- Summary:
- The Nasdaq 100 index is down to a seven-month low as investors react to the US political fears and the concerna about their valuation.
The Nasdaq 100 index is in trouble today. It is down by more than 1.72% in the futures market and is trading at the lowest level since July 31st. As I will explain below, the index has also moved below an important support, which is a sign that the downward trend will continue. It is trading at $10,807.
The Nasdaq is not the only index in trouble. In the United States, futures tied to the Dow Jones and S&P 500 are all down by more than 1.50%. Similarly, in Europe, the DAX index and FTSE 100 are all in the red. As I wrote earlier today, the Nikkei 225 is the only major index in the green.
The rising number of coronavirus cases is the main reason why the Nasdaq and the overall stock market is in the red today. Investors are worried that the cases will continue rising until a COVID vaccine is found. Now, several companies that are developing the vaccine are warning that it will take longer than expected to have the vaccine ready. In a statement last week, Moderna said that its vaccine will take longer. Also, the FDA is under intense political pressure to ensure that the vaccine is safe.
The Nasdaq 100 is also extremely vulnerable because of its tech constituents and their valuations. There are concerns about whether its constituent firms have become extremely overvalued. For example, the top five firms in the index are now valued at more than $7 trillion, which is a hefty valuation. Indeed, Apple itself is worth more than all companies in the FTSE 100.
Investors are also fearful about the political situation in the United States. With the election being just a few weeks away, there are concerns about whether tensions will continue rising. The situation worsened during the weekend after the passing of Ruth Bader Ginsberg.
Also, the Nasdaq 100 is rising because of a stronger dollar. The dollar index is up by more than 0.35% today because of the issues mentioned above. A stronger dollar tends to have negative impacts on the Nasdaq constituent companies.
Nasdaq 100 technical outlook
The daily channel shows that the Nasdaq 100 index has been falling in the past four consecutive days. It has also moved below the 25-day moving average. As you can see, this average formed a good support during its climb.
Also, the chart shows that the index has moved below the bearish flag pattern that it was forming a few days ago. This pattern is shown in purple. It has also moved below the first support of the classical pivot points.
Therefore, I suspect that the pair will continue falling as bears aim for moves below $10,500. On the flip side, a move above the pivot point above $11,500 will invalidate this trend.
Nasdaq 100 chart
