Chart of the day - US100 (21.07.2023) 💡

CFD contracts on the Nasdaq 100 (US100) reacted with a significant correction after yesterday's initial attempt to break above 16,000. The Nasdaq 100 index lost 2.3% at the close of trading on Thursday, marking the worst performance since the start of the year. This sharp decline is due to several factors. ⚡

Firstly, it's currently the quarterly earnings season, and not all reported results are satisfying investors. Tesla and Netflix published their earnings two days ago after the session, and the results were worse than expected, leading to nearly 10% drops in both companies during yesterday's session. These are companies valued at approximately $820 billion and $200 billion, respectively. Given these poor results, investors are also starting to worry about upcoming releases. Yesterday's session saw losses for Nvidia (-3.3%), Microsoft (-2.3%), Meta (-4.3%), and Alphabet (-2.3%). 🤖

Another factor could be the recently announced upcoming rebalancing of the Nasdaq index. The new weights are set to be implemented on July 24, which is next Monday. The new weights significantly reduce the share of the largest companies such as Apple, Meta, Alphabet, and Tesla. Therefore, all passive funds will also have to revise their equity portfolios, which carries significant short-term selling pressure on large companies and, conversely, on smaller ones buying pressure, making an opportunity for saavy investors. Currently, the six largest companies account for 50% of the Nasdaq 100's assets. Rebalancing the index will reduce these shares to 40% of the index portfolio.

Looking at the chart from a technical perspective, all the news coincided perfectly with the US100 approaching the upper limit of the upward channel. This strong reaction may indicate a short-term correction and a decline in indicators. It's possible that we may approach the lower limit in the short term.