Recent action in the NASDAQ 100 index represents the most violent period of correction that the index has seen in over two years. The topping process began two weeks ago with a breakout in interest rates at the long end of the yield curve, representing the sharpest impediment to stock market performance that we have seen since early 2016.
Technology stocks have seen some of the most dramatic declines. This suggests a broad de-risking by investors, as this group has likely harbored the majority of speculative interest in the market given the growth curves involved.
The NASDAQ 100 index broke beneath its 50-day simple moving average on October 4 and continued lower in subsequent days dropping into what one might call a mini-crash on October 10, and subsequently falling beneath the index’s 200-day simple moving average the following day.
Since then, we have seen some stabilization, and a grinding bounce that has occupied the market over the last five days into and through options expiration last Friday.
Looking ahead, we will be heading into a period that is definitive, including a large number of important earnings reports in the technology sector. As we head into this week, we will hear from some of the most important technology stocks in the market.
On Wednesday, after the close, we will get Q3 reports from Advanced Micro Devices, Inc. (NASDAQ:AMD) and Microsoft Corporation (NASDAQ:MSFT).
On Thursday, before the opening bell, we’ll hear from Nokia (NOK), Shopify (SHOP), and Twitter (TWTR). After the close on Thursday, prepare yourself for one of the most important days of this earnings season, when we get reports from Alphabet (GOOG), Amazon (AMZN), Baidu (BIDU), Cypress Semiconductor (CY), First Solar (FSLR), Intel (INTC), Snapchat (SNAP), and Western Digital (WDC).
That will represent one of the most defining days for Q3 earnings, and truly set the tone as we see fundamentals and technicals seemingly go head-to-head.
Most importantly, the market has been pulling back sharply in front of these reports, suggesting that – although one would assume strong Q3 reports are likely assumed by current market activity – immediate results are being trumped by concerns about future obstacles.
In other words, as we hit some of these huge and defining reports, backward-looking data will not be a focus of the market. Instead, everything will hinge upon the foreshadowing we get as we look ahead into Q4 in the first half of 2019.