US stocks took a steep dive overnight, with S&P 500 and NASDAQ Composite suffering their worst sessions since 2022, down -2.31% and -3.64% respectively. The sell-off was triggered by disappointing earnings reports from tech giants Alphabet and Tesla. Alphabet’s shares fell -5%, marking their biggest one-day drop since January 31, while Tesla plummeted -2.3%, its worst performance since 2020.
Beyond earnings, the market’s unease is likely compounded by the approaching US presidential election in November. With Joe Biden stepping out of the race and Kamala Harris stepping in, Donald Trump’s lead appeared to have narrowed significantly, and political uncertainty is looming large. Investors seem to be moving to lock in profits after the strong record run since last November, bracing for volatility in the lead-up to the election. This could signal a correction period, with the market possibly experiencing downward pressure for the next few months.
Technically, NASDAQ’s break of 55 D EMA (now at 17465.33) argues that it might at least be correcting the up trend from 12543.85. Risk is now on the downside as long as 18128.38 resistance holds. NASDAQ could falls to 38.2% retracement of 12543.85 to 18671.06 at 16330.46 before finding strong support to set the range for consolidations.
As for S&P 500, risk will stay on the downside as long as 5585.34 resistance holds. Decisive break of 55 D EMA (now at 5418.40) will align the outlook with NASDAQ. Deeper fall would be then be seen in S&P 500 to 38.2% retracement of 4103.78 to 5669.67 at 5071.50, before forming a base to set the range for medium term consolidations.
