The Nasdaq has currently eroded all of its weekly gains, and chances of a meaningful recovery after the Federal Reserve signalled that it would begin raising interest rates during the January policy meeting.
Bears are currently hammering US stocks right now. European are heading lower, but certainly not to the degree that the US is seeing, which clearly hints that a taper tantrum is happening.
Financial markets have shifted violently from bullish to bearish in recent weeks as investors are facing the reality of the FED’s stance, and the effects of an impending rate rising cycle by the US central bank as it aims to tame soaring inflation.
Interestingly, the Nasdaq is at real risk of moving into a bear market, after eroding all of its weekly gains and breaking under some very meaningful technical levels on the way to 13,900.
The Nasdaq has now moved under its 200-day moving average for the first time since the entire bull run, which started in mid-2020. Even more worryingly, the Nasdaq is now under its 50-week moving average.
A breach under the 50-week is very bearish. And usually signals that a coming test of the 100-week or even the 200-week could be pending. The 100-week is currently found around the 12,000 level.
The ActivTrader market sentiment tool is showing that some 83 percent of traders are bullish towards the US dollar index. Not a good sign. This probably shows that the retail crowd is buying, despite the trend change.
US100 Short-term Technical Analysis
Looking at the four-hour time frame, the technicals show that the Nasdaq has broken key trendline support and has started to make bearish lower lows and indeed bearish lower highs.
Typically, when a meaningful low is breached, the market then heads to the next significant low, which is found around 13,000, one thousand points lower. Technical analysis also shows that a bearish double-top pattern has formed.
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US100 Medium-term Technical Analysis
The medium-term picture for the Nasdaq now looks to be very bullish to me, and if bears can continue to heap on the pressure, we could be looking at 1,000 to 2,000 points lower, quickly.
Looking at the weekly time frame, huge amounts of negative MACD price divergence is found around the 12,000 and 10,000 level. For me, the 12,000 level looks highly probable to me.
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