Nasdaq and its 10,000 points raise doubts about its recovery in ‘V’
The Nasdaq and its 10,000 points raise doubts in the market since the powerful recovery in ‘V’ recorded by the index does not attend to fundamental and technical reasons as it lacks a previous comparison to explain this situation.
The annual rise for this Wall Street selective is 10% after rising 42% from the annual lows in March. Now, at the gates of the psychological barrier of 10,000 integers, it is time to check whether it is capable of sustaining this level or the corrections will appear again
“This situation is not supported by fundamentals, but by an excessive feeling of attraction towards financial markets,” says XTB analyst Darío García.
And it is that, if the situation of global companies is taken into account, or the worsening of the world economy, it is difficult to understand the revaluation of the technological index.
It would be by its composition where the rises could be understood, since the technological ones are the most benefited from this crisis: “Investors have thought throughout the pandemic that the technological ones are not only not going to be harmed by the crisis, but they are going to to benefit, ”says IG Spain analyst Sergio Ávila.
More is needed
Although this statement is a reality that the market does not question, for García it is insufficient and provides an example that also helped Nasdaq in its recovery: “It is known that the latest reports and surveys carried out in the United States show how many citizens have invested the government aid check ”.
The XTB analyst would see in this the origin of a recovery in the prices that he describes as “excessive”, not forgetting the liquidity injections by the Federal Reserve that “have filled the market with steroids”.
This analyst does not appreciate clear technical figures of relevance “beyond Fibonacci levels between the annual highs of February 19 and the lows of March 23”.
García insists on breakouts of levels that are not “totally contrary” to the theory and that, therefore, we could expect a first drop to the previous maximum to confirm the break of the new support above 9,767 points. ”
For Ávila, “it would not be surprising” to see any type of correction, “either in lateral range or a broader correction.” Of course, it ensures that it is “evident” that the Nasdaq is currently “the strongest index in the market and will probably continue to be so in the medium and long term.”
Have to wait
The director of Admiral Markets Spain, Juan Enrique Cadiñanos, opts for prudence and the waiting time until prices are consolidated and the situation is maintained in the short term, “but it will be an arduously complicated task,” he added.
The accumulated overbought is important and Cadiñanos observes how the contracting volumes fall as prices rise. This situation, he explains, may be “normal” in stocks, but not for indices. This makes him estimate that “there is not much interest in consolidating levels in the short term.”
The perfect drawing of ‘V’
From the highs in February to the lows in March, a period that coincides with the toughest moments of the crisis for world parks, the Nasdaq lost 31.89%. Losses that were sustained by the unstoppable advance of the virus from China to the rest of the world.
But from there it recovered in the same way until it rose 42% and entered the current 10% gains for the year. Thus, they recall on IG Markets, the falls began on February 20 at the highs of 9,733 points and, after three bearish impulses, made ground at 6,642.7 points, “with the indicator of CNN fear and greed coming at levels of panic never seen before ”, adds Ávila.
It is from a point when the rebound reached 8,015.6 points, the first resistance after the correction. After a pause, the increases began again to exceed the previous highs and the bullish target was set at 8,768.76 integers
He touched a correction that was settled later with a third bullish momentum to the area of 9,733.71 points, which he already exceeded.
With the breaking of resistances and supports it is now time to check how they are located. For IG the first support has it at 9,733.71 points, and the next ones would be at 9,140.8 and 8,950 points. Above, the only resistance he has is at 9,912.5 points and then he would be on a free climb.
Back to normal
There is consensus on the importance of technology companies for the future and their positive prospects, although this does not imply that they continue to project themselves with the same power as today.
This analysis is shared by Cadiñanos, assuring that the return to normality “will leave the technology sector in a growth situation, but not at the same speed as the current one, so it is probable that prices will go to a more reasonable level.”