The Nasdaq 100 Index futures are bouncing back today, November 6, as investors buy the dip following Thursday’s crash that led to a $2 trillion wipeout. It jumped to 27,080, a few points above Thursday’s low of 26,353. So, is it safe to buy the dip or is this a dead-cat bounce?
Nasdaq 100 Index is Rebounding as Investors Buy the Dip
The Nasdaq 100 Index futures suffered a big drop on Thursday as investors came to terms with the midterm elections , in which Democrats will take control of the House of Representatives and the Senate. Democrats have made AI and data centers a core part of their messaging.
The decline was more pronounced among companies in the artificial intelligence (AI) industry. SanDisk stock dropped by 22.2% on Thursday, meaning that the company has lost over 50% of its value. Astera Labs, Lumentum, Micron Technology, Western Digital, Advanced Micro Devices, Marvell Technology, Lam Research, and Seagate tumbled by over 16%.
Investors are buying the dip as they assess the impact of the Democrats’ win on companies in the AI industry. The reality, however, is that the AI industry will continue doing well, with companies like Meta Platforms, Amazon, and Google pledging to continue investing in the data center industry.
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Most notably, analysts believe that many of the top companies have more upside to go. For example, the average Nvidia stock target among analysts is $318, up by 75% from where it is today. Similarly, the average AMD target is $633, also higher than the current $404.
In the long term, such large dips are usually short-lived, with investors buying the dip. However, in the near term, there is a risk that this is a dead-cat bounce (DCB). A DCB is a situation where an asset in a freefall bounces back and then resumes the downward trend.
Nasdaq 100 Futures Technical Analysis
Nasdaq 100 Index futures | Source: TradingView
The daily chart shows that the Nasdaq 100 Index is attempting to rebound after falling sharply on Thursday. It is rebounding after hitting the 61.8% Fibonacci Retracement level.
The index has plunged below the 50-day and 200-day Exponential Moving Averages (EMA). Moving below that level is a sign that bears have prevailed. It has remained below the Major S/R pivot point of the Murrey Math Lines tool.
Therefore, the index will likely continue falling, potentially to the key support level of 25,000. A move above the resistance level of 28,000 points will signal more gains ahead.
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