We might be in the midst of a trend reversal for a rotation that has been going on since March: Megacaps and SuperLargeCaps have been going higher, while everything from SmallLargeCaps to NanoCaps has been on the decline.
We've had many days recently where indexes seemed to go higher when the majority of stocks seemed to decline. That was, because we've seen huge increases in MegaCaps and SuperLargeCap companies recently, which have used so much money on the market that many, if not most SmallCaps have litterally have "their blood drained".
Analyzing the 2,5Y Forward P/E and P/S rates of MSFT & AAPL and adding a little bit bonus for small debt/equity(MSFT) and a little malus for high debt/equity(AAPL) I have come to the conclusion that they're trading roughly 100% over market average valuation for this kind of analysis.
Now, considering the fact, that both these FAANG giants are quite expensive at current valuations and seeing most SmallCaps trading significantly below market averages one starts to wonder when a trend change might be in.
The answer is: probably now. Or soon.
Subtracting Nasdaq100 Index(
NAS100USD
) (that tracks only the top100 companies of the NASDAQ exchange) from the Nasdaq Composite Index(that includes all Nasdaq listed companies) You're left with a quite unique picture: How Non-Index-Nasdaq-Companies are trading vs Nasdaq100 companies. This, in theory, can be mostly translated into how SmallCaps are faring vs MegaCaps and SuperLargeCaps.
All of these facts lead me to believe the bottom for SmallCaps is in and MegaCaps and SuperLargeCaps are ahead of a major correction.
Let me know your thoughts! :)
We've had many days recently where indexes seemed to go higher when the majority of stocks seemed to decline. That was, because we've seen huge increases in MegaCaps and SuperLargeCap companies recently, which have used so much money on the market that many, if not most SmallCaps have litterally have "their blood drained".
Analyzing the 2,5Y Forward P/E and P/S rates of MSFT & AAPL and adding a little bit bonus for small debt/equity(MSFT) and a little malus for high debt/equity(AAPL) I have come to the conclusion that they're trading roughly 100% over market average valuation for this kind of analysis.
Now, considering the fact, that both these FAANG giants are quite expensive at current valuations and seeing most SmallCaps trading significantly below market averages one starts to wonder when a trend change might be in.
The answer is: probably now. Or soon.
Subtracting Nasdaq100 Index(
NAS100USD
) (that tracks only the top100 companies of the NASDAQ exchange) from the Nasdaq Composite Index(that includes all Nasdaq listed companies) You're left with a quite unique picture: How Non-Index-Nasdaq-Companies are trading vs Nasdaq100 companies. This, in theory, can be mostly translated into how SmallCaps are faring vs MegaCaps and SuperLargeCaps. - As you can see, we have been on a decline for months, with quite a consistent trend resistance (the yellow line).
- We're also trading near 03/2020 (Corona crash) & 09/2020 (Major Tech correction) lows.
- We seem to have broken the Trend resistance (but better wait for real confirmation on Monday/Tuesday)
All of these facts lead me to believe the bottom for SmallCaps is in and MegaCaps and SuperLargeCaps are ahead of a major correction.
Let me know your thoughts! :)
The downward trend has been broken, now we need to establish an upward trend. So far, things are looking good for SmallCaps.