The Nasdaq Composite set a multiyear intraday excessive of 4,957.02 on Friday pulling the S&P 500 to an all-time intraday excessive of two,110.61. The Dow Jones Industrial Common achieved its first all-time intraday excessive of 2015 at 18,144.29.
The tech-heavy Nasdaq is now simply 3.6% shy of its “tech bubble” peak of 5,132 set in March 2000. I present a quarterly dangerous stage of 5,245, which could possibly be examined in March. This goal can be revised on the finish of the primary quarter.
There are lots of tech and Web shares that weren’t publicly-traded in 2000 and have the momentum to assist inflate the “tech bubble of 2015.”
Three of the most important corporations that supplied the momentum gas 15 years in the past are parts of the Dow 30. Cisco Methods is 176% under its bubble peak of $82.00. Intel is 120% under its bubble peak of $75.81. Microsoft is 37% under its bubble peak of $59.96. IBM closed Friday at $163.65, which is 17.5% above its bubble peak of $139.18 set in July 1999. (IBM will not be within the Nasdaq)
Right here’s the month-to-month chart for the Nasdaq, courtesy of MetaStock Xenith.
The month-to-month chart of the Nasdaq Composite (4,956) clearly exhibits that the “tech bubble” started to inflate in November 1990 from its 120-month easy transferring common (inexperienced line), then at 359.06. The parabolic transfer that at all times precedes a bubble started in October 1998. Following the popped bubble, observe how the 120-month SMA was a stabilizing longer-term imply crossed a number of occasions between September 2001 and July 2010 when the “tech bubble of 2015” started to inflate.
Word that the brand new bubble ignores the 55.7% “Crash of 2008” when the Nasdaq dropped from 2,861 in October 2007 to a low of 1,266 in March 2009. The draw back danger again to 2,861 is 42.3% and the danger to 1,266 is a mammoth 74.5%.
It’s troublesome to foretell when a bubble will pop. March is the 15th anniversary of the “tech bubble” peak, so “watch out for the ides of March.” The Federal Reserve will doubtless make clear the timing of the “normalization” of financial coverage after they meet on March 17-18. That is additionally when the ECB begins its cash printing packages. If the Nasdaq is round 5,245 traders ought to cut back holdings by 50%.
Right here’s the month-to-month chart for Cisco Methods, courtesy of MetaStock Xenith.
Cisco Methods has a acquire of 6.5% 12 months up to now helped by a month-to-date acquire of 12.3%. The month-to-month graph clearly exhibits that the inventory has lagged its bubble peak of $82.00 by 176%. Cisco has been buying and selling forwards and backwards round its 120-month easy common at $21.81 since April 2001. The inventory can be under its November 2007 excessive of $34.24.
Buyers trying to purchase Cisco ought to enter a “good ‘til canceled” restrict order to purchase weak point to a semiannual worth stage at $23.72. Buyers trying to e-book earnings ought to think about using a promote cease given a weekly closed under its five-week MMA now at $28.07 up from $27.69 final week.
Right here’s the month-to-month chart for Intel, courtesy of MetaStock Xenith.
Buyers trying to purchase Intel ought to enter a “good ‘til canceled” restrict order to purchase weak point to an annual worth stage at $30.01. A semiannual pivot is at $33.94. Buyers trying to e-book earnings ought to enter a “good ’til canceled” restrict order to promote energy to a quarterly dangerous stage at $36.95.
Right here’s the month-to-month chart for Micrsoft, courtesy of MetaStock Xenith.
Buyers trying to purchase Microsoft ought to enter a “good ‘til canceled” restrict order to purchase weak point to an annual worth stage at $36.01. A semiannual pivot is at $42.27. Buyers trying to e-book earnings ought to enter a “good ’til canceled” restrict order to promote energy to a quarterly dangerous stage at $52.35.
Disclosure: I’ve no positions in Cisco, Intel, IBM or Microsoft.
Richard Suttmeier is CEO and founding father of International Market Consultants.