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Nasdaq 100, Dow Jones, S&P 500 Forecasts: Tech Stocks Falter, Lead Selloff

Nasdaq 100, Dow Jones, S&P 500 Forecasts: Tech Stocks Falter, Lead Selloff

2020-09-03 18:30:00
Peter Hanks, Analyst
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Nasdaq 100, Dow Jones, S&P 500 Price Outlook:

Nasdaq 100, Dow Jones, S&P 500 Forecasts: Tech Stocks Falter, Lead Selloff

The Nasdaq 100, Dow Jones and S&P 500 began Thursday trading with modest losses which then accelerated as the session progressed. After leading the charge higher since mid-March, technology stocks stayed at the helm during the dive lower, seeing losses in the Nasdaq 100 outpace that of the Dow Jones and S&P 500. As a result, the Nasdaq has posted a staggering decline as it falls from the topside of an ascending band, to potential support beneath.

Nasdaq 100 Price Chart: 1 – Hour Time Frame (August 2020 – September 2020)

Nasdaq 100, Dow Jones, S&P 500 Forecasts: Tech Stocks Falter, Lead Selloff

Many analysts have warned valuations in the technology industry have shown symptoms of euphoria for weeks and Thursday’s price action may be a much-needed reminder that stocks can in-fact decline. To that end, some of the most severe losses were seen in names like Apple and Tesla – two stocks that have been dominating the speculative spotlight. Thankfully for the Dow Jones, a recent Apple stock split has helped curtail losses for the Industrial Average, as the California-based company is on pace for its worst day since March.

In the case of Tesla – which has exhibited bubble-like symptoms for weeks – catastrophic losses have seen the electric vehicle manufacturer fall the most since May. Judging by the abrupt reversals, investors may have at least begun to consider some of the fundamental concerns behind a few of the technology leaders and that has sparked pain in the Nasdaq. To be sure, continued weakness in the technology sector could see this pressure continue as exuberance is exchanged for fear.

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That being said, Thursday’s losses are not necessarily the advent of another stock-Armageddon like we saw in February and March. As we warned earlier this week, September is typically a volatile month for equity markets and one that has seen stocks fall on average over the last forty years. Couple seasonal trends with uncertainty from the coronavirus and the looming US Presidential election, and blips of volatility become much more understandable.

Nasdaq 100 Price Chart: 4 – Hour Time Frame (April 2020 – September 2020)

nasdaq 100 price chart

Therefore, bears will have to display some conviction in their attack lower before the broader bullish trend can be put in real danger. To be sure, initial losses in the Nasdaq 100 have seen price fall near a potential area of support around 11,670, but subsequent support may prove to be more meaningful.

A Guide to Support and Resistance Trading

Derived from the index’s swing low in early April and riding along the bottom of various higher lows since, an ascending band around the 11,500 mark may be the technical “line in the sand” at this stage. Thus, a bearish break beneath the level could allow losses to accelerate which would seriously undermine the broader uptrend that has been in place since March. In the meantime, follow @PeterHanksFX on Twitter for updates and analysis.

--Written by Peter Hanks, Strategist for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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