Between last November 2021 and January 2022, Nasdaq (QQQ) indicated a bearish double top. That suggested the index would not break out above its all-time high. This month, markets tried to recover from January’s correction.
Early rallies proved temporary.
Nasdaq faces a technical downtrend, hurt by a fundamental slowdown post-Covid. Technology companies, especially those that sell cloud solutions, front-loaded years of demand between 2020-2021. For example, Fastly (FSLY) posted weak results, as cloud demand slowed. The firm also failed to replace its lots business from Tiktok. Investors are panicking that they are selling mega-cap companies like Apple (AAPL) and Microsoft (MSFT). Both firms posted strong growth. They are resilient to any risks of a recession.
To prepare businesses for a tightening cycle, The Federal Reserve continued to hint at rate hikes and tapering. The central bank did not even raise rates by 25 basis points yet. Still, it sent high-flying tech stocks lower.
Zoom out the chart and realize that technology stocks are already crashing. Sea Ltd. (SE) and Unity (U) are some of the stocks already down by 50% or more. Expect the current slow crash to continue until market fear subsides.