It was a poor day for US equities in general, with tech shares leading the declines. The S&P 500 closed down by 0.8% with the Nasdaq down by 1.4%. Meanwhile, the Dow fared better in closing down by just 0.3%.
What is interesting about the selloff yesterday is how tech-heavy they were for the most part. Tech shares dragged down the S&P 500 even when more than half of the stocks in the index ended higher on the day. That speaks to the weightage but also how perhaps there is some rotational play happening in Wall Street.
The ongoing narrative since the turn of the year is that there are concerns that AI valuations have stretched out too far. It is about time for tech firms and those investing heavily in AI to deliver some results. And investors are pretty much starting to err towards “show me the money” or else it is time to move on.
Adding to the concerns is increasing scrutiny over OpenAI at the moment. That is especially made complicated by their “frenemy” relationship with Nvidia. And making the news in the past week is that Nvidia is not going to outright commit and pay up on their $100 billion partnership with OpenAI. As such, that has the potential to open up a whole new can of worms in the AI saga.
Putting aside the known unknowns, what is market sentiment telling us based on the charts?
Well, it’s a key moment for the Nasdaq especially as the drop yesterday ran to test the 100-day moving average (red line) again. That has been where dip buyers have been drawing a line since the end of last year in keeping the upside momentum running. But amid price stalling closer towards 24,000, it is raising doubts about whether the latest rally has run out of steam.
If anything else, keep a watchful eye on the 100-day moving average and if tech shares can hold up to keep above that. A firm break below could start to trigger stops and lead to accelerated profit-taking, that especially if accompanied by the right selling triggers from any fault to the AI bubble.
For some context, the last time the Nasdaq traded above both key daily moving averages and broke down below the 100-day moving average was back in late February 2025. And during that fallout, the index dropped by over 22% before the dip buyers eventually put a stop to the whole rout in April 2025.
As a reminder though, that sharp selloff was largely due to major concerns surrounding Trump’s tariffs and ‘Liberation Day’. And we all know how that played out in the end. Got TACOs anyone?
This article was written by Justin Low at investinglive.com.
