Of Bubbles and Crashes Looking at Nasdaq 100
The physics of the market are not that different from the environment. Whatever goes up will eventually comes down, and if it goes up so fast without the opportunity of steady growth and maturity, it will eventually go down faster, similar to the Newtonian laws. Inn market terms, quick gains mean quick cashing out, because investors don't like volatility when they are already green, Looking at this chart of almost 3 decades, one can't unsee the following:
* Nasdaq 100 barely went down the 15 SMA line of the weekly graph, except when there was a crash and for a relatively brief period.
* There's a tendency for high acceleration since the 90s.
* Areas of overselling are highly correlating with bubbles and crashes.
* An imminent crash comes after the already exponential growth becomes hyper-accelerated. This is similar to what's happening these days if one compares the dot-com curve with the post COVID-19 one.
* The current exponential growth started around 2016.
The shaded curve represents a somewhat linear growth based on the early days of the dot-com boom and the days after the housing crash. It shows a grwth of around 3000% since the 1990s, around half of what Nasdaq 100 actually achieved. It is still much more than China 50 and DowJones 30, both dwarfed at the bottom of the graph; yet, I believe, it shows the real value of Nasdaq 100 given the edge of the Tech sector but without the bullish activities. This is purely graphical and is not based on extensive data analysis, but it's an approximation I am willing to make. It also coincides with the area of support in case the index falls to the lower band of the weekly graph, below the SMA 15 line,
The crash (aka. correction) is coming and it's not so far from us since the early signs are showing. How strong would it be, that's yet to be seen, but given how inflated the market is and especially Tech, I wouldn't be surprised if it's stronger than the ones before.
* Nasdaq 100 barely went down the 15 SMA line of the weekly graph, except when there was a crash and for a relatively brief period.
* There's a tendency for high acceleration since the 90s.
* Areas of overselling are highly correlating with bubbles and crashes.
* An imminent crash comes after the already exponential growth becomes hyper-accelerated. This is similar to what's happening these days if one compares the dot-com curve with the post COVID-19 one.
* The current exponential growth started around 2016.
The shaded curve represents a somewhat linear growth based on the early days of the dot-com boom and the days after the housing crash. It shows a grwth of around 3000% since the 1990s, around half of what Nasdaq 100 actually achieved. It is still much more than China 50 and DowJones 30, both dwarfed at the bottom of the graph; yet, I believe, it shows the real value of Nasdaq 100 given the edge of the Tech sector but without the bullish activities. This is purely graphical and is not based on extensive data analysis, but it's an approximation I am willing to make. It also coincides with the area of support in case the index falls to the lower band of the weekly graph, below the SMA 15 line,
The crash (aka. correction) is coming and it's not so far from us since the early signs are showing. How strong would it be, that's yet to be seen, but given how inflated the market is and especially Tech, I wouldn't be surprised if it's stronger than the ones before.
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