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Tech Bulls Have Not Seen This Pattern Since The 2000 Highs

Published 11/11/2020, 03:38 PM
Updated 07/09/2023, 06:31 AM

It’s always good to monitor the performance of market-leading sectors and indices. These leaders provide insight into the health of the bull market, potential trend changes, and/or the trend status of that particular sector or index.

NASDAQ 100, Russell 2000

Today’s focus is on a long-term “monthly” chart, highlighting a current bull market leader—The NASDAQ 100 Index (representing large-cap technology stocks). And more specifically, today’s chart compares the performance of the NASDAQ 100 Index to the Russell 2000 Index (representing small-cap stocks).

This ratio clearly displays the importance of large-cap tech stocks to the current bull market. Wow, just look at the out-performance over the past 10+ years!!

BUT, all good things eventually come to an end… and if you have been around the block for a few decades, maybe you are experiencing a little deja vu.

Recently, the large-cap tech to small caps ratio has turned lower (and momentum has turned down as well). This looks awfully familiar to what happened back in 2000. Similarly, the ratio broke its steep up-trend and is now testing a big horizontal support level at (1). Horizontal support broke in 2000, confirming the reversal lower… will it break again in 2020 or early 2021?

Latest comments

Make an indice with EV and Hydrogen stocks and you can compare them to 2000, rising and very valued stocks with small or no earnings at all making a wild run of +500% each in few months. Tech in general now have strong earnings, strong growth, bright future and they’re taking over any aspect of future world
No eorries eith biden we will all be equal.,,equally poor! VenezUSAla here we come.
;-)
The tech bubble in 2000 involved investors going crazy over untested, unproven tech startups, many of which were outright scams. The speculation was out of control.  Today's tech rise involves mostly proven big tech companies who have already proven their worth in the marketplace and created unbelievable value in today's economy (with or without Covid-19). So I don't think the overall comparison is realistic.  Having said that, I do believe, based on Elliott wave analysis, that at the broader market could be due for a significant, though temporary, pullback - possibly as far down as 2917 on the SPX. This would be a 50% retracement from the March low to today's (11/11/2020) high.
This is not a dot com bust time like 2000. Companies have real earnings now!
thanks for the graph
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