Bears on Tuesday started strong, and they never looked back, states Jon Markman, editor of Strategic Advantage.
The Nasdaq 100 closed at 12,725, a loss of 1.9%. The decline puts the benchmark NDX below its 20-day moving average at 12,912.
Bears got help Tuesday from vague rumors of an earnings shortfall at Microsoft (MSFT). After the close, the Seattle-based company reported solid results, and shares soared 5%, twice as much as they lost on Tuesday. Shares of Alphabet (GOOGL) also jumped after the search giant announced inline quarterly financial results and a $70 billion share buyback program. It is too early to know if this strength will spread Wednesday to the NDX.
Traders are still awaiting results later this week from Meta Platforms (META) and Amazon.com (AMZN). Important support for the benchmark is 12,583, the rising 50-day moving average. I expect bulls to aggressively buy any near-term dip to that level. Pullbacks of this nature are common within the context of bullish trends.
The bottom line is the weakness on Tuesday was a giveback. The NDX became overbought and bulls bailed out ahead of the Microsoft number. They should return on Wednesday and push the index back toward 12,912, the new resistance level.
The NDX Loop: Members are in cash in this program. I still expect a significant summer rally.
Buy ProShares Ultra QQQ (QLD) on a pullback toward $45.40 lmt gtc. If filled, set a stop loss at $44.20 stp.
Behind the Headlines: The S&P 500 lost 1.6% to 4,071.6 and the Dow fell 1%. All sectors closed lower, led by materials and technology.
Breadth favored decliners seven-one. There were 477 new lows vs 77 new highs. In economic news, the Conference Board's consumer confidence index fell to 101.3 this month from March's downwardly revised print of 104, which was the consensus for April on Econoday.
The report suggests that the Federal Reserve needs to continue to push forward with the "hawkish" policy guidance that it has been delivering for the last few months, with another 25-basis-point rate increase next week, Jefferies said in a note. "They will likely try to keep the door open for further rate hikes down the road as well."
The US two-year yield plunged 20.2 basis points to 3.944%, and the ten-year rate sank 12.1 basis points to 3.39%.
The Federal Housing Finance Agency's measure of home prices rose 0.5% in February following a 0.1% gain the previous month, compared with a 0.1% decline expected in a survey compiled by Bloomberg. Prices were up 4% from a year earlier in February.
New-home sales in the US rose nearly 10% in March even as median prices increased, underscoring concerns about the lack of existing homes for sale in the market, government data showed.