E-mini NASDAQ-100 in Position to Take Out 10-Month Low

June E-mini NASDAQ-100 Index futures are inching higher early Tuesday in a relatively uneventful trading session.

In yesterday’s session, the tech-heavy index tumbled to a new low for the year and nearly its lowest level since May 2021 as traders kept an eye on the conflict between Russia and Ukraine, as the two countries resumed peace talks. A highly anticipated rate hike by the U.S. Federal Reserve later this week also weighed on prices.

At 06:45 GMT, the June E-mini NASDAQ-100 Index futures contract was trading 13077.00, up 33.00 or +0.25%. The Invesco QQQ Trust Series 1 ETF (QQQ) settled at $318.23, down 6.17 or -1.90%.

Among the losers in Monday’s trade, Qualcomm Inc fell 7.25%, Micron Technology was off 4.70% and Marvell Technology Inc was down 4.50%.

Moderna Inc was up 8.59% on reports of a COVID-19 outbreak in China and Hong Kong.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The downtrend was reaffirmed on Monday when sellers took out a pair of main bottoms at 13106.75 and 13031.00.  A trade through the May 2021 main bottom at 12957.25 will reaffirm the downtrend on Tuesday. A move through 13858.00 will change the main trend to up.

Short-Term Outlook

With downside momentum increasing, we continue to look for investors to probe and poke at former bottoms in an effort to find the key value area that could lead to a turnaround in the market. In the meantime, however, investors may have to put up with a few spikes to the downside since the distance between major support levels is quite large.

There are two ways this sell-off can end. Both take time to develop, but one is a little faster than the other.

Firstly, investors are going to have to find a value level attractive enough to stop the selling. Then they are going to have to build a support base. It’s often said that “The Height of the market is determined by the length of the base” so we’re going to need to see a solid elongated base built to provide the support needed to challenge new all-time highs. But this takes time to form.

Secondly, another way to signal a major bottom is to produce a closing price reversal bottom that is massive enough to wipe out a large number of short-sellers and attract enough new buyers to drive out the short-sellers still hanging on for lower prices.

The first leg up from the bottom is going to have to be a game-changing move, typically signaled by strong buying volume. After the bottom is establish then we’re going to have to see a series of higher bottoms and higher tops in order to tell us that new investors are coming in to support the market on the dips.

Given the current prolonged move down in terms of price and time, however. The simplest sign that the market is attracting new buyers will be a change in trend. It’s been a while since a main top was taken out so a move through 13858.00 over the near-term may be the easiest way to tell us that sentiment is shifting. Until that happens, the mantra in the market will be, “Think long, Think wrong.”