Nasdaq 100 index analysis as it sits at its make-or-break point

The Nasdaq 100 index (IXIC) has come under intense pressure in the past few weeks as concerns about technology companies continued. The stock has dropped seven straight days and is hovering at its lowest level since January 31st. It has crashed by over 7.50% from the highest level in February.

Bond yields surge is a concern

The biggest concern for the Nasdaq 100 index and other American indices is the soaring short-term bond yields. Data compiled by Bloomberg shows that the 10-year government yield jumped to 4% for the first time since October last year.

At the same time, the shorter-term 2-year yield has soared to over 5%, meaning that the yield curve has been inverted to the lowest level in decades. This view is supported by the recent strong economic numbers, which have raised the possibility that the Fed will deliver more hikes going forward.

Historically, stocks tend to recoil when bond yields are surging. Besides, it is now possible to generate a substantial return by just buying bonds or even saving money in a bank. As such, some analysts caution that we could see more Nasdaq 100 index sell-off. 

In an interview on Monday, David Einhorn, the founder of Greenlight Capital, warned that the recent stock market rally was part of a bear market rally. This is notable since Greenlight was one of the best-performing hedge funds in the industry.

The Nasdaq 100 index faces additional risks going forward. For example, there is the risk of earnings, considering that most companies have published weak results recently. According to FactSet, the average earnings growth of companies in the S&P 500 index was minus 3%, the worst reading since 2020. And the situation could worsen if inflation remains at an elevated level. 

Nasdaq 100 index forecast

Nasdaq chart by TradingView

The daily chart is not looking good for the Nasdaq 100 index since bulls failed to move above the important resistance level at $12,886 in February. It has now retreated and moved below the key support level at $12,160, the highest point on December 13. The index has also retreated below the 50% Fibonacci Retracement level. The only hope is that the index has found support at the 50-day and 100-day moving averages (MA).

Therefore, the index will likely continue falling if there are enough sellers manage to move it below the two averages. If this happens, the index will drop to the next psychological level at $11,000. This is in line with what we wrote in this article.