E-mini NASDAQ-100 Index (NQ) Futures Technical Analysis – CPR Top Confirmation Signals Further Weakness

The technology-heavy March E-mini NASDAQ-100 Index sank over 2% early Wednesday as investors trimmed positions on the prospect of a Democrat-controlled Senate that could lead to corporate tax reforms and tighter regulations on technology giants.

The early weakness in NASDAQ shares indicates that investors believe that’s where the outright war is going to take place in terms of what the Democrats have said about breaking up big technology companies.

At 14:30 GMT, March E-mini NASDAQ-100 Index futures are trading 12569.00, down 224.50 or -1.75%.

A so-called “blue wave” would give more scope for President-elect Joe Biden to act on his reform plans including new COVID-19 stimulus, but it could also mean higher corporate taxes and more regulations on the technology behemoths that led Wall Street’s recovery from a coronavirus-driven crash last year.

Shares of Apple Inc, Microsoft Corp, Amazon.com Inc and Google-parent Alphabet Inc fell between 1.9% and 2.4% in early premarket trading. Tesla Inc was the only major technology stock trading higher.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum has shifted to the downside with the confirmation of Monday’s closing price reversal (CPR) top. The main trend will change to down on a move through the nearest main bottom at 12461.00. A trade through 12959.75 will signal a resumption of the uptrend.

A pair of 50% levels at 12588.50 and 12710.50 are early resistance.

The short-term range is 10936.25 to 12959.75. Its retracement zone at 11948.00 to 11709.25 is the major downside target area.

Daily Swing Chart Technical Forecast

Our chart work shows that the direction of the March E-mini NASDAQ-100 Index futures contract into the close will be determined by trader reaction to 12588.25 and 12710.50.

Bearish Scenario

A sustained move under 12588.25 will indicate the presence of sellers. Taking out 12461.00 will change the main trend to down and could trigger an acceleration into the next main bottom at 12217.00. A near-term view of the daily chart indicates that 11948.00 is a potential downside target.

Bullish Scenario

A sustained move over 12588.25 will indicate that sellers have lightened up and that buyers may have returned. Taking out 12710.50 will signal the presence of stronger buyers. If this is able to generate enough upside momentum, we could see a retest of 12959.75 over the near-term.