Nasdaq 100 Sell-Off Could Accelerate as Fear and Greed Index Drops

Summary:

In this article, we look at the recent action in the bond market and the impact on the Nasdaq 100 index and fear and greed index

The Nasdaq 100 sell-off accelerated in the futures market as investors worries of the rising bond yields increased. The tech-heavy index is trading at $12,440, which is 10% below this year’s high of $13,915. At the same time, the fear and greed index has moved from last week’s 63 to 48, signalling that investors are getting fearful.

What happened: The Nasdaq 100 index has performed horribly recently as investors have rushed away from the volatile technology companies. Indeed, some of the top-performing companies in the index have recently done worse.

For example, Tesla’s shares have lost more than 27% of their value in the past month. This has brought its total market cap to $596 billion, down from more than $800 billion. Similarly, Roku shares have fallen by 15% while Amazon has declined by more than 10%. Other risky assets like cryptocurrencies and emerging market currencies have also slumped.

The reason for this decline is the strong performance of US bond yields. The 10-year yield has risen to 1.563% while that of the 30-year has risen to 2.31%, as shown below.

Fear has returned: The ongoing sell-off of the Nasdaq 100 index has led to more fears in the market. The fear and greed index, which is a popular gauge of sentiment has dropped from 68 a week ago to 48. This performance is mostly because of the put and call options, safe-haven demand, and market momentum.

Nasdaq 100 technical outlook

The daily chart shows that the Nasdaq 100 index has been struggling lately. It is already halfway through the current corrective phase. It has also moved below the ascending channel that is shown in black. It has also dropped below the 25-day and 50-day weighted moving averages while the Relative Strength Index (RSI) has continued to drop.

Therefore, in my view, while the overall trend is bullish, I suspect that the price will drop by another 10% to $11,000. However, a climb above $13,000 will invalidate this trend.