Keep watch of this ratio-We're looking like 1999 based on this ratio. Tech to go hyper before tech wreck 2.0? The recipe is slightly different but it's starting to smell the same. Even if this plays out, we should see the NASDAQ cool off & consolidate for a bit..perhaps we'll see some weakness going to the Fall prior to election with increased volatility in the markets. I'm looking for some type of cycle trough in the markets in the next 2-3 months. While I seriously doubt it's going to be a lower low (than March low), it's not off the table. Cycle lows occur very quickly whereas cycle peaks roll & roll. March is a great example of just how quickly cycle troughs can occur. We witnessed the fastest & deepest drop in market history this year which proved to be a fantastic buying opportunity. Let's see what the markets offers next. Another correction in markets might be met with even more life-support from the Fed.
Comment:
It's worth noting that even back in 1999 when this ratio reached this zone, it consolidated for months. It's entirely possible that the same events will unfold with months to even a year of volatility and market noise. I'm not currently long the nasdaq. I have a hedge with put options to cushion some of my other positions but I'll consider taking a longer term (2023+) call position around Sept-Nov if I see a similar consolidation play out.
