NASDAQ 100: Potential tech bubble burst incoming

nasdaq historic analysis

From the last week’s analysis, we looked at the historic analysis of the NASDAQ 100 applying Elliott Waves. The chart above shows that we are waiting for the end of Expanded Flat wave (b). It seemed that the next burst of the tech bubble was coming soon. Now as Friday 26th closed, it is already showing potential for bears to trigger the next sell-off.

Nas june 28 4 hour

On the 4-hour chart above we see good uptrend line and a 200SMA almost in line with it. Price action formed a nice Head and Shoulders pattern, supported by RSI divergence. At the moment of writing weekend rates on indices show bearish momentum, most likely the open will have a small gap lower on NASDAQ. If the trend line and 200SMA break, then next support is around 9400/9500 level. Pullback or consolidation is expected there. If this is the end of wave (b), then wave (c) should progress now in a 1-2-3-4-5 wave formation. This can be confirmed if the next week shows some panic selling. For that we need a trigger that will put Fear above Greed.

Recent news and reports from Central Banks and IMF showed a downgrade of the economic forecast, putting a bit more realism into the markets that things are quite bad and we shall deal with the fallout of this for a long time. Since NASDAQ was the one index that went back to making new all-time highs, the burst of the tech bubble might be the bloodiest.

Nasdaq top 20 companies

The top 20 companies of the NASDAQ 100 weigh about 70.4% of the index. And various charts of those companies show bullish exhaustion. Every chart on that list had a very bearish Friday and closed the weekly candle, suggesting further downside.

Apple, AAPL
Amazon, AMZN
Amazon, AMZN
Microsoft, MSFT
Microsoft, MSFT

Apple, Amazon and Microsoft, the 3 top giants of NASDAQ together make around 34% of the index. Weekly candles on all 3 stocks show potential for a reversal.

Complete discrepancy between the real economy and the stock market became the main talk of all investors and financial institutions. The primary concern is that inflating the stock market with stimulus as the Central Banks have been doing since March, will only make the eventual fall much harder, and just delays the inevitable. While the tech sector flourished during lock down as online services became more important than ever, the financial conditions of the consumers continued to deteriorate, and eventually, the reality of the situation must catch up with the stock market. 

The contrarian view is that the current bearish signals will be used as ‘buy the dip’ moment. As indices will go lower, investors will jump in to buy on the cheap. We also must consider the additional stimulus that can be created. They can print as much as they want after all. Any news on the new financial support measures could boost the market. USA can’t afford a complete collapse of the stocks, that is a huge chunk of their wealth. D Trump and his team might make some announcements next week, especially if Monday starts with a sell off. So, the current H&S pattern might be good for intraday traders, but we need more bearish confirmation for a longer-term view.


Anton is an accomplished Director at Markom Development Ltd where he combines cross functional competencies in staff management, operations planning, customer retention and strategy development. BU...continued

Comments on this analysis

Your email address will not be published. Required fields are marked *

Latest Related News

Hesitant: Caught between FOMO rally and second wave worries

Macroeconomic/ geopolitical developments The strong “risk on” phase from mid-May into early June has stalled, and although last week saw a bounce it also produced another stall, to leave a hesitant more cautious tone across global financial markets into latter June.The Federal Reserve in the US has given further support to credit markets over the past week, but this has not been enough to fully… Continued

Share averages rebound, cycle/record highs in the crosshairs again (S&P 500 forecast)

Global stock indices have staged resilient rebound over the past 24 hours, shrugging off the “risk off” tone from Monday-Tuesday after Apple’s (AAPL) negative guidance from the impact of the coronavirus.This recovery has been assisted by the number of coronavirus cases in China continuing to rise but at a still slower pace (according to the official figures).This has allowed the future on the broad benchmark… Continued

Stocks Rise as Zombie Companies Proliferate

Share prices on the major US exchanges are hitting all-time highs at the same time that both the number and percentage of companies that do not make any money at all are rising. According to the Wall Street Journal, the percentage of publicly-traded companies in the U.S. that have lost money over the past 12 months has jumped close to 40% of all listed corporations--its… Continued

American Employment Growth Justifies Fed Caution

Non-Farm Payrolls in October exceeded expectationsThe only concern is manufacturing which continues to struggleThe Fed seems justified in pausing on rates for nowThe declines durable goods orders and a build of excess capacity will need watching Non-Farm Payrolls in the U.S. is arguably the most important economic statistic in the world. It possesses the ability to move the U.S. Treasury and Wall Street equity markets… Continued

Will Rate Cuts Be Enough?

The mainstream financial media is absolutely ebullient about global central banks’ renewed enthusiasm to cut interest rates to a level that is even lower than they already are. And, most importantly, Wall Street is completely confident that theses marginally-lower borrowing costs will not only be enough to pull the global economy out of its malaise; but will also be sufficient to provide enough monetary thrust… Continued

Forex Brokers in your location