FED "pivot" hopes won't die. Bank collapses are "good for the stock market".
AI mania has the meme market looking alive again. NVDA, a company in which both revenue and earnings have dropped significantly over the past 3 quarters, is trading at 150+ P/E and 25xSales with a 666Billion market cap!
We're "back to normal" folks! /s
I LOVE how this classic Market Psychology chart lines up so well with the current NASDAQ monthly chart!
Your monthly RSI just crossed the MA - don't forget to look at the chart.
RobBiddle
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@dRends35, yeah, not sure that means anything, it could but I have strong doubts. It did that in Dec2001-Jan2002 as well, right before a 50% drop. Coincidentally, it's right about a 50% drop from here to the 200MonthMA.
dRends35
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@RobBiddle, Yes but that was a lot more steep, for all the doom this bear market has moved more like a bull flag hence NVDA that appears to be be in a bull run since October.
RobBiddle
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@dRends35 , You're correct, it was a lot more steep for NASDAQ back then, but that was mostly due to how small the index was at the time, the entire index was meme driven back then. SPX looks like a much bigger bubble today than during dotcom.
The ChatGPT AI mania just happened to hit right smack in the middle of this bear market rally which is the main reason why NVDA bounced so far. I'll be shocked if it hits a new ATH anytime soon. It's possible the AI hype train allows it to be an outlier but I think the more likely scenario is that it'll turn around hard when the rest of the market moves down. We'll know sooner than later.
dRends35
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@RobBiddle, Thats a very big bounce. Perhaps its simply an in demand stock for the next bull cycle. Take a look at your chart and see almost every time you get that RSI cross a very bullish phase follows except for one occasion 21 years ago and none before then. Thats the probability you're dealing with here.
RobBiddle
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@dRends35, from a purely technical trading point of view you're not wrong. The monthly RSI cross is definitely a strong point in favor of a bullish view.
From a technical viewpoint I think the dotcom crash is a good comparison, so I think that once occasion shouldn't be dismissed. S&P500 went up ~500% from 2009-2021. 1990-2000 was only ~300%. It was only down 25% in the Oct 2022 low compared to ~45% in 2002. NASDAQ went up ~1000% from 2009-2021. Similar to 1990-2000. It was only down 35% in the Oct 2022 low compared to ~80% in 2002. That would be a relatively modest bear market to correct the biggest & broadest bull market ever. That doesn't seem a very likely technical resolution to me.
The technical view is only one part though. I think fundamentals matter, especially for long macro analysis. The Total Market Cap of the US stock market is still ridiculous relative to GDP, far above the historical mean on any timeframe.
QE fueled much of the 2009-2021 bull run, especially the blow off top. That fuel is gone and won't be back for a long time. Even after the inflation fight is "won" and rates are lowered to "normal" levels, QT will most likely continue, it's going to take several years to roll off a large portion of the FEDs balance sheet to get it down to where it would have been with "normal" expansion.
The adage "Don't fight the FED" has proven to be better than any technical indicator. The FED is currently with the bears and outside of a black swan type event there's no reason to believe the FED will be looking to befriend the bulls anytime soon.
dRends35
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@RobBiddle, Fundamentals matter but if they don't match the technicals then something is wrong.