The Nasdaq 100 index is declining for the third day in a row as the number of jobless Americans filing for unemployment benefits for the first time continues to pile up. Today’s data shows that 2,981K people filed for jobless claims for the first time, which exceeded the consensus number of 2500K and was only slightly lower than last week’s 3,169K reading. This figure shows that the jobs are not yet back, and indeed, people are still getting laid off.
Today’s reaction on the Nasdaq shows that investors are now starting to factor in the economic impact of the coronavirus pandemic on the future of the companies they are trading on. Already, several billionaires have begun to issue dire warnings about the economy and are also expressing concerns that the markets may now be heavily overbought. Last week, Bloomberg reported that Blackrock CEO Larry Fink cautioned about lasting economic impacts from the coronavirus in a private call with an institutional fund’s clients. Are markets starting to take notice?
The Nasdaq 100 continues its decline after the Monday and Tuesday candles on the daily chart formed a bearish engulfing candlestick pattern at point D of the harmonic crab pattern. This setup was the trigger that was needed to initiate a bearish reversal from point D, thus confirming the technical expectations of the harmonic pattern.
The Nasdaq 100 is on its way towards the initial target at 8691.0, having breached the price levels at 9167.4, 9092.3 and 8945.7. The river of sell order pushing towards 8691.0 has to take out the lower border of the channel to make landfall at that point. Below this area, 8442.5 and 8160.2 serve as further price targets. 8015.5 could also come into the picture if the 200-SMA is taken out as well.
On the flip side, a bounce at 8691.0 could allow price to retest all previously violated price levels in the reverse sequence in which they were just breached. We can, therefore, expect the initial target from such a bounce to be at 8945.7, followed by 9092.3, 9167.4 and point D at 9264.4 respectively. Only an advance to 9452.0 invalidates the W pattern.