Nasdaq Composite index
The tech-driven NASDAQ offers steep discounts following the early-December slide. | Image: Johannes EISELE / AFP
  • The NASDAQ plunged along with the other benchmark indexes, even as its major components raked in record Cyber Monday sales.
  • Bullish analysts see the market tumble as a good buying opportunity for investors to acquire tech stocks at value.
  • A volume-weighted analysis measuring the breadth of the NASDAQ selloff reveals investors are acting calmly this week.

Gizmos and gadgets weren’t the only thing on sale this Cyber Monday. All of the NASDAQ Composite’s mega cap tech stocks were available at discounted prices too. And they’re still on sale as the pullback extends through Tuesday.

nasdaq composite 5-day graph december 3 0154pm EST source yahoo finance
NASDAQ Composite (IXIC) 5-Day Graph, Dec 3, 2019. | Source: Yahoo Finance

The NASDAQ retreated 99 points or 1.1% Monday, as markets faced stout economic and geopolitical headwinds. The Dow took a 230-point nosedive, followed by a 450-point crash by Tuesday afternoon. The NASDAQ dropped 65 more points or 0.8% Tuesday, buoyed by key support at the 8,500 level.

Disappointing manufacturing data and Donald Trump’s tweet threatening new tariffs on imports from Brazil and Argentina chilled markets on the first trading day of December.

On Tuesday morning, the president made alarming remarks shedding doubt on a US-China trade deal at a NATO summit in London.

Wall Street Bulls: Now’s The Time to Buy!

But it’s not all fear or panic on Wall Street. On “Markets Now” Monday, Jim Cramer assured viewers that he doesn’t expect a repeat of last December:

Nothing worries me in the sense that– looking for a big sell off in December. I’m looking for more reasons for it to go higher… November was supposed to be a bad month… and it wasn’t!

The stock market historically performs best in December. But last year saw a harrowing equities rout, the worst December for stocks on record.

The S&P 500 crashed 9% with the Dow close behind at an 8.5% bleed out. The NASDAQ led losses with a 9.5% plunge.

Stock Market Dip, A “Christmas Gift?”

Jeff Saut, chief investment strategist at Capital Wealth Planning, says lower stock prices this week are a “Christmas gift” for investors to shop for equities on sale:

I think you’re getting an early Christmas gift with this sell-off right here on Friday and today.

Saut predicts the selloff will abate by the middle of the week as investors buy the dip. He’s not worried about weak manufacturing numbers because he expects strong retail sales will buoy the markets into the new year.

This year’s Black Friday set e-commerce sales records. American consumers bought $4.2 billion online on Thanksgiving, and $7.4 billion online on Black Friday. Cyber Monday also set a $9.4 billion online sales record.

Technical Analyst: Calm NASDAQ Pullback

Despite the sell off in equities this week, volumetric market breadth readings look good for the stock market.

The Arms Index is a short term trading indicator used by technical analysts to measure the ratio of advancing to declining stocks against the ratio of advancing to declining volume.

It’s used by traders as a more genuine gauge of market sentiment than price movements by themselves. For instance:

Many analysts believe that the Arms Index provides a bullish signal when it’s less than 1.0, since there’s greater volume in the average up stock than the average down stock.

While NASDAQ stocks continued their steep sell-off for a second day Tuesday, the NASDAQ Arms Index actually dropped to 0.792. That might give markets a reason to be jolly through the rest of the week.

 

This article was edited by Sam Bourgi.

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