There was a really interesting development in the overnight futures market, with the Nasdaq under notably more pressure than the other indices.
The Nasdaq futures primarily represent tech stocks, and these futures contracts were being sold hand over fist last night and early Wednesday morning.
We saw a little volatility in the other futures — specifically the S&P 500, Dow Jones and Russell 2000 — but nothing like the selloff we saw in the Nasdaq.
Even though the Nasdaq is now down just 0.21%, it continues to lag. The Dow is up 1.5%, while the S&P 500 is 0.86% higher. The Russell is surging, up 3.4%.
As such, all three are hitting or nearing new all-time highs. The Nasdaq is not, but will it?
Trading Tech Stocks
It seemed foolish to me that the Nasdaq futures were down almost 3% at the lows, while the S&P 500 was down only 1.3%.
I suppose the argument is that a Democratic-held White House and Congress may take on Big Tech more aggressively. That’s certainly possible, but to start selling tech today on that possibility seems shortsighted.
For now, tech is in a bullish trend, and while that trend has been wavering, it doesn’t seem reasonable that the Nasdaq is leaps and bounds more vulnerable than the S&P 500, Dow and Russell.
In other words, unless the entire market rolls over, I don’t expect the Nasdaq to do so on its own.
That said, the rally has been pretty intense as the Invesco QQQ ETF (QQQ) - Get Report shows above. The ETF could fall over 15% and still be trading only at the late-October lows. That’s how powerful the move has been.
Let's use the technicals, not political possibilities, to trade tech.
Currently, the QQQ has been struggling to maintain its 10-day and 21-day moving averages, which have been support amid this multimonth move.
If the stock takes out Monday’s low at $305.18 and can’t reclaim it, the $300 area may be on the table. Within a few dollars of either side of this mark sits the 10-week moving average, 50-day moving average and VWAP support.
Should these marks fail as support, a test of the 100-day moving average — support from October — is likely in the cards.
On the upside, if the QQQ can reclaim the 10-day moving average and make new highs, the 138.2% and 161.8% extensions could be in play.