Nasdaq100 price correction deepens on tech earnings

Key Takeaways:

1. Election Speculation and Market Reactions: The possibility of Donald Trump's win in the upcoming US elections has triggered early profit-taking on the Nasdaq100 (USTech100).
2. Earnings Reports Impact: Short-term weakness in the Nasdaq100 and the S&P500 has been exacerbated by disappointing earnings reports from Tesla and Alphabet.
3. Vulnerability of Major Tech Companies: Major technology companies are particularly susceptible to international trade tensions. Disruptions in the US-China trade relationship could lead to increased component and manufacturing costs
4. Technical Analysis of Nasdaq100: The Nasdaq100 is experiencing a short-term correction from its all-time highs. Despite this, the long-term trend remains upward.

Impact of Election Speculation on Nasdaq100

The possibility of Donald Trump winning the upcoming US elections has prompted some early profit-taking on the Nasdaq100 (USTech100). Traders are factoring in concerns about potential new US-China tariffs, which could negatively impact major technology companies like Nvidia, Tesla, and Apple. These companies are particularly vulnerable to international trade tensions due to their extensive global supply chains and significant revenue from Chinese markets. For example, any disruption in the trade relationship between the US and China could lead to increased costs for components and manufacturing, thereby impacting profit margins.

Earnings Reports Influence on Market Sentiment

The recent earnings reports from major tech companies such as Tesla and Alphabet have also contributed to the short-term weakness observed in the Nasdaq100 and, to a lesser extent, the S&P500. Both companies reported earnings that fell short of consensus expectations. This has led to a sell-off in their stocks, as high valuations and optimistic market expectations mean that any negative news can result in significant price corrections. For instance, Tesla's earnings miss may have raised concerns about its ability to maintain its rapid growth and profitability, while Alphabet's performance might have caused investors to reassess its advertising revenue prospects in a challenging economic environment.

Nasdaq100 – technical analysis

The Nasdaq100 (USTech100) is extending its short term correction from all time highs. The long term trend for the index does however remain up.

Trend followers might look for the short term correction of the longer term uptrend to end with a bullish price reversal before looking for long entry once again. New long positions might be considered on a bullish price reversal off either the 18950 or 18400 support levels. In this scenario (should it manifest) a move towards initial resistance at 20150 would be favoured, while a close below the reversal low might be used as a stop loss consideration.