OVERVIEW
Tech Sell-Off Continues

The major U.S. stock indexes took a hit on Thursday, mainly because tech stocks faced some serious selling pressure again. The Dow Jones, which had hit record highs for two days straight, dropped 1.3%—that’s over 500 points. The S&P 500 and Nasdaq Composite also slipped, falling 0.8% and 0.7%, respectively, continuing their sharp declines for the second day in a row.

The recent losses are mostly due to steep declines in chip stocks, which are being hit by worries about potential trade restrictions and geopolitical tensions. Investors are also moving away from large-cap tech stocks. Shares of Micron, AMD, Arm Holdings, and Super Micro Computer all fell on Thursday, though Nvidia, a favorite among AI investors, ended up higher. Other big tech names like Apple and Amazon also dropped, which weighed heavily on the Dow. JPMorgan Chase and Goldman Sachs were among the biggest losers on the blue-chip index, and Eli Lilly saw significant declines for the second day in a row, making it one of the biggest S&P 500 decliners.

In the last few months, the strong performance of large-cap tech stocks has been crucial for the gains in major indexes, along with growing optimism that the Federal Reserve will start cutting its benchmark lending rate soon. This optimism has also recently boosted small-cap stocks, which benefit most from lower interest rates. The Russell 2000 small-cap index had gained about 10% over the past week as investors shifted away from large-cap tech stocks, but it fell 1.9% on Thursday.

The yield on the 10-year Treasury, which had fallen as hopes for rate cuts increased, rose to 4.2% on Thursday after hitting its lowest level since March the day before. Gold prices, which had hit record highs recently, dropped about 0.5% to $2,447. Everyone's closely watching economic data and Fed comments for more clues on when rate cuts might happen. New data on Thursday showed a bigger-than-expected increase in jobless claims, which is adding to concerns about the labor market as the Fed tries to figure out the best timing for a possible rate cut.

Nasdaq

The Nasdaq experienced another drop, falling by 0.47% and slipping below its daily 20 EMA. This decline is bringing it closer to its daily 50 EMA, which could potentially act as a level of support. The consistent downtrend is being driven by heavy selling volume, particularly influenced by the sharp declines in chip stocks. This pattern indicates that investors are becoming increasingly cautious, possibly reassessing their positions in the tech sector amid ongoing uncertainties.

The heavy selling volume suggests a strong bearish sentiment among investors, especially as the semiconductor sector continues to face significant pressures. If the Nasdaq fails to find support at the 50 EMA, it could signal further downside risk and a potential shift in market sentiment. Market participants are likely to keep a close eye on this support level, as a breach could lead to accelerated selling and broader market instability. Conversely, a successful hold at this level might encourage a recovery and renewed buying interest.

S&P Midcap 400

The MDY also experienced a decline, dropping by 1.11%. This recent move brings it closer to its daily 10 EMA, a key technical level that traders often watch for potential support. Although the selling volume isn't substantial, there's a noticeable sense of pessimism among investors. This sentiment suggests that caution is prevailing, with market participants possibly anticipating further downside or consolidating their gains from the recent rally.

Despite the moderate selling volume, the overall sentiment indicates a lack of confidence in sustaining the recent uptrend. If the MDY manages to hold above the 10 EMA, it might stabilize and potentially attract buyers looking for value at this level.

Russell 2000

The small caps are also facing a heavy sell-off, with the IWM dropping nearly 2% yesterday. This decline was accompanied by very high selling volume, indicating strong bearish sentiment among investors. The substantial selling pressure suggests that market participants are quickly exiting their positions in small-cap stocks, possibly in response to broader market concerns or sector-specific issues.

This significant drop highlights the vulnerability of small-cap stocks to market volatility and shifts in investor sentiment. If this selling trend continues, it could push the IWM below key support levels, leading to further declines.

DAILY FOCUS
Waiting For The Right Moment

Given the current negative sentiment in the market, we will hold off on taking any long positions today. The lack of appealing setups combined with the overall bearish atmosphere suggests it's prudent to avoid adding new exposure for now. We will closely monitor market developments and wait for more favorable conditions over the coming days.

WATCHLIST
The Leaders

SLQT: SelectQuote, Inc

• SelectQuote provides comparison shopping services for insurance products, including life, auto, and home insurance.

• Currently distributing following a minor rally, indicating a potential shift in investor sentiment.

• Exhibiting signs of forming a volatility contraction pattern, which often precedes significant price moves.

• Maintaining a position above all daily EMAs, suggesting underlying strength and support at these levels.

• SLQT is one that we will be keeping an eye on over the coming days/weeksto see how it develops.

We Want To Hear From You
Stay Updated with Intraday Analysis!

Don't let opportunities slip by - whether it's seizing a breakout or recognising a breakdown.

Join us on Twitter by clicking the button below and stay ahead of the market all day long!

We respond to everyone who message us on Twitter!

We are here to help! ✌️