“US Stock Market Plunges as Nasdaq 100 Faces Potential Liquidity Crisis Triggered by Nvidia’s Weak Performance – Analysis and Forecast”
The major US bench stock indices, including the S&P 500, Nasdaq 100, Dow Jones Industrial Average, and Russell 2000, kicked off September on a weak note. The Nasdaq 100 took the biggest hit on September 3, dropping by 3.15% due to the underperformance of high-beta technology stocks like Nvidia and other semiconductor companies.
The recent struggles of Nvidia, particularly after its Q2 earnings report, could lead to a negative liquidity cascade effect, potentially causing a spike in the VIX volatility index. Keep an eye on the key medium-term resistance level of 19,670 on the Nasdaq 100 for further insights into market movements.
Following a brief 4.9% bounce to reach the 19,900 mark on August 22, the Nasdaq 100 failed to sustain its rally. After Nvidia’s disappointing earnings report on August 29, the index reversed course, erasing its gains and struggling to surpass the 50-day moving average resistance at 19,670.
The weak start to September was exacerbated by a dismal ISM Manufacturing PMI reading of 47.2, indicating a fifth consecutive month of contraction in US manufacturing activity. Market participants are growing anxious over the delayed interest rate cut cycle by the US Federal Reserve, leading to a decline in higher beta stocks like mega-cap and technology companies.
Nvidia’s performance has been crucial in shaping market sentiment, with its share price rally earlier in the year contributing to a positive liquidity cascade effect. However, recent declines in Nvidia’s stock have raised concerns about a potential liquidity crisis similar to past market events triggered by the company’s performance.
Technical analysis suggests that the Nasdaq 100 is at risk of revisiting the 17,160/16,930 levels, with bearish reversal candlestick patterns forming near the key resistance level of 19,670. Investors should closely monitor market developments and key levels to navigate potential risks and opportunities in the coming weeks.