Tech shares poised for a fourth straight week of declines after yesterday’s selloff

While there was a slight bounce late yesterday in Wall Street, it was still a very rough day for stocks. Tech shares bore the brunt of the pain, with the Nasdaq closing down by a whopping 4%. That tees up the likelihood of another down week, with this being the fourth weekly decline in a row pending. The technicals certainly aren’t looking good.

It’s perhaps a healthy correction of sorts after the unrelenting run higher since the AI bubble began. The break of the 100 and 200-day moving averages have led to the break of the key trendline support (white line) above as well.

The technical side of things suggests that there is more scope for the latest correction to run. But just be mindful that we’re already due for four straight weeks of declines in the Nasdaq. And typically, dip buyers will find some room to squeeze back in.

The last time we had four straight weekly losses in tech shares was back in July to August last year. But even then, that final stretch saw the Nasdaq close just 0.2% lower after having been down by as much as 6.4% during the week. So if you really want to track four painful weeks for the Nasdaq, you’ll have to go all the way back to the period of April to May 2022.

The confluence of factors are perhaps a good reason for stocks to shave some off the top and to “detox” as they are calling it now.

Trump’s tariffs, geopolitical uncertainty, softening US economic data, recession risks, AI competition from China, and overstretched valuations are just some reasons to point to.

Of course, there’s always the saying that the market can stay irrational longer than you can stay solvent. But I guess the naysayers do have something to shout about for the time being.

The corrective run we’re seeing points to the potential that stocks might not have it that easy of a time this year. However, as soon as the Fed put starts to come back in, I’m sure that will help to soothe markets somewhat down the road.

This article was written by Justin Low at www.forexlive.com.