Until its overnight drop, the Nasdaq 100 had recovered much of the ground lost during last week’s sharp sell-off, with buyers stepping back in around an important technical support zone. The rebound has been encouraging, although a number of unresolved issues continue to leave technology stocks vulnerable to renewed volatility.
Nvidia Chief allegations trigger fresh selling
US equity futures turned lower overnight as technology shares faced a fresh distraction following reports concerning NVIDIA chief executive Jensen Huang. Allegations published by the New York Times and Wall Street Journal introduced uncertainty around one of the most influential figures in the AI industry, with the latter also reporting that the company’s board was considering his future. The implications remain unclear, but the headlines added another layer of uncertainty to an already closely scrutinised sector. Nvidia stock price fell more than 7% in premarket.
Until this happened, we have had a strong week for the tech sector. Technology stocks extended their rebound on Wednesday, helping the Nasdaq outperform the broader market. CoreWeave shares surged more than 20% in after-hours trading following its earnings announcement, lifting sentiment across the so-called neocloud sector. Attention now turns to Nebius’ results on Thursday for further evidence that demand for AI infrastructure is translating into sustainable growth.
AI optimism returned this week, but questions remain
The recent recovery in Nasdaq 100 futures and other major US indices had helped claw back much of last week’s losses. However, investors still face questions over the scale of AI investment, the potential for greater regulatory scrutiny following the Democrats’ midterm victory and, crucially, whether the billions being committed to infrastructure will generate sufficient returns.
Strong results from companies such as CoreWeave offer some reassurance, but the market will need broader evidence that the current spending cycle is sustainable. Against a backdrop of demanding valuations and substantial gains over recent years, technology stocks remain susceptible to profit-taking when sentiment deteriorates.
Nasdaq 100 technical analysis
From a technical perspective, the recovery has been encouraging, but now fresh resistance is being provided. Nasdaq 100 futures found support towards the end of last week in the 26,350–26,400 region. This is an important area, having marked a previous double top formed in October and January. The index subsequently broke above this resistance in April and had not returned to test it until last Friday.
The fact that former resistance has now acted as support is constructive. The index has also reclaimed its 200-day moving average and moved back above the broken summer lows around 27,200, suggesting buyers are beginning to regain some control.
However, it is too early to declare the correction over.
The Nasdaq still needs to overcome the sequence of lower highs established since its October peak. A bearish trendline is converging with the 21-day exponential moving average around 28,800–29,000, making this the next significant resistance zone to watch.
A sustained move above that area would materially improve the technical outlook, potentially opening the way towards 29,675, which marks the base of the breakdown towards the end of October. Beyond there, the psychologically important 30,000 level would come back into focus.
On the downside, the 200-day moving average and the 28,000–28,100 region are important levels to monitor. A retreat below this area would suggest that the recovery is losing momentum. More immediately, yesterday’s low at 27,847 represents short-term support. A break below it would undermine the latest bullish move and raise the possibility that the rebound is proving little more than a temporary recovery.
In short
The strength of the bounce from longer-term support has been encouraging. But the index has yet to deliver the technical confirmation needed to suggest that a sustained move higher is under way. The immediate focus is therefore on whether buyers can push through 28,800–29,000. A break above would strengthen the bullish case, while a move back below 28,000 would put the recovery under renewed pressure. Until one of these levels gives way, a degree of caution remains warranted.
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