This year Nasdaq will be going nowhere as it will be traded within a range of around 10500-13000 and probably will end around 10000-12500 by the end of the year. It may test lower point and may touch higher point than the given range, however it won't crash and won't spike either. The reasons for these analysis is based on Index Value Rainbow indicator above. This indicator shows multiple value of base Money Supply or Net Liquidity. For US market Net Liquidity formula is as follow:
NL = FBS - ( TGA + RRP)
NL = Net Liquidity
FBS = Fed Balance Sheet
TGA = Treasury General Account
RRP = Reverse Repo
What happened this year is the Fed is reducing it's balance sheet by selling of their asset or doing some quantitative tightening program, which basically reduce the net liquidity value. However on the other side Treasury is also reducing it general account due to debt limit issue, which actually increasing the net liquidity. So the net value of these two opposing factors will impact Nasdaq value. As a result the net liquidity will remain the same or slightly down through out the year, as the Fed has more impact than Treasury. Other factors need to consider though is the foreign market impact on US stock as EU follows US tightening while CN & JP is on easing policy that will negate downward pressure. As a result Nasdaq will be traded sideways throughout the year. However it will be volatile, because there will be shift of balance from overvalued stocks like TSLA, APPL, etc. to undervalue stocks like META, PYPL, etc. So I expect there will be 20-30% price drop on overvalued stock and 20-30% increase on undervalued stock prices on average.
NL = FBS - ( TGA + RRP)
NL = Net Liquidity
FBS = Fed Balance Sheet
TGA = Treasury General Account
RRP = Reverse Repo
What happened this year is the Fed is reducing it's balance sheet by selling of their asset or doing some quantitative tightening program, which basically reduce the net liquidity value. However on the other side Treasury is also reducing it general account due to debt limit issue, which actually increasing the net liquidity. So the net value of these two opposing factors will impact Nasdaq value. As a result the net liquidity will remain the same or slightly down through out the year, as the Fed has more impact than Treasury. Other factors need to consider though is the foreign market impact on US stock as EU follows US tightening while CN & JP is on easing policy that will negate downward pressure. As a result Nasdaq will be traded sideways throughout the year. However it will be volatile, because there will be shift of balance from overvalued stocks like TSLA, APPL, etc. to undervalue stocks like META, PYPL, etc. So I expect there will be 20-30% price drop on overvalued stock and 20-30% increase on undervalued stock prices on average.
