Nasdaq 100 Suffers Breakdown As Dow Jones Treads Water - Stock Market Forecast

The Nasdaq 100 and Dow Jones have continued lower this week as rising Treasury yields give investors a reason to consider exposure elsewhere. That said, the longer-term equity outlook remains encouraging as inflationary pressures and rising yields are underpinned by expectations of a strong US economy. Nevertheless, equity weakness may persist in the coming days as investors ponder portfolio allocations amid the shifting market environment and the Nasdaq 100 appears exceedingly vulnerable.

NASDAQ 100 TO DOW JONES RATIO – ROUGH GROWTH TO VALUE PROXY

nasdaq 100 and dow jones price chart

Chart created in TradingView

To be sure, the tech-heavy Nasdaq 100 is situated at the extremes of the market’s risk curve which has left it exposed as investors look to reposition. It is rather unsurprising, then, that the Nasdaq 100 has seen its losses outpace that of the S&P 500 and the Dow Jones. Steeper declines have also seen the technical landscape weaken, most notably with a break below the March 2020 trendline, which may allow for an extension lower and a continuation of the shift from growth to value.

NASDAQ 100 PRICE CHART: DAILY TIME FRAME (JANUARY 2020 – FEBRUARY 2021)

nasdaq 100 price chart

Last week we highlighted 13,315 as a potential line in the sand that could see losses accelerate if pierced. Evidently, 13,315 fell in short order and an extension lower was delivered. The rising trendline had guided the Nasdaq 100 higher since March and a break beneath is a substantial blow to the index’s technical landscape. Staving off further losses in the days ahead may prove crucial for tech stocks.

To that end, months of gains have created a plethora of subsequent support for bulls to work with. As recent price action might suggest, the late January low near 12,727 could provide a modicum of support. The 12,500 area slightly lower still may serve as the next major zone before giving way to the 200 day moving average near 12,000.

DOW JONES TECHNICAL FORECAST

Unlike the Nasdaq 100, the Dow Jones has been able to tread water near record levels and create a series of long lower wicks in the process. Should turbulence continue, the Dow can look to a major confluence of support from 31,130 to 30,865. Critically, the Dow has maintained the trendline extending from March and trades above its 50-day moving average.

1 2
View single page >> |

Disclosure: See the full disclosure for DailyFX here.

How did you like this article? Let us know so we can better customize your reading experience.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.