Nasdaq Index: Critical Turn Higher Needed Today to Keep US Stocks and Tech Alive

Nasdaq Attempts First Three-Day Win Streak Since January Top

The major stock indexes are lower after the first hour of trading on Thursday in what I think is a critical day for the Nasdaq Composite and Nasdaq-100. It’s an important day because we haven’t seen three straight positive days since January 23, January 26 and January 27. The last date was the day before the Fed’s January interest rate decision and the 23988.27 top. It was also about the time the software sub-sector began to fall apart on fears of business destruction, which eventually dragged down nearly all AI-related stocks and the “Magnificent Seven.”

50-Day and 200-Day Moving Averages May Converge—Bearish Death Cross Possible

I’m not going to use the classic definition of correction or bear market here, but just looking at the daily chart, I see weakness in both the Nasdaq Composite and the E-mini Nasdaq-100 as they navigate below the 50-day moving average. However, I also see a ray of light with the 200-day moving average support moving closer to the market.

The movement in both moving averages suggests a convergence is possible in the next few months, which could send a bearish signal if the 50-day moving average crosses under the 200-day moving average. That’s more intermediate-term analysis—I’m looking at short-term analysis today.

Nasdaq Sits Dead-Center Between 50-Day MA at 23308 and 200-Day MA at 21853

Currently the Nasdaq Composite (IXIC) is sitting dead-center between 50-day moving average resistance at 23308.18 and 200-day moving average support at 21853.58. Which way the market will move will be determined by the Magnificent Seven stocks – Alphabet, Amazon, Apple, Meta Platforms, Microsoft, NVIDIA and Tesla. These seven stocks brought us to where we are and these seven will either take us higher or substantially lower.

Tuesday-Wednesday Rally May Be Just a Technical Bounce

We saw a little of how they can influence the Nasdaq market on Tuesday and Wednesday, but today’s weakness suggests that those two days may have been a technical bounce. A third day up will balance with the January move, but with four days of gains, investors will likely take notice, which could extend the rally even more.

Three Major Headwinds Could Stop the Rebound in Its Tracks

The headwinds the market faces are mounting, however, which could stop the rebound in its tracks. First, the Fed rate cut uncertainty is a drag especially in interest rate-sensitive companies. Second, we can’t do anything about the disappointing guidance in several of last month’s earnings reports, especially in Microsoft which sold off sharply—we’ll just have to wait until April. The rotation into “old economy” stocks, which drove the Dow to a record high, is also an issue. The size of the move out of tech and into industrials was massive and it can’t be reversed overnight.

Time Is Running Out—The Decision Point Is Today

Given these fundamentals and the market’s position on the IXIC daily chart, time is running out to either make a run at the 50-day moving average at 23308.02 or the 200-day moving average at 21853.50.

I think it all starts today. If the Nasdaq Composite (IXIC) turns positive late in the session, investors will notice and cover aggressively, turning the Dow and S&P 500 green also. If the Nasdaq can’t turn higher and starts to make new intraday lows, then look out to the downside.

More Information in our Economic Calendar.