Key Takeaways:
The Nasdaq Composite is one bad session away from a correction after breaking through three layers of technical support in the wake of the Federal Reserve's hawkish hold.
The Nasdaq Composite fell 9.78% from its June 2 record closing high of 27,093.90 to end Wednesday at 24,442.94, leaving the index on the brink of a correction after the Federal Reserve held interest rates steady while three members voted for a hike. A 10% drop from a record closing peak is the standard definition of a correction on Wall Street.
"The index has taken out several closely watched support levels that technical analysis would suggest buyers would become more active at," said Terence Gabriel, a Reuters market analyst.
The Composite closed below its 100-day moving average at 24,771.69 and the 38.2% Fibonacci retracement of the March-to-June rally at 24,707, according to LSEG data. The 24,000 area — which includes the rising 200-day moving average and the 50% retracement — now looms as the next downside magnet. An immediate reversal that sees the Composite reclaim its 100-day moving average on a closing basis may signal potential for greater strength.
A correction from the June peak would erase roughly $2.7 trillion in market value from the Nasdaq's record close. The selloff coincided with a broad dollar rout — the US Dollar Index pulled back from 101.640 to 101.406 — as traders interpreted the Fed's decision as less hawkish than feared, with fed funds futures pushing expectations for a follow-up hike from December to March. The 10-year Treasury yield eased 4.5 basis points to 4.602%.
Technical Breakdown Deepens
The index's slide below the 100-day moving average marks a significant shift in near-term momentum. Moving averages smooth out price data to help analysts spot underlying trends and are often watched as zones where buying or selling pressure can build. The 38.2% Fibonacci retracement breach adds another layer of concern — Fibonacci retracements mark prices that markets often revisit after a big move, and traders use them to gauge potential support or resistance zones.
The next major test sits near 24,000, where the rising 200-day moving average converges with the 50% retracement of the March-to-June advance. A break below that level would open the door to a deeper pullback, potentially targeting the June 30 low near 23,800.
Cross-Asset Divergence
The dollar's worst single-day drop in three months provided little relief for equities. EUR/USD rose 0.56% to 1.1531, while GBP/USD gained 0.77% to 1.3477. Commodity currencies surged — AUD/USD added 1.10% and NZD/USD jumped 1.44%. Gold, which typically benefits from a weaker dollar, fell 1.26% to $4,025.15, suggesting the rate repricing of the past two weeks has done structural damage to the bid for haven assets.
The Fed's next decision is scheduled for September, with markets pricing a 25-basis-point hike. Thursday's personal consumption expenditures print from the Bureau of Economic Analysis will provide the next data point that could shift the rate outlook.
This article is for informational purposes only and does not constitute investment advice.
