Nasdaq plunges for the second day as the overbought tech sector continues the correction. No surprise for the correction as the big tech stocks had reached extreme valuations. It was time for investors and hedge funds to stop chasing the overvalued stocks and have a look at the fundamentals. The correction still does not threat the bullish momentum for the Nasdaq.
Positive Surprise From U.S. Unemployment Rate
Investors shrug off the important improvement in the unemployment rate. The U.S. unemployment rate dropped to 8.4% well below the expectations of 9.8%; the July reading was at 10.2%. The U6 Underemployment Rate also surprised investor’s positive as it came in at 14.2% below the forecasts of 17.3%.
The U.S. Nonfarm Payrolls came in at 1,371,000 new jobs created in August below the market consensus of 1,400,000. The U.S. Labor Force Participation Rate beat the consensus of 61.4% for August as it reported at 61.7%. The United States Average Weekly Hours showed an improvement at 34.6, exceeding the expectations of 34.5, while the Average Hourly Earnings came in at 4.7% also above the estimates of 4.5%.
Stocks That Push Nasdaq Lower
As I have mentioned above the big tech and FAANG stocks are among the top losers. Apple is 5.22% lower at 114.68; Tesla is 4.85% lower at 387, Amazon is 5.44% lower at 3,179, and Facebook is 4.80% lower at $277.14
Nasdaq 100 Analysis
Nasdaq 100 gives up 4.34% at 10,959, making fresh three week lows. Even the bullish momentum is intact until now, but bulls have to guard the 50-day moving average today. Actually, the first intense wave of sellers absorbed successfully at 10,875 – the 50-day moving average, and now we need to see a return above the 11,100 mark that would attract more bottom fishers.
So the magic number for today is 10,852. A break below might have very negative implications for the index and a move down to 10,200 can’t be ruled out.
On the upside, after the 11,100 minor resistance sellers would emerge at 11,531 the daily top. The next supply zone for Nasdaq stands at 11,903 the high from yesterday’s trading session.
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Nasdaq Daily Chart
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