Nasdaq Remains Near Cycle Lows, Trades in Bear Market

Nasdaq Remains Near Cycle Lows, Trades in Bear Market
Investors sought to shrug off the latest wave of selling spurred by mounting fears about the effect of inflation on business profitability and the general economy as US stock futures declined again on Wednesday.

At the time of writing, the Nasdaq 100 index was down 1%, sliding toward the current cycle lows near 11,700 USD, with sentiment remaining negative.

Weak result, even weaker guidance

Snap announced yesterday that its sales and earnings will be lower than projected this year as the macroeconomic situation "deteriorated considerably and quicker than anticipated."

This was interpreted as a foreshadowing of weaker results for a slew of ad-driven tech firms, bringing the Nasdaq Composite to its lowest finish since November 2020. Snap lost nearly 50% following its weak results.

On the other hand, the US Federal Reserve's head, Jerome Powell, alleviated worries of ultra-aggressive monetary policy by hinting those predictions of 0.75% rate increases in the coming months were way off the mark. Nevertheless, even 0.5% rate hikes are damaging for (tech) stocks in the current environment.

Oversold, but still bearish

Technically speaking, the index is about to close down for the eighth consecutive week, looking heavily oversold, with chances growing for a solid short-squeeze rally.

It looks like the Nasdaq could decline to October 2020 lows near 11,000 USD, or possibly the 200-week moving average (the purple line), near 10,700 USD.

On the other hand, bulls must push the index above 12,300 USD (the red horizontal line) in order to cancel the current bearish sentiment. As previously mentioned, oversold conditions could prompt a relief rally, especially if there is any optimistic fundamental news.

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