The S&P 500 has fallen 4.3% in the past two sessions, but is still up 53% from its March lows at the height of coronavirus fears. The highly technological Nasdaq 100 index fell 6.4% on Thursday and Friday. Given those big drops and the three-day Labor Day weekend, technical strategist Robert Sluymer says there is a risk of another downdraft.
“We wouldn’t be surprised to see the ‘three day rule’ come into effect,” Sluymer wrote in a note. “Mass sales often take at least three days to eliminate seller panic.”
Nasdaq 100 futures fell 2.1% at the start of Asian trading on Monday.
The consecutive sudden losses came after a notable fierce run for a rare simultaneousincrease in volatility, the outperformance ofa few megacaps and an unusually high volume of options. Some strategists just see itelimination of the foam, rather than a long-term decline, while Fundstrat’s view remains unchanged that the recent decline is a healthy consolidation, Sluymer said.
The Nasdaq in particular tends to drop very quickly from its highs, according to Jason Goepfert, the founder of Sundial Capital Research Inc. So if it really is a top, there could be “almost direct movement in weeks to come, ”he warned in a note on Friday.