So, I suppose it is a test of the direction of markets in
general to compare the evolution of the Dow with that of the Nasdaq. If there
trends are the same over the 4 year period, then we can assume that the
conditions are general. If they diverge then we know that this is saying
something about the composition of the
indices.
Up until the end of 2012 the Nasdaq had always shown more of
a recovery from crisis levels than the Dow. But, although the Nasdaq has gained
in January 2013 ( and more so in late December 2012) it has not showed the same
pattern as the Dow which has risen almost twice as fast in the last month and the
Nasdaq had already reached highs back in September. The recent divergence is
due mainly to a disproportionately large bad Apple which has been spoiling the
bunch a little lately!
2013
However after early February some of the divergence reduces
and there is sufficient strength from the background scenarios to support a
spurt in trading, possibly reaching the pre financial crisis highs ; though
obviously not pre bubble ones!
Things get interesting in April, when we can expect Nasdaq
surprises to be in the news. Perhaps a peak is reached and then there is pull
back. There is some of the old over-exuberance at play but it is tempered by investor
fears for overall fundamentals. This is actually somewhat a key time for the
market, maybe seeing the last of big IPOs for a while.
Investor sentiment is relatively positive in June, however
there are tensions relating to the sustainability of the market aimed at newer
types of businesses now that technologies are so embedded across the board.
There could be actual technological
problems with the market at this time too.
The challenges come together by the summer. On the one hand
there are the economic issues and on the other the nature of the Nasdaq itself.
However there is sufficient momentum to prevent any significant pull back in
prices. I would not expect further gains now though. Ther is too much general
re-evaluation going on.
There is no change in the general conditions in September to
November, ; pressures continue to build. However there is still a high level of
expectation/speculation/faith in the market. While some companies will suffer,
there will not be an overall fall in values.
The year ends with the same themes in play. A somewhat
irrational belief in some major index components, but an economic background
that undermines the overall market.
2014
There is no real change to the picture in early 2014. The
general economic tensions reach a peak though. And there is likely to be a fall
in the value of the index by late February as the concerns of the previous
months come to a head. The overall negative sentiment then holds sway for the
coming months and there is less of the
exuberance effect to counteract it.
The picture does not improve in May and June. The overall
mood is one of fear and the overall effect is to restrain valuations.
July is more mixed, with some new positive sentiment, a
little more of the past enthusiasm creeping back in – all in all reducing the
impact of the negative conditions which still continue to dominate
September sees a shift in sentiment, reflecting the start of
a new 30 year phase ( and the end of the previous one). The effect might well
be to change the balance of the Nasdaq to a different type of business. There
is certainly a challenge to the dearly held views of what the market is
supposed to be for.
All the factors again converge in the last few months of
2014. There are a lot of challenges to the valuations and there appears to be
quite significant general economic events and external conditions affecting the
market at this time. While some positives till remain, the picture is
difficult. On balance though we’ll have
fluctuations rather than new lows.
2015
There is evidence that the enthusiasm for the type of stocks
on the market fades for a while in early 2015. Tricky conditions remain,
although the position is more mixed and might involve unravelling the effects
on the market of the events of late 2014.
The subdued mood continues throughout the first half of the
year despite there being some positive influences coming into play.
This happens noticeably around June, when there is
noticeable change in direction perhaps caused by merger or other conditions.
The summer seems to be more moderate in tone. The challenges
remain but there is another bout of optimism.
By September there is a subtle change in the outer
appearance of the Nasdaq. It becomes less dramatic; more conservative and
concerned with sustainability than in its whole history to date. The impact on
the value is mixed and likely to be observed as fluctuations rather than a new
trend direction. However the market is still faced with all the same background
conditions that have plagued it over the last 2-3 years and as a result there
is most definitely no likelihood of speculative valuations.
The end of 2015 is characterised by unexpected
announcements, and a continued subdued mood, although the picture is more
stable than has been the case throughout the rest of the year.
2016
Just as we were about to give up on exuberance in the
Nasdaq, it finds a new lease of life for a few more years. The main conditions
have gone but there is encouragement from new sources for a while longer.
As a result January is a upwards looking month, with plenty
of volatility and news.
Although February and March see the wider outlook impinging
again- the overall impact is for more stability in the market. This might be
boring but is more than needed at this point.
As a result there is little to remark on for April and May
either
But June to August shows stability and renewed increase in
the overall index.
Sept Oct is more mixed, but again the balance seems broadly
positive. However we are talking sensible levels of positivity with valuations
supported by fundamentals rather than blind faith.
By November we have therefore reached the lows in this intermediate cycle
and should see a sudden shift in sentiment.
December is therefore a quiet month but with a low level
re-evaluation continuing that will improve the market fundamentals for the
future.
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