Nasdaq has gone more than 300 days without a major pullback. Does that mean a shakeout is overdue?

Nasdaq has gone more than 300 days without a major pullback. Does that mean a shakeout is overdue?
By: market watch Posted On: March 04, 2024 View: 67

The tech-heavy Nasdaq-100 has gone 303 trading sessions without a pullback of 2.5% or more, the third-longest stretch since 1990, according to Jonathan Krinsky, chief market technician at BTIG.

While this doesn’t necessarily mean the artificial-intelligence-driven boom in U.S. stocks is ripe for a selloff, Krinsky thinks the market is overdue for a bout of volatility.

“Some sort of shakeout is likely coming, in our view,” Krinsky said.

The Invesco QQQ Trust Series ETF QQQ, which tracks the Nasdaq-100 and is one of the most popular U.S.-traded ETFs, has marched to 14 straight record highs in 2024. It’s most recent record arrived on Friday, when the ETF rose 1.5% to finish at $445.61.

According to FactSet data, the most recent pullback of 2.5% or more occurred on Dec. 15, 2022, when QQQ fell 3.4%.

Notably, the Nasdaq-100 has been achieving these records without the help of Apple Inc., AAPL, -2.54% once considered an indispensable constituent of the index. While Apple was down 9.1% so far this year, the Nasdaq-100 was up 8.3%, according to FactSet.  Divergence in the performance of a popular group of megacap technology stocks has been growing since the beginning of 2024, while all of the so-called Magnificent Seven tech stocks helped drive gains for the S&P 500 in 2023.

Take Monday’s session for example: Nvidia Corp. NVDA, +3.60% is up 3.6% on Monday, while Tesla Inc. TSLA, -7.16% was down 7.2%. Alphabet Inc. GOOGL, -2.76% was down 2.8%. And Apple AAPL, -2.54% was down 2.5%.

“… [T]he dispersion under the surface shouldn’t be ignored. Yes, it’s encouraging to see some broadening beyond the ‘AI’ trade, but the continued one-way move in many momentum names is ultimately going to have some ramifications, even if only short-term in nature,” Krinsky said.

The weakness in several megacap names weighed on the Nasdaq on Monday.

Both the Nasdaq-100 NDX, which includes the 100 largest nonfinancial stocks trading on the Nasdaq, and the Nasdaq Composite COMP, which includes more than 3,000 stocks listed on the exchange, finished 0.4% lower. The S&P 500 SPX also eked out a loss after briefly turning positive. The Dow Jones Industrial Average DJIA finished lower as well.

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