The action in the Nasdaq is ugly this morning as the US stock market averages are experiencing heavy selling again in the big cap technology space after they were hit by waves of profit taking yesterday. Now we are faced with asking ourselves how far is this going to drop? Where is support?
The next natural support area is the 50-day moving average, which isn’t that far away now for the market averages. Notice how the VIX is now up to 37. That fear index was near 20 just a few days ago. This is a huge jump in the VIX, which suggests that we nearing the end of this current decline and should see a bounce soon – probably next week. We’ll then have to see whether this will end up being a bounce and then drop again like what happened when the market rolled over in February or a simple consolidation drift.
The drop is being led by big cap tech stocks, which are imploding. They went straight up in bubble type action and some sort of decline was inevitable at some point. You can see this in shares of Apple, Inc. (NASDAQ: AAPL), which are down 7.73% this morning.
This is an ugly reversal for AAPL stock. Again though look for some sort of bounce on the 50-day moving average. Whether that will BE the bottom for the rest of the year if it happens I have no idea. It would take watching how it reacts over the next 2-3 weeks that will be key to answering that question. Yes, this is an ugly morning, but we need to see how things play out for a few weeks before drawing major conclusions from this decline so far.
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-Mike
