Morgan Stanley Warns Nasdaq 100 Could Drop More Than 20% From Peak

    The Nasdaq 100 extended its three-week losing streak and was down 2.4% at 1:40 p.m. Est. It already down 13% from its Sept 2 high and below its 50-day average, the largest ETF tracking the index suffered its biggest loss since 2000 on Friday, while big speculators' net short positions in Nasdaq futures rose to a 12-year high.

Morgan Stanley strategist, Mike Wilson, believes there could be a deeper decline ahead, with the tech-heavy index likely to fall toward its 200-day average, a drop of more than 20%.

    The prime brokerage data showing hedge funds, while still long in tech and growth stocks, partly reflects the outstanding returns of internet and software companies, but also highlights the dangers when sentiment starts to sour, Wilson said. Despite this month's decline, the Nasdaq 100 is up 24% this year, while the S&P 500 is up less than 1%. So many of these funds are on this trend, potentially leading to a bigger pullback than most expected.

In a low-interest-rate environment, can you find a better investment than high-growth technology?