US-China Trade Tensions Continue; The Tech Industry Is Getting Hit Hard
Yesterday, everyone was talking about how the stock market is getting affected by China’s decision to impose new tariffs on goods, imported from the US. This is China’s response to the US imposing duties on Chinese steel and aluminium. Even the World Trade Organisation is trying to step in and find a common ground between the conflicting sides by warning that the markets have already experienced the worst quarter in the last couple of years. Today’s morning headlines are already talking about the US thinking of proposing a 25% tariff on high-tech Chinese products. The question here is, who will win this 'game of checkers'? Or even better, will there be a winner in the end at all?
The US technology sector got affected by the Chinese tariffs as well, because it is well known that the US tech companies have very close ties with the Chinese manufacturers. Also, in addition to all this, Trump’s tweets about Amazon (NASDAQ:AMZN) not paying enough taxes and just references to the general implementation of more regulations on big companies, have also put pressure on tech giants.
Since the peak in March, the technological Nasdaq has dropped already around 10% and on the 2nd of April even closed below the 2018 opening price. Yesterday, we saw a bit of a rebound in the US equity markets, where Nasdaq closed on the day with around 1% gain.
Nasdaq – Technical Outlook
As mentioned before, yesterday, Nasdaq managed to gain a bit of its lost ground by moving back up and gaining around a percent. It is still difficult to say, if this has been the bottom for this index and that we should treat the whole pattern as a double bottom formation. Probably it is a bit too early to determine that, as there are still a lot of geopolitical tensions that are affecting the technology sector.
Looking from the shorter-term perspective, yesterday’s bounce pushed Nasdaq from the low of 6320, above the round number of 6400. Now there is a chance for the index to continue moving higher at least for a little bit more. A break through the 6488 area could open the path towards the 6643 level, a break of which could also break the downwards moving trendline, that started on the 13th of March.
Alternatively, a push back down below the 6400 mark, could indicate that Nasdaq is still feeling weak and could pull the index down again, to test the recent low of 6320. For us to consider further declines, we would need to see a break below that low that could open the way to 6250 level.
