By Akshay Chinchalkar, Bloomberg Markets Live commentator and reporter
The Nasdaq’s near-16% plunge since the middle of August has brought two critical thresholds back in focus. One of them is the June low that remains unbroken for now and the other is support from the 200-week moving average that successfully held a test by the last leg down.
The bellwether technology gauge has had a roller coaster third quarter — underlined by extreme volatility under the surface. The trough in June saw the index rally over 22% on investor expectations that the growing risk of a recession would force the Fed to pivot down from its aggressive tightening stance. Those gains were merely fleeting though, as a surging dollar along with rapidly rising rates globally saw investors quickly reassess those earlier bets, resulting in the gauge reversing its largest intra-quarter gains in history.
The index is now resting at the 200-week moving average which has provided support on several occasions historically, including the pandemic crash of 2020. Breadth wise, the percentage of members trading above the 200-day average was at 8% at Tuesday’s close, matching readings witnessed during the 2018, 2020 and the June 2022 lows.
Whether this oversold state at long-term support results in the Nasdaq bouncing remains to be seen. But there is no doubt that continued deterioration in price action at these levels will make the rest of 2022 as challenging as the rest of the year has been.