Predictive System Shows Nasdaq May Be Nearing A Top
Chris Vermeulen | Jun 05, 2018 12:43AM ET
If you’ve followed any of our previous analysis posts, you already know we called this market bottom as it happened, over 60 days ago. You also know we’ve been predicting the markets to rally in an attempt to breach the all-time market highs for the past 40+ days. Now, you are going to learn what the markets are going to do over the next 3~5+ weeks as a dynamic price valuation shift is starting to unfold.
Here we go..
Right now, as we understand it, a number of institutions and professional traders are watching the global markets for any immediate signs this market will rotate lower and potentially crash. Many institutions are betting that the foreign markets and the US market is overextended and may collapse. Yet, our proprietary analysis and price modeling systems are showing a completely different picture for the next 6~9+ months. You are about to learn how and why you want to focus your trading on specific sectors over the next 4~6 months.
Recent price action in the US majors has been a bit lopsided into the tech-heavy NASDAQ. Because of this, the other US majors have now seen the types of price advances that our predictive modeling systems have predicted. The NQ has advanced substantially as we believe a unique capital flight is taking place where foreign capital is rushing into the US markets chasing profits and earnings. The general consensus is that investing in technology firms will provide the best returns. Well, this may not be the case over the next few months and we believe the real opportunity lies in the Blue Chips and S&P sectors.
This NQ Weekly chart shows that the NASDAQ has nearly rallied to above all-time price high levels and has little more than +1% to go before testing/breaching these levels. Granted, the move in the NQ has been impressive and we believe the primary factor in this move is the rush of capital entering into the technology and biotech markets that make up the NQ sectors driving this rally. Our price modeling systems suggest this move is nearly over and the NQ will likely consolidate and rotate over the next 3 months.
This leads us to believe that capital will shift from the technology and biotech-heavy NASDAQ to the other US sectors that have underperformed recently.
This SPY (NYSE:SPY) weekly chart shows what we believe is the underlying shift that is taking place. While the NQ has rallied to near all-time highs, the SPY has just recently begun to advance above recent rotational highs. With a strong support zone near $255 and all-time highs near $268.60, the SPY has a potential for a +4.5% price rally to reach these recent all-time highs.
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This YM chart shows a similar setup to the SPY. With support near 24,450 and a clear upside sloping price channel, the YM chart shows a potential for a +7~8% upside price move before reaching near all-time highs.
We believe a pricing valuation shift will begin to occur in the US majors over the month of June where the NQ rallies to just above the all-time high levels, stalls and rotates over the Summer months while the S&P 500 and DOW Blue Chips and leaders rally +4~10% over the same time span. We believe this shift in pricing dynamics will be the result of price valuations/expectation levels in the NQ having outrun true earnings potentials. Foreign capital has been pouring into the US technology stocks for well over 16 months now. Much like the 2000 Dot Com bust, this run may be overextended and a pricing shift is likely already started. The real profits over the next few months will be in the S&P and DOW leaders.
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