Like the Dow , the Nasdaq index has passed its previous peak
( in 2000). It has had a pretty remarkable run since the 2008 crisis. I was generally
more positive for the Nasdaq than the Dow and indeed in absolute terms it has
risen more over the last few years.
The Nasdaq index is interesting as it was “born” in 1971,
the same year as the US$ was freed from the gold standard. It reached its peak
around the time the Nasdaq was at its peak. The two clearly have an intimate
relationship. While it would be naïve to
expect them to always be inversely correlated, it would definitely be worth
betting on in the medium term.
Although my forecast for 2016 was wrong in January, it was
pretty much accurate the rest of the year and correctly forecast a key moment
in November. This is helpful as it confirms that the chart we are using is
still working.
So where do we go from here? Will the Nasdaq follow the Dow
or are we about to see a separation? Of course all this also ties back to the
dollar and the US debt fundamentals. I am beginning to guess the likely
direction of policy and think it will affect different companies in quite
different ways, but it is the net effect on the index which we are looking at
here.
Overall the index does look strong in 2017 and even through
to 2019, though not without some wobbles. It should be noted that there is
continuing theme that runs into the 2020s that started around 2014 which does
bear watching, this seems to relate to market glitches.
Despite some doubts and the fact that not all companies will
benefit from the new administration the picture looks fairly rosy for the
Nasdaq between January and April 2017.
Nevertheless we should watch out for those glitches,
especially around February, although we are not looking for the high drama 2013
ones.
Although there is some uncertainty about technology stocks,
there is still a reasonable about of stability in the market.
There may be a pull back around May and June. Volatility at
this time is certain.
In July to September, it is investors who are busy
rebalancing their portfolios.
It is a pretty mixed period and we’d have to look at a day
to day analysis to see the actual movements.
It is a quieter period than the previous few months
I don’t expect this quarter to end much different to how it
began
The last quarter of 2017 sees a return to volatility.
Aside from internal tech issues which might get some press,
I think that there will be a shake out of some smaller companies.
There is still overall stability though as value continues
to be conserved in the main components.
2018 is a more interesting year. There is potential for
overvaluations and bubbles.
A hint of that is found in January and February.
However there is a tug of war between winners and losers and
the fact that some companies are failing puts the breaks on.
We are back to glitch and switch ( in index components)
territory in March to May. There is
quite a challenging situation which might lead to suspension or
restriction of trading briefly. But it doesn’t last long as we see a return to
optimism quickly.
Also in the background, the environment is also changing and
the desire is for longer term investment rather than short term trading.
Nevertheless there is a bit of a mixed bag in June through
August. Perhaps because of the time of year, there does not seem to be any
particular direction then.
There may be a repeat of the restrictions of earlier months.
Although there are some difficulties with the image of the
market around September and October the general public investor perception is
positive.
Indeed there’s a key
turning point now when the market should rise.
Although some of the restrictions may return in November/December this is likely to
take a back seat to the fact that the market is booming , trading is very busy
and we have a bit of a bubble on our hands.
But it must be noted that this is a short term trend not a
longer term one.
2019
There are rather more challenges in 2019.
However, January through to March are mostly calm and
without much direction.
April and May are again times when there may be those
annoying glitches and when some elements
of the index may struggle again.
June to August are better months. Sentiment is more positive
and there may be some good surprises. However, there is still some matters
which create unsettled conditions.
I expect the overall index to end August pretty much where
is was in March.
There is a change of mood in September, and this might
result in a couple of up months.
November and December
2019 are very important for the future.
There is still some instability but the overall mood is
again positive.
The index embraces the new environment and in general
investors want in. I don’t expect quite the same impetus as at the end of the
previous year though.
2020
However it is also a time when there are huge global
pressures.
January seems to be a month of heavy trade and investor
confidence despite a challenging background
February and March see more trade, more of those glitches
and minor failures
There is uncertainty that increases the rate of changes
However, there is also huge external pressure. Although the
signs are not all bad, I think this will result in some significant
selling.
April is a key turning point in sentiment. Any movements in
value will be huge and trade will continue to be high volume and erratic.
Then we see a long run from July to November there is continued erratic trading, swings in
sentiment and more selling.
There are some stabilising influences but I don’t think they
will be enough to balance what could be a bit of a rout until the end of the
period.
Then there is potentially a brief period of recovery,
although there is a suggestion that the momentum might be significant enough
that the is just an increase in selling.
December sees a shift and a calming of the mood. Of course
there is still some unsettling factors and there is still pressure building up
which will manifest in the coming year but at least 2020 ends on a somewhat
more positive note
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