Tech stocks showed substantial weakness as investors continued to digest poor economy and also they remained concerned about the Federal Reserve rate decision, and a looming US recession.
The slide sent the Nasdaq lower by nearly 5% on the day, marking one of the largest intraday losses for the tech heavy index since the financial crash of 2008 and the COVID-19 pandemic.
Several key technical levels were broken to the downside, confirming the bear trend in the Nasdaq and the fact that selling stocks is now the best trade in town for traders.
Markets are in risk-off mode, with Wall Street resuming the selling spiral after enjoying a relief rally in the Feds decision aftermath. The batch of tepid US data, however, revived concerns among investors, fueling demand for safety.
Traders sentiment towards the Nasdaq is bullish. This is not very encouraging for the current recovery, as the retail crowd is typically on the wrong side of the trade when new trends emerge.
I think we could see the Nasdaq starting to fall hard if traders remain wholesale bullish towards the leading US Tech index over the coming days and weeks.
The Nasdaq index has formed a head and shoulders pattern on the four-hour time frame and looks like it could be in danger of staging a significant decline.
If the index manages to hold under the 11500 level, then technical analysis is highlighting that the index could see a decline towards the 10,000-support area.
The Nasdaq index is currently bearish in the medium-term despite the recent price correction. A move above the 15,000 level is needed to change the price trend.
The possibility for movement to the upside is however low probability. Bulls may need to break above 13,000 near-term resistance for any further gains to the upside.
A head and shoulders pattern has been activated since the price moved under the 13,000 level, which strongly indicates a coming 4,000 price decline.