shares bearing the brunt of the sell-off
- The Nasdaq 100 slides greater than 2% and falls under its 100-day easy transferring common, a bearish sign in accordance with technical evaluation
- On Tuesday, traders will concentrate on the ISM No-Manufacturing report for clues on the well being of the providers sector
U.S. shares plummeted in the beginning of the week, dragged by expertise shares, because the latest rise in Treasury yields led traders to flee high-flying corporations. On the identical time, considerations in regards to the debt ceiling, persistently elevated inflation, recent U.S.-China commerce worries and the potential of increased company taxes additionally weighed on sentiment.
When it was all mentioned and executed, the Nasdaq 100 plunged 2.16% to 14472, shedding its 100-day transferring common, pulled decrease by outsize losses in mega-caps equivalent to Amazon, Microsoft, and Apple. In the meantime, Fb, the fifth most respected firm, was hit the toughest, dropping nearly 5%, after an insider whistleblower accused the social media firm of going through no oversight, betraying democracy, and selecting earnings over public security. Elsewhere, the S&P 500 sank 1.3% to 4300, whereas the Dow Jones fell 0.94% to 34003 factors on the closing bell.
With stretched and frothy valuations, the expertise sector faces a number of near-term dangers, however one of many foremost menacesseems to stem from the prospect of tighter financial coverage because the Fed prepares to taper its asset buy program, a course of that would begin as quickly as subsequent month (November).
The normalization endeavor by the U.S. central financial institution ought to carry increased yields throughout the Treasury curve, weighing on valuations, boosting volatility ranges, and ushering a shift in market management away from the large tech names. That mentioned, one key sector that will outperform in a rising charge setting is financials, with the XLF ETF seemingly providing uneven upside potential over the last quarter of the 12 months.
Transferring on to different near-term catalysts, the September ISM Non-Manufacturing launch must be the focus on Tuesday. The index is seen rising at an excellent tempo, however decelerating barely to 60 factors from 61.four in August. Any constructive surprises relative to expectations might ease considerations in regards to the slowdown in providers spending seen over the summer time and elevate bond yields, exacerbating destructive sentiment in the direction of the expertise section.
NASDAQ 100 TECHNICAL ANALYSIS
After breaking under its 100-day easy transferring common on Monday, the Nasdaq 100 has fallen quickly in the direction of a Fibonacci help within the 14365 space. If sellers handle to breach this flooring within the subsequent few buying and selling classes, the tech index might retreat in the direction of cluster help within the 13950area, the place the 200-day SMA converges with the 50% Fib retracement of the March/September rally. On the flip aspect, if bulls reassert upside strain and costs handle to pivot increased, the primary resistance seems close to 14775. Ought to consumers reclaim this degree, there could possibly be scope for a transfer in the direction of 15150.
NASDAQ 100 TECHNICAL CHART
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— Written by Diego Colman, DailyFX Market Strategist