Investing.com - Financial Markets Worldwide
🚀 ProPicks AI Hits +34.9% Return!Read Now

Nasdaq 100 Correction Imminent?

ByFxPro Financial Services Ltd
AuthorAlexander Kuptsikevich
Published 07/06/2023, 06:56 AM
Updated 03/21/2024, 07:45 AM
NDX
-

Since the second half of last month, US indices have been struggling to grow. Closing on a strong note at the end of the half-year could trigger a severe correction or even be the first step towards a prolonged decline.

The US Nasdaq 100 index ended the half year with the strongest gain in its history
 
The US Nasdaq 100 index ended the half year with the strongest gain in its history, up almost 40%. The index paused or exhausted its momentum near the 15200 level, which also served as a turning point for the bears in January and March-April last year. This level was also a significant resistance line from July to August 2021.
 
A complete correction of the year-to-date rally in the Nasdaq100 can go as far as 13500 (61.8% of the rally), but a lesser pullback to 14200 (76.4%) is theoretically possible. Markets need a trigger for such a move, and the Fed's hawkish tone is not seen as an appropriate reason to sell stocks.
 
On a weekly timeframe, the index has been in the over-bought territory on the RSI for the past month and a half. For traders and investors, the risk of a full-blown correction increases as soon as the buoyant growth falters. The signal that a correction has begun in the markets would be a sharp drop in the RSI to below 70 from the current 73. A gradual cooling is unlikely to be seen as such a signal.

Nasdaq100 in overbought territory
 
Perhaps only news of economic contraction or weak quarterly earnings could trigger it. If the recession is severe enough and the Fed does not reverse course, the Nasdaq100 can return to its long-term 50 or even 200-week averages, now at 12500 and 12200, respectively.
 
However, a bearish reversal needs confirmation, which could be another scramble this week and next.

The FxPro Analyst Team

Latest comments

Loading next article…
Install Our App
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.