Thursday's Market Minute: Nasdaq Futures Break Below Key Support

Nasdaq-100 futures have far outpaced their other equity index peers in 2023, with the /NQ up more than +32% year-to-date after being fueled by an artificial intelligence-driven boom in major tech names. Meanwhile, S&P 500 futures are up almost +10%, Dow futures are almost exactly flat, and Russell 2000 futures actually are down more than -5% during the same time frame. The recent move lower in the Russell is potentially worrying, as small-caps tend to be more reflective of risk sentiment and could lead the way to the downside – and the tech-focused Nasdaq could get knocked down a peg or two from its elevated levels.

 The /NQ has been trending down since hitting its 52-week highs near 16,062 on Jul. 19, and has now fallen about -10% from that level as of yesterday’s close. The general shape of the trading action is a downward channel, with price near the lower end of the range as of today’s downward move. The chart shows that the overall uptrend that began near the beginning of the year has been broken. Price also broke through a key level near 14,600 to the downside yesterday. This level represents some old closing highs from early June, as well as a point near which price bottomed out several times in the following months. 

Major moving averages also reflect this deterioration in trend. The 21-day and 63-day Exponential Moving Averages have been much more sideways since August and are now starting to slope downward once again, which is another sign of potential trend shift. The faster 21-day EMA is also crossing below the slower 63-day EMA, which is not necessarily useful as a trading signal but also reflects potential trend shift. Meanwhile, the Relative Strength Index (RSI, which measures momentum) is making new relative lows with price and is inching closer to the oversold threshold of 30, which would be another bearish signal.

Old support can frequently become new resistance, so the previously mentioned old support level of 14,600 now becomes the nearest resistance point to watch to the upside. Beyond that, the 21-day and 63-day EMAs could be further resistance at around 14,918 and 15,023, respectively. For support, there’s another set of lows near about 14,250 to watch. The 252-day EMA is the last line of nearby defense for bulls, and comes in around 14,077.