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Nasdaq tumbling flags risks ahead

By Margaret Yang, CMC Markets

Technology giants’ share prices tumbled following Goldman Sachs’ call for vigilance, sending the Nasdaq index down by 1.8% on Friday evening. Profit-taking activities were behind this sell-off, as Goldman Sachs warned that FAANG stocks – Facebook (-3.3%), Amazon (-3.16%), Apple (-3.88%), Netflix (-4.73%) and Google (-3.41%) etc – might have been overbought after hitting new, record highs recently

Money is flowing out from the technology sector resulting in a technical pullback in the Nasdaq. The SuperTrend (10, 3) has flipped downwards into a bearish set-up, indicating more downside from here. The momentum indicator DMI has formed a ‘dead cross’, suggesting that upward momentum remains week in the near term.

Central banks’ interest rate decisions in focus this week

The market is also preparing for central banks’ interest-rate decisions near the end of this week. While the market expects the Fed to raise the base rate by 25bps on 15 June, the Bank of England (BoE) is likely to keep its monetary policy unchanged this time, amid political uncertainty following the election.

No one expects change in the Bank of Japan’s policy at its meeting this week. The BOJ’s governor Kuroda is likely to extend his second term as the central bank’s governor, and most market participants foresee no change in the BOJ’s monetary policy until April next year.

US NDAQ 100 – Cash

Margaret Yang Yan, CFA, is a market analyst for CMC Markets Singapore.