Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Chart Of The Day: Nasdaq Bears Eye Summer Lows

Published 2022-09-23, 07:25 a/m
Updated 2024-03-11, 07:10 a/m

After a busy week for central banks, nothing has changed to alter my bearish outlook on the stock markets. I continue to expect to see new lows on the year on the major European and US indices. The Nasdaq only needs to drop another 4%-5% to get there.

Admittedly, the markets do look a little bit ‘oversold’ following the sharp moves this week, so a bit of a rebound may be warranted. But we are likely to see the bears continue to defend their ground amid a bearish macro backdrop. 

The Nasdaq futures this week broke another support area around 11,750. The area around this level is now the most important short-term resistance zone that they need to defend. For as long as the index holds below here, the path of least resistance would remain to the downside towards the June low at 11,036.

Nasdaq Daily

The lower lows and lower highs, as well as the downwardly sloping 21- and 200-day moving averages all objectively tell us what we need to know. So, there’s no doubt that the trend is bearish right now. 

For now, and as I have been banging on about it, stocks remain rooted in a bearish trend. This week saw investors dump stocks hurriedly along with the euro, pound and nearly all other foreign currencies, as they watched yields continue to rise following a flurry of central bank action.

Among them, the US Federal Reserve announced a 75 basis point rate hike and signaled that it would continue to raise rates aggressively until inflation comes back under control. In response, bonds broke down, causing the yields on bonds with all maturities to move higher. The 10-year US bond yield broke above 3.7%, making low- and zero-yielding assets such as some technology stocks and gold even less appealing for yield seekers. 

In addition to mounting concerns about rising interest rates and inflation, the energy crisis is continuing to weigh heavily on the European economy as the Russian invasion of Ukraine drags on after Putin announced that military reservists will be sent to Ukraine as part of a "partial mobilization" of his forces. Today’s soft European PMI numbers underscore these concerns. Furthermore, there are growing concerns about the health of the Chinese economy, which has been held back by the government’s zero covid policy and global economic weakness amid surging price pressures.

Given these macro concerns and the technical outlook, I wouldn’t bother looking to buy the dips until the charts tell us otherwise. For traders shorting the indices, it has been a good year. This trend is likely to continue until something changes fundamentally.

Disclaimer: The author currently does not own any of the instruments mentioned in this article.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.