I am looking at the distance of the Nasdaq-100 from its 200-day moving average. I am looking as far back as 2015. What we see here is something slightly historic... it's the most extended it's been from its 200-day moving average in a long time.
I examined the chart and the last time the distance from its 200-day MA was above 30 for a long period of time was the 1999 DotCom Bubble. That's not to say there's anything wrong. Because it's true - an overextended market can always become more overextended. Trying to call a top is nearly impossible. It's better to be aware and manage your situation independently with the data before you. So a few notes to keep in mind:
1. For the market to reach it's DotCom bubble extension, or distance from 200-day MA, it would need to rise another 50% or so.
2. Tech still remains very strong and is far different from what it was in 2000. Companies are real, big, and operate around the world. The largest holdings in the QQQ ETF are Amazon, Apple, and more. Large cash piles and products that weave society together.
3. However, as someone who follows markets closely, I am actually not quick to buy or sell anything at these levels. The risk-reward is slightly unbalanced. Now, the March crash does skew the 200-day MA data, but still worth watching this.
Special shout out to @ AlexWe1992 for creating this indicator. It's really cool. Select the moving average, customize the colors of the bars, and then get to work. It's open source and free to use here: tradingview.com/script/FTHXnuCR-Deviation-from-MA/
I agree however I adjusted the chart for M1 inflation and I'm getting the same signal, however not to severe. Thoughts?
Do you think inflation is increasing the downward expectations of most traders beyond what's rational by skewing their traditional signals to the upside?
dmac95s
⋅
@vx5ma5NCCk2GPrzpZ, i see the same. M1 is about double what is was since last year so technically speaking, we are in the bottom of a 100 year upward linear channel when plotted on log scale. "Linear" on log scale -"sounds stupid huh" - i mean there are clear LOOOOONG upper bounds and lower bounds that are both logarthmic and when plotted on log scale, you can see them in a linear fashion. Last time we hit upper bound was in 2001 and we've been on lower bound (sometimes at lowr bound, sometimes just 20% log distance above lower bound) since 02 up to today.
This means we cant drop lower unless FED deletes money supply ( this would create depression). Once market picks up and realizes tech/bio tech/super cond. are the future, they will go into ^NDX and with the additional M1 by fed, I can see QQQ going to 6500+ in next 15 years. Hopefully its a repeat of 1990-2001. We can load in now. Price now is same as last year when it was 160 on market bottom since FED printed double.
Jonas99
⋅
Good chart, perhaps also factoring in how much money was printed and zero interest rate. I do think mean reversion is in order.
Dr_Roboto
⋅
trad3rj03KZ
⋅
@Dr_Roboto can you share an updated version of this chart
@trad3rj03KZ, this is in dollars which is stupid because dollars in 2000 are not of equal value as they are one day later. the dollar is a function of time and only way to price is against m1/m2/m3.