Nasdaq 100: Tech Stocks Tumble Below 200-Day MA in Bearish Forecast

Pre-Market Sell-Off Wipes Out Monday’s Gains

The major U.S. stock indexes are sharply lower during Tuesday’s pre-market session. The current sell-off has erased all of yesterday’s reversal gains, putting the indexes in a weak position ahead of the opening. Investors have become accustomed to buying dips and Monday was no exception. But all strategies eventually fail and today may be the day unless “the dip” is clearly defined.

With all three indexes on the bearish side of their respective 50-day moving averages, the next objective could be the 200-day moving average. Earlier today, the March E-mini Nasdaq-100 Index futures contract crossed to the bearish side of its 200-day MA.

If there is elevated volatility, it may be related to the battle between “buy the dip” and “sell the rally” traders.

S&P 500: Fibonacci Support Under Fire

March E-mini S&P 500 Index futures are sharply lower shortly before the cash market opening Tuesday. The downside momentum is threatening to take out Fibonacci support at 6758.75 and the February 6 main bottom at 6751.50. This would reaffirm the short-term downtrend and open the door for a further decline into the 200-day moving average at 6668.45.

On the upside, the first resistance zone is 6897.25 to 6931.75. The 50-day moving average at 6932.25 is both major resistance and trend indicator.

Day-traders should watch the reaction to 6813.00 if early support is established at 6758.75 to 6751.50. This price level could act like an intraday pivot. Bigger picture traders are likely to sell rallies and press support, while eyeing the 200-day moving average objective.

Nasdaq-100: Crossing Into Bearish Territory

March E-mini Nasdaq-100 Index futures have crossed to the weak side of the 200-day moving average at 24556.50, putting it in a bearish position. This indicator is likely to control the direction of the market today.

If bearish traders continue to press the market by selling weakness, we could see a break all the way to the pair of bottoms at 24239.75 to 24153.50. We could see a technical bounce on the first test of this zone, but a failure to hold will open the door for a potential near-term plunge into 23544.25 to 23350.00. As you can see on the daily chart there isn’t any pronounced support under 24153.50.

I don’t think we have to worry about the upside potential unless we take out yesterday’s high at 25101.00. Two consecutive reversal bottoms would send a serious message that the professionals are defending this market against a major collapse. But the index will not be out of the woods unless traders recapture the 50-day moving average at 25435.75 with conviction. We’re likely to remain in “sell the rally” mode until the 50-day MA is regained.

Dow Futures: 50-Day MA Becomes New Resistance

March E-mini Dow Futures are also in the midst of a steep sell-off. The selling began last Friday when the 50-day moving average at 49275 failed as support. This is new resistance and our trend indicator.

The market is currently testing a key retracement zone at 48383 to 47857. We could see an early technical bounce if this zone holds as support. Similar to yesterday’s reversal, bargain hunters could come in on the dips as the intraday headlines about the war change.

Negative news will continue to encourage traders to press the market lower. Taking out 47857 will open the door for an even further break with the 200-day moving average at 46843 the main target.

Technical Levels Take Center Stage

Today’s price action is likely to be controlled by retracement zones and the moving averages. Minor tops and bottoms were taken out overnight so I think traders will concentrate on the more prominent technical indicators.