NASDAQ Tech Wreck 2.0?

Much of the headline news last week was focused on the 25th anniversary of “Black Monday,” October 19, 1987, when world markets crashed and the Dow Jones Industrial Average (DIA) plunged 508 points or approximately 24% in one day.

Much has been written about whether or not Black Monday can happen again, and, of course it can, but on its anniversary this year, it’s more important to pay attention to what’s happening today, particularly what’s happening in the tech sector since tech tends to be a leader both up and down in modern markets.

On My ETF Radar

In the chart of the Nasdaq Composite (QQQ) above, we can see how the index is in a significant downtrend, with declining momentum and has decisively broken its 50 day moving average. Next significant support lies in the 2900 level, approximately 3% from current levels.

In this chart of the S&P 500 (SPY) we can see how the index has formed a triple top, which is generally seen as an ominous development in technical analysis, momentum is declining and Friday’s sell off ended right at the 50 day moving average.

In the point and figure chart of the S&P 500 (NYSEARCA:SPY) we can see that the chart is on a “sell” signal with a downside price objective of 1380, some 3.7% from today’s levels. A close below the blue, bullish support line at approximately 1390 would indicate the onset of a new bear market according to point and figure methodology.

Add it all up, and the technical indicators are looking more and more bearish.

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On a fundamental level, one must pay attention to the Nasdaq as it’s loaded with big names like Google (GOOG) Apple (AAPL) Microsoft (MSFT) Intel (INTC) and others. Therefore, the index represents some of the strongest, leading edge companies operating in the technology sector which has become indispensable to the functioning of modern, developed economies. Furthermore, Nasdaq and glamor names like Apple (AAPL) tend to attract the interest of big players in the hedge fund and institutional space, and if the big money is heading for the exits here, this development could portend rougher water ahead.

While October is typically the beginning of the “best six months of the year,” weak action in the Nasdaq sends a clear warning and any kind of a “Tech Wreck 2.0″ must be carefully observed. Privacy Policy before accessing or using this or any other publication by Wall Street Sector Selector or Ridgeline Media Group, LLC.