This is a classic chart breakdown for the Nasdaq 100 Technology index. I don’t often draw trend lines, but this one has been decisively broken. At the same time, the monthly moving averages have bunched and then turned lower. They are turning lower from 13 months of sideways trading, which has been confirmed as a top area.
There is no window dressing this chart. It looks scary and not dissimilar to the charts for Microsoft and Nvidia displayed in the last alert. The MegaCaps are crumbling, as noted in the alert (27 February 2025).
The future is famously unpredictable, but this chart could be massively bearish. The moving averages have bunched and are heading lower, giving a moving average sell signal. What is especially alarming is the size of the potential top pattern. The Tesla chart has been heading sideways for over four years. A confirmed break from here, which we may already have, could lead to a complete unravelling of the share price.
Tesla depends on the mystique of Elon Musk. If the Trump administration is going to be a car crash, to coin a phrase, it could take Musk down with it. Lose faith in Musk and the main support for Tesla shares kicks in at around $20.
Maybe all the gods of Silicon Valley will turn out to have feet of clay. AI could change everything but in unexpected ways. All that clever technology, which has made the MegaCaps so dominant, could commoditise their magic and make great technology cheap and ubiquitous as the whole DeepSeek revelations suggested.
The market is vulnerable to a Black Swan event like Nvidia’s booming order book suddenly starting to shrink as doubts grow over the AI investment boom. In my Crumbling MegaCaps alert I suggested there might be parallels between the 19th century railway boom, which proved disastrous for investors and the AI boom where similarly gigantic investments may be chasing dwindling returns.
We could be heading into a perfect storm where a madman in the White House meets a flagging investment boom to cause chaos in a stock market where margin debt in January 2025 stood at a record $934bn.
I thought Trump might be an exciting breath of fresh air. It turns out he is just a bully. The meeting between him, Vice President Vance and Zelensky was a disgrace. His attempt to impose tariffs on such friendly neighbours as Canada and Mexico is insane. My eyes have been well and truly opened. This man is a disaster, a bad joke that has somehow become the president of the United States.
To look at Putin and Zelensky and say the latter is the aggressor and a dictator is risible and disgraceful. When I was young, friends of mine travelling in the US who explained their accent by saying they were from England were asked where in the US that was. These are the people who elected Trump. I didn’t like Hilary Clinton but her description of half the people who voted for Trump as a ‘basket of deplorables’ was right on the money.
It leaves me with nowhere to go in this political climate. I hate the wokeness and hypocrisy of people like Kamala Harris but when the alternative is Trump and Vance. Ugh!
As we can see on this chart of the Nasdaq 100, it is rare for all three monthly moving averages to bunch, roll over and head decisively lower. Previous occasions signalled the start of significant bear markets. We are perilously close to another such signal.
The picture with the S&P 500 index is similar.
The top area is not that large, but once shares start falling in earnest, the fall becomes self-feeding and can even spill over into the underlying fundamentals.
Strategy – Time To Head For The Hills
The key question to ask is are we seeing a chart breakdown? It could be fine if the stock market recovers quickly from here but time is running out. Share values are volatile with plenty of blue sky for values to move up and down in line with changing sentiment. Nvidia has around 30,000 employees. The company is valued at $2,600,000,000,000. This means each employee is valued at some $86m.
This is a company which is creating a staggering amount of value, but maybe this is because all the stars are perfectly aligned. A serious wobble could trigger a meltdown in the shares. Many shares look the same. I can almost pick them at random.
The alignment we have to worry about is all three of my monthly moving averages heading down, and we are either at or near that point with many shares. At best this market is high risk. At worst we could be facing a serious meltdown.
