The Nasdaq 100 technology index rallied in 2023 as companies like Tesla saw significant retail investor flows. Research suggests that the latest retail surge could float, and the Nasdaq could reverse.
NAS100 – Daily Chart
The Nasdaq 100 has dipped below the 50 moving average and the 38% Fibonacci retracement. The next target is the 50% level at 11,784, but traders should watch for market strength here.
Tesla dropped -1.43% on the day after its investor day failed to inspire investors.
Seasonal patterns suggest that retail investors’ buying of stocks could fade between now and April due to a tax filing deadline.
“Seasonality ahead of tax season suggests that flows into US markets will begin to decelerate,” Vanda said in a research note. “The buying of ETFs and single stocks in April tends to decline in unison. That’s because… in April, selling generally occurs across all securities, implying that investors hold back their investments to build cash to pay their tax liabilities.”
“Should stocks come under pressure on the back of decelerating retail flows in the weeks ahead, capitulation in the less-preferred tech names could help identify an eventual turnaround,” Vanda said. “Over the past year, capitulation in this segment of tech has tended to coincide with turning points in the broad indices.”
“Seasonality typically improves in late Q2, but investors will first have to tread carefully in the weeks ahead given how dependent on retail investors US stocks have become,” Vanda added.
